Fairfax stock positions

[Viking]

15 minutes ago, gfp said:

Look at Eurobank breaking out!  I hadn't noticed until your post

 

 

+1. Both Eurobank and especially Hellenic Bank are overcapitalized. My guess is the management team at Eurobank is licking their chops - and already has a plan in place to 'solve' that problem.

• Another large dividend?
• Begin sizeable share buybacks?
• More acquisitions? (After they close on and digest Hellenic Bank)

Edited January 8 by Viking

[Viking]

Fairfax's second largest equity holding is FFH-TRS. This holding is up $914 million in 2024. Over the past 4 years it is up $2 billion. 

 

Now let's put Eurobank and FFH-TRS together. Together they are up $1.7 billion in 2024 ($784+$914). And $4.1 billion over the past 4 years. WOW!

 

Fairfax's average total equity portfolio was probably about $20 billion in 2024. Eurobank and FFH-TRS represent about 26.5% of the total. In 2024, these two investments delivered a total return of 8.5%.

 

Guess what Fairfax's equity portfolio delivered in 2024? A number much higher than 8.5%. Two investments delivered that. Fairfax has another 73.5% in equity investments that are - as a group - performing well (some very well).

 

At the start of 2024, investors were WAY TOO PESSIMISTIC in their estimates of what Fairfax's equity portfolio would deliver in 2024 and future years. My guess is that remains the case today.   

 

Edited January 8 by Viking

[Dinar]

This is going to sound horrible, but I think the California fire situation is about to drive premiums, including reinsurance up quite a bit.  The property loss must be immense, and even if insurance losses are not that big, it might still enforce underwriting discipline.  

[gfp]

Sounds like the state of California FAIR Plan insurance outfit is going to get a large chunk of it.  I wonder who sells reinsurance to that entity?

[mananainvesting]

JP Morgan estimated $10B in Insured Losses due to California Wild Fires. 

 

https://www.investors.com/news/top-california-property-insurer-earns-double-upgrade-from-goldman/

 

[Hoodlum]

51 minutes ago, mananainvesting said:

JP Morgan estimated $10B in Insured Losses due to California Wild Fires. 

 

https://www.investors.com/news/top-california-property-insurer-earns-double-upgrade-from-goldman/

 

 

But with of most of that not covered by reinsurance.

 

Based on a preliminary assessment of the affected area and historical events, insured losses from this fire could approach $10 billion, with primary carriers being more exposed than reinsurers, the note said. Arch Capital (ACGL) and RenaissanceRe (RNR) are the most exposed reinsurers, but their losses should be less than for similar events prior to 2023, the JPMorgan note said.

[Hoodlum]

Just to close of on the Peak (Bauer acquisition).  It looks like both CCM and Bauer were valued at 8x earning.

 

https://www.theglobeandmail.com/business/article-northleaf-buys-ccm-stake-hockey-equipment/

 

Quote

Altor’s growth strategy at Rossignol included building the company’s sports clothing business. Mr. Nabib said under its new owners, CCM plans to expand its apparel sales.

 

The private equity funds declined to disclose the terms of the transaction. Two sources with knowledge of the sale said Altor and Northleaf paid a total of $600-million in enterprise value – equity plus debt – which is eight times the company’s earnings before interest, taxes, depreciation and amortization (EBITDA) last year.

 

Private equity firms control the hockey equipment industry. CCM has approximately 35 per cent of the market and its major rival is Bauer Hockey LLC, with a roughly 60-per-cent share.

 

In October, Fairfax Financial Holdings Ltd. announced a deal to take control of Bauer by acquiring Sagard Holdings Inc.’s stake. The two sources said Fairfax also paid eight times EBITDA for Bauer, and Altor looked at buying the company before purchasing CCM.

 

 

 

 

Edited January 9 by Hoodlum

[Maverick47]

 

On 1/8/2025 at 1:38 PM, gfp said:

Sounds like the state of California FAIR Plan insurance outfit is going to get a large chunk of it.  I wonder who sells reinsurance to that entity?

All of the primary property insurers in the state share in the losses of the FAIR plan in proportion to their own voluntary market shares.  They will receive assessments from the FAIR plan to pay for losses that exceed the Plan’s ability to pay…because of this, I don’t believe the FAIR plan purchases reinsurance coverage itself, but I could be wrong about that.

 

I also don’t know how companies’ assessments are handled.  In some states, companies are allowed to recoup FAIR plan assessments in future years from their own future customers by adding recoupment surcharges to their customers’ bills until they have recouped the full amount of the assessment they paid previously.  Since a recoupment mechanism may exist, typical cat reinsurance contracts wouldn’t cover assessments.

