Fairfax 2015 Q1 Results are out...

[Vizi1]

http://finance.yahoo.com/news/fairfax-financial-holdings-limited-first-210500373.html

[TwoCitiesCapital]

The market seems disappointed for some reason...maybe it's the lag that's been discussed here before? Would be happy to pick up more sub-$500 USD.

[LowIQinvestor]

Pretty much as expected for me: Book value unchanged...

 

I am trying to understand the disconnect between recent stock performance of FFH.TO and FRFHF ( US OTC Market)? Trying to figure out if the under-performance of FRFHF is warranted ( currency? liquidity? etc.)

 

Anyone already look into this?

 

Thanks!

[gfp]

Different currencies

 

 

Pretty much as expected for me: Book value unchanged...

 

I am trying to understand the disconnect between recent stock performance of FFH.TO and FRFHF ( US OTC Market)? Trying to figure out if the under-performance of FRFHF is warranted ( currency? liquidity? etc.)

 

Anyone already look into this?

 

Thanks!

[LowIQinvestor]

Thanks, seems obvious now...

Had no idea the canadian dollar had fallen so much.

[dartmonkey]

You mean risen so much

[wknecht]

You mean risen so much

CAD has fallen relative to USD. Around 10% since 2014, and more than 20% since 2011.

[ERICOPOLY]

They don't hold very much in CAD, do they?  Northbridge isn't that big.

[wknecht]

They don't hold very much in CAD, do they?  Northbridge isn't that big.

No I don't think they do. The conversation stemmed from the widening difference between the price of FFH shares (priced in CAD) and FRFHF shares (priced in USD).

[giofranchi]

Q1 2015 Conference Call Transcript

 

Cheers,

 

Gio

fairfax-financials-Q1-2015-conference-call-transcript.pdf

[giofranchi]

Insurance results keep getting better. And I like the newly annuonced acquisition by Fairfax Asia. Fairfax Asia has an history of writing very profitable contracts, probably because the insurance market in those places is still very lowly penetrated. The Fairfax's strategy of gradually building scale over there is imo to be praised.

 

Cheers,

 

Gio

[giofranchi]

•At March 31, 2015, the company owned $106.2 billion notional amount of CPI-linked derivative contracts with an original cost of $650.1 million, a market value of $294.5 million, and a remaining weighted average life of 7.2 years. Those contracts appreciated by 23.5% in the first quarter of 2015. The majority of the contracts are based on the underlying United States CPI index (55.4%) or the European Union CPI index (37.2%).

 

The fact these contracts appreciated during Q1 2015, despite the massive money printing effort that's going on in Europe, might not be meaningful, but should be at least pointed-out.

 

Gio

[giofranchi]

•On April 23, 2015 Ridley Inc. and a subsidiary of Alltech, Inc. announced that they had entered into an agreement pursuant to which Alltech will acquire all of the outstanding common shares of Ridley for Cdn$40.75 in cash per common share. The company has irrevocably agreed to tender its shares in favour of the transaction, which is expected to close in the second quarter of 2015, subject to certain customary conditions. The company estimates that upon successful completion of the transaction it will receive approximately $317 (Cdn$384) million for its 73.6% interest in Ridley and as a result will recognize a pre-tax gain of approximately $232 (Cdn$282) million. Fairfax's interest in Ridley was initially acquired at an average cost of Cdn$8.44 per share.

 

Shrewd investors! Aren't they? ;)

 

Cheers,

 

Gio

[A_Hamilton]

They don't hold very much in CAD, do they?  Northbridge isn't that big.

No I don't think they do. The conversation stemmed from the widening difference between the price of FFH shares (priced in CAD) and FRFHF shares (priced in USD).

 

They hold no net exposure to the Canadian dollar. They've shorted it all out via CAD bonds and preferred shares.

[giofranchi]

Paul Holden

Okay, got it. And then the more of a philosophical question I guess is, it’s kind of – to me it’s a little bit of a switch

going from necessarily a call on outright deflation to a call on low inflation, so looking at it in two ways I guess

that would be, one is just perceptually it’s kind of different. And then two, is you say that you have the CPI

hedges to service and economic hedge against the potential adverse financial impact on the company of

decreasing price level, so with low inflation that’s not quite the same, so just wondering if you can explain your

thinking behind this new structure?

 

Prem Watsa

Yes. No, that’s on the 0.5% fall, we did that because it was extremely inexpensive. And that’s why we did it. And

you might have noticed it’s kind of quite significantly it’s more than doubled on our cost, whereas everything else

is still below our cost. What - Paul, you have to understand is that we haven’t gone in North America. We have

an experience deflation since the 1930s. The last time we all of us here on this call and others have experienced

deflation is by watching what happened in Japan, but none of us have experienced 30s. And when you have –

and deflation is in the air right now in the United States, you have had January and February basically CPI

numbers have been flat to a little negative. And the economy in the first quarter it’s came out at 0.2%. Now,

people say there was a severe winter. There was a strike – a port strike and other things like that.

 

And I am suggesting to you that after QE1, QE2, QE3 of the second and third quarter come out like that, I don’t

know I am just suggesting that if that does come out, then this idea of deflation might get in people’s minds and

it’s a very difficult environment to face. It’s one that we have studied and it’s one that we want to protect our

company from. If we can get the advantages of deflation, protection by building in 0.5% inflation, because no one

else believes deflation, that’s the reason we were able to buy those contracts. And of course, we are going to do

that. We would buy at 2% inflation each year if we could buy it cheap. And that’s basically what we have done.

We have shown for some time that over 29 years that as I said in my prepared remarks that realized gains have

been very significant over $11 billion, that’s when we were very small company and now we are significant. And

the problem with realized gains is its not forecastable, you can’t forecast it, none of the other analysts can

forecast it, but that does not make it not real. It is significant our book values have compounded because of that.

And we think over the next few years, I have listed some of the realized gains that we have made recently, the

Ridley and others. I think we will – our company will experience very significant realized gains and we expect to

benefit from that for all our shareholders.

--Q1 2015 Conference Call

 

 

Gio

[giofranchi]

Prem Watsa

.... So, the industry is still difficult, but Crum has moved as you know basically to 100% specialty as we have said in the – in our Annual Meeting. And it’s really from that focus that you are going to see, we think, Crum develop underwriting profits on a sustainable basis, because it’s gone from about 20% specialty, maybe 7, 8, 9 years ago to about 100% specialty. And we think that’s a dramatic change. And we think the possibilities for Crum now in the future are very significant. You heard Marc Adee make that comment at our AGM and we think you will see that in the future.

--Q1 2015 Conference Call

 

 

Gio