Fairfax has started repurchasing shares

[ourkid8]

https://finance.yahoo.com/news/intention-normal-course-issuer-bid-210200367.html

 

Under its existing normal course issuer bid, Fairfax has purchased 335,112 of its Subordinate Voting Shares, which included Subordinate Voting Shares reserved for share-based payment awards, through open market purchases on the TSX during the last twelve months at a weighted average price per share of Cdn.$621.65. Fairfax has not purchased any Preferred Shares under its existing normal course issuer bid.

 

Fairfax has repurchased $208M in stock so far, let the good times roll....

 

 

[ValueMaven]

Fairly important update...

 

Let's see how this plays out...

[Dazel]

 

 

I suspect that the cash infusion to the holding company from the recent ICICI-Lombard ipo that they should have received will speed up the buy backs at these levels...but the Fairfax Asia sale will fill the holding company with cash taking the buy back war chest above $2.5b. This will allow them to buy buckets full...Hoping the stock stays or falls from here before that deal gets completed....they would be able to do a Dutch auction or large block share repurchases. I also expect a debt ratings upgrade because of the liquidity at the holding company. If you throw in a possible hard market for the insurance subs...the buy backs would be immediate and very large in my opinion.

[Guest longinvestor]

What is the intrinsic value estimate for FFH? Does Prem have some sort of BV multiple to execute buyback, similar to Berkshire?

[Dazel]

 

 

 

Prem told us that the book values of the insurance subs were very low...he showed us by selling ICICI-Lombard and Fairfax Asia at over 3 times book value. So he has proven that book values are low..he told us Fairfax was undervalued intrinsically but Prem has not given us a specific number. He likely won't until he has retired a lot more shares.

Unlike Mr. Buffett this is a hated stock and know one really cares what he says right now. That's why I am here! When everyone jumps on the "Buffett of the North" mantra the shares will be too high to buy back.

[FFHWatcher]

I keep seeing that Fairfax Asia was sold. Was it? I am pretty sure only First Capital was sold which is one of several Fairfax Asia operating subsidiaries (First Capital is one of the best and biggest parts of Fairfax Asia but I am pretty sure Fairfax Asia is staying in tact Pacific, Falcon, Fairfirst, AMAM, - leaving relatively small assets and premiums, but something like 2000 employees?).

 

 

[Dazel]

 

 

 

Last year's limit on share buy backs was 800,000 shares...and a little over 6000 shares per day. Excluding block trades.

 

This years the limit is 2.72 million shares....15,000 a day

 

Let the big buy back some of us predicted and Prem promised (if shares remained cheap) begin. Well the 200,000 already retired is a start so I guess it already has begun. I did tell the board so. LOL

Of course I was speculating...but being around Fairfax and watching studying them. They are predictable to do the right thing.

[UK]

If I am not mistaken in March of 2015 and 2016 they issued 1.15 and 1.0 M shares at 650 and 735 CAD or simple/unadjusted 1.31 and 1.37 PBV (on year end BV of the each year) respectively. Now supposedly they are starting to buyback the same amount or little more at the price 625 CAD at the same simple/unadjusted 1.34 PBV (on 2q 2017). So how it could be so smart thing to do? Isn't the awesomeness of this whole operation not bigger than the difference between issuing and buying back valuations?

 

Other question is if we can be so sure that underwriting track record of recent years will not be broken due to the recent events? It is a question for FFH experts, because I myself have no idea really about his, but FFH attained these underwriting profits while under really favorable circumstances and now I read that Maria alone could caused an estimated $40 billion to $85 billion in insured losses (but mainly in Puerto Rico and I have no idea if they do have any exposure there).

 

UK 

 

[Dazel]

FFHWatcher you are correct

UK

When the shares were issued Fairfax and its investors hedging and it is hated because of this drop and a few bad investments.

It's a different company now and the holding company will have $2.5b in cash...

Fairfax is become a large specialty insurer more like Markel although they will have losses from the hurricanes. If the industry event is big enough they will be able to increase their premiums which will more than make up for the losses. They have $15b in premiums now...in hard market they could could write $25b. How cheap would that make it?

If interest rates rise as they expect their now $40b investment portfolio probably benefit on a per share basis more than any other company in the world. (Because Brian Bradstreet is the best bond investor around)...and hopefully they took my advice and bought a billion worth of Citigroup and B of A like said they should!

 

The shares are cheap now that's why Prem will buy hand and fist as would I.

[UK]

Yes, recent history/longer term/on general you are probably right regarding their improving quality, but they just made "transformation acquisition" (and btw issued some 4.8 M shares to finance it) and added substantial new exposures for 1.3 BV, seemingly not cheaper than their own shares, especially considering that they are undervalued and know themselves better, and I am wondering, can we be sure that there will not be any really negative surprises, especially considering this:

 

https://www.fitchratings.com/site/pr/1029717

http://www.artemis.bm/blog/2017/09/27/maria-turns-2017-cat-losses-into-a-capital-event-for-some-reinsurers-fitch/

 

"At the upper end of that range this would be a record year for global catastrophe losses, which Fitch says, “could weaken capital at some (re)insurers and increase the risk of rating downgrades.”

 

Does anybody has any deeper insights into this and possible impact on Fairfax+AW? Maybe than, accidentally or not, this could turn out to be even better opportunity/cheap price? Or just nobody can know about possible event impact even remotely at this time? Why not wait than?

 

 

 

[Dazel]

 

https://www.canadianunderwriter.ca/insurance/benefits-merging-fairfax-allied-world-far-outweigh-overlap-reinsurance-fairfax-insurance-coo-1004105613/

 

Fairfax insurance is not very understood by the market as the company has been looked at as hedge fund over the years...Odyseey Re is 26th and Allied world is 41st biggest writers of reinsurance in the world in 2016 and Brit writes 25% of its business in reinsurance and the other 75% is primary insurance.

Odyssey Re (see Fairfax 2017 posts) bought reinsurance on their reinsurance in north America according to their annual report and would have little impact from small cat's and they also ended a large reinsurance contract for Florida in June of 2015 ...

 

These are not small Cat's of course and the losses could be very large at Fairfax but not in the context of Fairfax size. Fairfax owns 67% of Allied World as well I believe with options to buy it all over the next 5 years.

 

As for the industry if this creates a hard market...Fairfax will have a large amount of capital with insurance sales they just made so not only will they not have to raise capital they will be in position to take advantage of the hard market if happens. If that's the case its a back the truck up borrow money from whoever will give to you type investment! fingers crossed!

 

[Alekbaylee]

hmm... that looks like a new strategy from Fairfax...  ;)

https://globenewswire.com/news-release/2017/09/29/1134849/0/en/Fairfax-Enters-Into-Automatic-Share-Purchase-Plan.html