 

Another possibility if a state doesn’t allow this sort of assessment recoupment mechanism is for their catastrophe reinsurance contract to specifically allow for these FAIR Plan assessments to be included with their own direct losses reported to their reinsurers.  In that case, it would be difficult to know which reinsurers have the most exposure since it would depend upon the reinsurance contract language for each primary company, loss attachment points, and the percentage share of each reinsurer in the company’s cat reinsurance treaty….

 

 

[gfp]

3 hours ago, Maverick47 said:

 

All of the primary property insurers in the state share in the losses of the FAIR plan in proportion to their own voluntary market shares.  They will receive assessments from the FAIR plan to pay for losses that exceed the Plan’s ability to pay…because of this, I don’t believe the FAIR plan purchases reinsurance coverage itself, but I could be wrong about that.

 

I also don’t know how companies’ assessments are handled.  In some states, companies are allowed to recoup FAIR plan assessments in future years from their own future customers by adding recoupment surcharges to their customers’ bills until they have recouped the full amount of the assessment they paid previously.  Since a recoupment mechanism may exist, typical cat reinsurance contracts wouldn’t cover assessments.

 

Another possibility if a state doesn’t allow this sort of assessment recoupment mechanism is for their catastrophe reinsurance contract to specifically allow for these FAIR Plan assessments to be included with their own direct losses reported to their reinsurers.  In that case, it would be difficult to know which reinsurers have the most exposure since it would depend upon the reinsurance contract language for each primary company, loss attachment points, and the percentage share of each reinsurer in the company’s cat reinsurance treaty….

 

 

 

thanks Maverick47!  Also explains all these line items on my Louisiana insurance policies that are tacked on "2005 Louisiana FAIR plan emergency assessment" ... That was 20 years ago and I'm still paying several hundred

[Maverick47]

4 hours ago, gfp said:

thanks Maverick47!  Also explains all these line items on my Louisiana insurance policies that are tacked on "2005 Louisiana FAIR plan emergency assessment" ... That was 20 years ago and I'm still paying several hundred

From what I can tell, the 2005 hurricane losses to the Louisiana FAIR plan were higher than the maximum 10% of 2005 statewide voluntary property premiums in the state that the FAIR plan was allowed to assess…so they issued revenue bonds to pay the 2005 FAIR plan losses instead, and the assessments since then have been used to retire the bonds.  If I’m not mistaken, the Louisiana assessments started in 2007 and are expected to end in 2025.  So if there are no assessable FAIR plan losses in 2025 and forward, you may be able to see those surcharges finally drop off your insurance bills in the not too distant future…

[Hoodlum]

On 1/8/2025 at 3:42 PM, gfp said:

Look at Eurobank breaking out!  I hadn't noticed until your post

 

 

it is Interesting that Go Digit has gone in the opposite direction the past few weeks and is now back to the IPO price.  I wonder what that is about.

[TwoCitiesCapital]

7 hours ago, Hoodlum said:

 

it is Interesting that Go Digit has gone in the opposite direction the past few weeks and is now back to the IPO price.  I wonder what that is about.

I know I saw India's GDP growth is expected to slow some in 2025 - perhaps thats weighing on the market as a whole? The NIFTY index is down 10-12% since September?

 

Also, while dangerous to apply generalizations to individual circumstances, my understanding is that MOST IPOs return to their IPO price, if not lower, within 3-years of the IPO once the hype and limited volume/access has faded. This is precisely why I have a rule to not buy IPOs in the first 2-years in place for my portfolios. 

Edited January 10 by TwoCitiesCapital

[Hoodlum]

Fairfax is selling 2.2% of Eurobank to meet regulatory ownership requirement of minority ownership to be below 33%.  Price will be announced tomorrow.

https://www.tovima.com/finance/eurobank-prem-watsa-s-fairfax-reducing-stake-to-33/

 

Canadian billionaire investor and businessman Prem Watsa commenced the placement of 2.2% of Greek systemic lender Eurobank’s shares – some 80 million shares in total – on Wednesday, with the price per share to be announced on Thursday morning.

 

According to sources from within the bank, the founder and CEO of Fairfax Financial Holdings was reducing the holding company’s stake in ATHEX-listed Eurobank to meet regulatory conditions – which mandate a minority stake of no more than 33.3% – and is not part of any change in the composition of the bank’s main shareholders.

 

According to market watchers, the price per share was expected to be just under of the current market rate.

 

According to a Reuters dispatch, demand for the placement is already oversubscribed.

Watsa had previously received a special exemption from banking regulators to own a stake higher than 33.3% but without retaining board voting rights. That exemption was recently rescinded.

[nwoodman]

53 minutes ago, Hoodlum said:

Fairfax is selling 2.2% of Eurobank to meet regulatory ownership requirement of minority ownership to be below 33%.  Price will be announced tomorrow.

https://www.tovima.com/finance/eurobank-prem-watsa-s-fairfax-reducing-stake-to-33/

 

Canadian billionaire investor and businessman Prem Watsa commenced the placement of 2.2% of Greek systemic lender Eurobank’s shares – some 80 million shares in total – on Wednesday, with the price per share to be announced on Thursday morning.

 

According to sources from within the bank, the founder and CEO of Fairfax Financial Holdings was reducing the holding company’s stake in ATHEX-listed Eurobank to meet regulatory conditions – which mandate a minority stake of no more than 33.3% – and is not part of any change in the composition of the bank’s main shareholders.

 

According to market watchers, the price per share was expected to be just under of the current market rate.

 

According to a Reuters dispatch, demand for the placement is already oversubscribed.

Watsa had previously received a special exemption from banking regulators to own a stake higher than 33.3% but without retaining board voting rights. That exemption was recently rescinded.

That sounds more like they are taking money off the table to me than compliance.  The upside is that that it will free up Eurobank to repurchase shares.  

 

Definitely closer to FV than it was but still cheap. Should give Fairfax around 80mx€2.40/.96=$USD200m pre-tax 

 

Edit: it gives them a mark too

 

https://www.eurobankholdings.gr/en/investor-relations/shareholders/shareholding-structure

Edited January 22 by nwoodman

[dartmonkey]

If Fairfax had 32.89% on 2024-12-31, how did they get over 33.3%, requiring a 2.2% reduction? Eurobank repurchased shares in 2023, but not in 2024, as far as I can tell, and I don't see any repurchase announcement for 2025.

 

 

[Viking]

35 minutes ago, nwoodman said:

That sounds more like they are taking money off the table to me than compliance.  The upside is that that it will free up Eurobank to repurchase shares.  

 

Definitely closer to FV than it was but still cheap. Should give Fairfax around 80mx€2.40/.96=$USD200m pre-tax 

 

Edit: it gives them a mark too

 

https://www.eurobankholdings.gr/en/investor-relations/shareholders/shareholding-structure

 

@nwoodman, thanks for highlighting magnitude... US$200 million is a meaningful amount. At what point would something like this require Fairfax to update its carrying value on Eurobank (to their selling price)? That would trigger a massive unrealized gain. 

 

I wonder if this also ties into capital return at Eurobank moving forward. We will find out shortly what Eurobank has planned (for 2024 earnings): 

• Continue with dividend
• Buy back stock

Perhaps Eurobank wants to buy back stock. Perhaps the Greek regulator signalled that Fairfax would need to get their ownership position below 33% before approving a buyback. 

 

It is nice that Fairfax was able wait a year to do this - Eurobank's stock is much higher.  

 

[nwoodman]

Looking at this more closely, I don't think the sale gives them the ability to mark to market because of the rules around equity method accounting:

 

"To capture the excess of fair value on their balance sheet, Fairfax would need to:

1. Reclassify the Eurobank stake as a financial asset (FVTPL or FVOCI).

2. Lose significant influence over Eurobank (e.g., reduce stake or governance involvement).

3. Take an impairment reversal under IFRS if applicable.

 

Absent these changes, the excess fair value can only be disclosed but not formally reflected in the balance sheet under the equity method."

 

However, the gain on sale of the 80m shares does flow through the P&L.  Roughly (2.4-0.92)*80m/0.96=123.3 m =123.3/22=5.6 per share 

Edited January 22 by nwoodman

[Viking]

6 minutes ago, nwoodman said:

Looking at this more closely, I don't think the sale gives them the ability to mark to market because of the rules around equity method accounting:

 

"To capture the excess of fair value on their balance sheet, Fairfax would need to:

1. Reclassify the Eurobank stake as a financial asset (FVTPL or FVOCI).

2. Lose significant influence over Eurobank (e.g., reduce stake or governance involvement).

3. Take an impairment reversal under IFRS if applicable.

 

Absent these changes, the excess fair value can only be disclosed but not formally reflected in the balance sheet under the equity method."

 

However, the gain on sale of the 80m shares does flow the P&L.  Roughly (2.4-0.92)*80m/0.96=123.3 m =123.3/22=5.6 per share 

 

@nwoodman , got it! Thanks for the explanation. 

 

In terms of how much of Eurobank that Fairfax owns, perhaps we can use the dividend payment as a guide. Fairfax received 34.6% of the total dividend payment ($128/370).

 

From Fairfax's Q3 earnings report.

 

"On July 31, 2024 Eurobank paid a dividend of approximately $370 (€342). The company’s share of that dividend was approximately $128 (€118), which will be recorded in the company's consolidated financial reporting in the third quarter of 2024 as a reduction of Eurobank's carrying value under the equity method of accounting."

[nwoodman]

@Viking, when this came up a while back there was a view that they were over the reported 33.29%.  That div calculation suggests the same

[Hoodlum]

1 hour ago, nwoodman said:

That sounds more like they are taking money off the table to me than compliance.  The upside is that that it will free up Eurobank to repurchase shares.  

 

Definitely closer to FV than it was but still cheap. Should give Fairfax around 80mx€2.40/.96=$USD200m pre-tax 

 

Edit: it gives them a mark too

 

https://www.eurobankholdings.gr/en/investor-relations/shareholders/shareholding-structure

 

It certainly looks like this was driven by compliance.  The link I provided specifically mentioned that the exemption to hold over 33.3% was recently rescinded.  The link you referenced displays the current voting rights for Fairfax, not the ownership of shares. 

 

This was how the regulators allowed Fairfax to own over 33.3%, by limiting their voting right.  This sale will now bring their shares ownership in line with their voting rights, meeting the regulator requirements.

[Hoodlum]

1 hour ago, Viking said:

 

@nwoodman , got it! Thanks for the explanation. 

 

In terms of how much of Eurobank that Fairfax owns, perhaps we can use the dividend payment as a guide. Fairfax received 34.6% of the total dividend payment ($128/370).

 

From Fairfax's Q3 earnings report.

 

"On July 31, 2024 Eurobank paid a dividend of approximately $370 (€342). The company’s share of that dividend was approximately $128 (€118), which will be recorded in the company's consolidated financial reporting in the third quarter of 2024 as a reduction of Eurobank's carrying value under the equity method of accounting."

That would suggest their shares would be brought down  to 32.4% (34.6-2.2).  Fairfax may have decided to bring their ownership to below 33.3%, so they would not need to immediately adjust after any Eurobank buybacks. 
 

 

Edited January 23 by Hoodlum

[SafetyinNumbers]

1 hour ago, Hoodlum said:

That would suggest their shares would be brought down  to 32.4% (34.6-2.2).  Fairfax may have decided to bring their ownership to below 33.3%, so they would not need to immediately adjust after any Eurobank buybacks. 
 

 

They could participate pro rata in buybacks much like Exxon does when imperial Oil does buybacks.

[nwoodman]

Nice numbers from Digit

 

https://www.business-standard.com/markets/news/go-digit-general-insurance-shares-rally-9-after-strong-q3-details-here-125012300348_1.html

 

https://www.ndtvprofit.com/markets/go-digit-general-insurance-share-price-jumps-as-q3-profit-nearly-triples

 

Market loving it after the recent Indian sell off

[Hoodlum]

Here is the press release from Eurobank on the Fairfax shares that were sold today.  Shares closed at Euro 2.39 today.

 

https://www.eurobankholdings.gr/en/grafeio-tupou/etairiki-anakoinosi-23-01-2025

 

Eurobank Ergasias Services and Holdings S.A. (“Eurobank”) announces that it has been informed by the official announcement of its shareholder, Fairfax Financial Holdings Limited (“Fairfax”) of the following:

 

Fairfax has successfully sold 80 million ordinary shares (the “Shares”) of Eurobank, corresponding to approximately 2.2% of Eurobank’s share capital, at a price of Euro 2.33 per Share, through an accelerated book building procedure reserved for qualified investors (the “Transaction”).

 

The total proceeds of the Transaction amount to approximately 186 million euros. Settlement is expected to occur on or around January 27th, 2025.

 

This disposal represents a mandatory technical adjustment to Fairfax’s significant equity holding in Eurobank and does not reflect in any way a view on Eurobank’s valuation or long-term prospects. Following the Transaction, Fairfax will retain an equity stake of around, but below 33% of Eurobank’s share capital and will continue to remain a long-term, committed reference shareholder of Eurobank. Fairfax has also agreed to a 180-day lock-up period from the closing of the Transaction with respect to its remaining shares in Eurobank, subject to customary exceptions.

[petec]

20 hours ago, nwoodman said:

That sounds more like they are taking money off the table to me than compliance.

 

Highly unlikely that they would outright lie about the reason. Should be easy enough to check whether the regulator did rescind permission.

 

20 hours ago, nwoodman said:

The upside is that that it will free up Eurobank to repurchase shares.

 

I'd rather they flowed dividends to Fairfax to redeploy. Long term I think that's more tax efficient - I don't think FFH pays tax on dividends received (?) but presume it does on constant sales of shares to stay below the threshold. Not sure though.