Fairfax stock positions

[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  The link I provided specifically mentioned that the exemption to hold over 33.3% was recently rescinded.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 Thursday at 12:40 AM 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.

[petec]

20 minutes ago, Hoodlum said:

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”).

 

It's actually really good to see that they can liquidate chunks of this holding reasonably close to the market price. I have always felt there was a risk around that. 

Edited Thursday at 05:55 PM by petec

[villainx]

8 hours ago, petec said:

I have always felt there was a risk around that. 

 

That's partly why I haven't sold my 2.2% position in  ...   okay, I don't have 2.2% in any non controlling corporation.

[SafetyinNumbers]

8 hours ago, petec said:

 

It's actually really good to see that they can liquidate chunks of this holding reasonably close to the market price. I have always felt there was a risk around that. 

It’s the biggest company in the Greek ETF. It’s like saying it would be hard to do a secondary in Royal Bank. 

[villainx]

What's Royal Bank?  A UK thing?

[mananainvesting]

16 minutes ago, villainx said:

What's Royal Bank?  A UK thing?

Its a canadian Bank, #1 in marketcap on the TSX. 

[ValueNation]

19 minutes ago, villainx said:

What's Royal Bank?  A UK thing?

Biggest bank in Canada

[Dazel]

Viking,

 

Our work horse.

 

What number should we expect for annual earnings…unless Bradstreet sold bonds at the beginning of the quarter  they will be down in the fourth quarter mark to market…$800m paper gain in the third quarter.

[dartmonkey]

21 hours ago, petec said:

 

It's actually really good to see that they can liquidate chunks of this holding reasonably close to the market price. I have always felt there was a risk around that. 

I dunno, count me as disappointed - I don't see why they would expose themselves to being a forced seller below market prices. Sure, a 5-10c discount on 80m shares is just EU4-8m, but that shouldn't happen. I wonder why they couldn't get a friendly partner like OMERS to 'buy' them with a deal to buy them back at some point, but maybe it's not enough money to be worth the bother. It seems like such a good deal, I have bought a few shares recently, so it kind of grates to see them selling them below market price.

[KFRCanuk]

16 hours ago, ValueNation said:

Biggest bank in Canada

 

Yoga pants are 18th. FFH is 24th.

Edited Friday at 08:47 PM by KFRCanuk

[Viking]

5 hours ago, Dazel said:

Viking,

 

Our work horse.

 

What number should we expect for annual earnings…unless Bradstreet sold bonds at the beginning of the quarter  they will be down in the fourth quarter mark to market…$800m paper gain in the third quarter.

 

@Dazel , my last earnings update was mid-November. My guess then was basic earnings would come in around $160/share. I think $160 to $165/share is a reasonable number to use as a 'normalized' level of earnings for Fairfax today. 

 

There will be lots of puts and takes in Q4 (some of these have not been incorporated into my mid-Nov update);

- do we see growth resume in net premiums at Odyssey and Brit?

- spike in interest rates further out on the curve will likely be a modest headwind (unrealized losses on bonds > IFRS impact on insurance liabilities).

- mark to market investment gains = $200 million?

- Stelco sale  = $366 million gain

- Peak revaluation = ? gain

- AGT Food Ingredients sale of rail business = ? gain

- currency will be a headwind, perhaps meaningful (US$ strength) 

- adverse development at runoff of $150 to $200 million?

- tax rate has been a headwind (22 to 25% guide, from low 20%)

- fall in shares outstanding is a tailwind

 

Bottom line, my guess is we get a good quarter. 

 

Edited Friday at 08:51 PM by Viking

[Hoodlum]

23 hours ago, Viking said:

 

@Dazel , my last earnings update was mid-November. My guess then was basic earnings would come in around $160/share. I think $160 to $165/share is a reasonable number to use as a 'normalized' level of earnings for Fairfax today. 

 

There will be lots of puts and takes in Q4 (some of these have not been incorporated into my mid-Nov update);

- do we see growth resume in net premiums at Odyssey and Brit?

- spike in interest rates further out on the curve will likely be a modest headwind (unrealized losses on bonds > IFRS impact on insurance liabilities).

- mark to market investment gains = $200 million?

- Stelco sale  = $366 million gain

- Peak revaluation = ? gain

- AGT Food Ingredients sale of rail business = ? gain

- currency will be a headwind, perhaps meaningful (US$ strength) 

- adverse development at runoff of $150 to $200 million?

- tax rate has been a headwind (22 to 25% guide, from low 20%)

- fall in shares outstanding is a tailwind

 

Bottom line, my guess is we get a good quarter. 

 

At the end of q3, asset duration was almost the same as liability duration. This gap may have shrunk further towards the end of q4.  I wonder if due to IFRS reporting, we will not see much of an impact going forward with bond volatility. 
 

AGT Food mentioned that the rail sale would provide significant capital to them and was expected to close in late 2024 or early 2025. I haven’t heard anything on this, so I presume they are only waiting for regulatory approval. Fairfax may receive a special dividend from this, albeit in Q1 now. 
 

 

Edited Saturday at 08:13 PM by Hoodlum

[Viking]

2 hours ago, Hoodlum said:

At the end of q3, asset duration was almost the same as liability duration. This gap may have shrunk further towards the end of q4.  I wonder if due to IFRS reporting, we will not see much of an impact going forward with bond volatility. 
 

AGT Food mentioned that the rail sale would provide significant capital to them and was expected to close in late 2024 or early 2025. I haven’t heard anything on this, so I presume they are only waiting for regulatory approval. Fairfax may receive a special dividend from this, albeit in Q1 now. 

 

@Hoodlum , on bond volatility, I agree - given the bond portfolio and insurance liabilities are likely roughly balanced, the net impact to Fairfax should be pretty neutral. But the line items (where it shows up in the earnings report) will see some pretty big changes. Importantly, investment gains will take a big hit and IFRS 17 will see a big benefit from the big change in interest rates in Q4. 

 

AGT has become something of a 'phantom' type of holding since Fairfax took it private in Dec 2018. It has been chugging away for 6 years now. My guess is value has been building in this holding that is not being captured in Fairfax's reported results (and not captured in BV). So we will see if we get an update when the rail sale closes (with a possible dividend payment to Fairfax). I might be wrong.

 

I would love to get an update on Grivalia Hospitality (what the assets are worth). My guess is that investment will work out well for Fairfax.  

Edited Saturday at 10:15 PM by Viking

[Hoodlum]

56 minutes ago, Viking said:

 

@Hoodlum , on bond volatility, I agree - given the bond portfolio and insurance liabilities are likely roughly balanced, the net impact to Fairfax should be pretty neutral. But the line items (where it shows up in the earnings report) will see some pretty big changes. Importantly, investment gains will take a big hit and IFRS 17 will see a big benefit from the big change in interest rates in Q4. 

 

AGT has become something of a 'phantom' type of holding since Fairfax took it private in Dec 2018. It has been chugging away for 6 years now. My guess is value has been building in this holding that is not being captured in Fairfax's reported results (and not captured in BV). So we will see if we get an update when the rail sale closes (with a possible dividend payment to Fairfax). I might be wrong.

 

I would love to get an update on Grivalia Hospitality (what the assets are worth). My guess is that investment will work out well for Fairfax.  

I was actually surprised when AGT mentioned in their press release that they had over $3B in annual revenue.  This could be another asset to monitor for valuation. 
 

I came across this recent interview with Grivalia Hospitality’s CEO, that provides some insight on how they develop their properties. 
 

https://www.hospitalityinvestor.com/investment/interview-grivalia

[nwoodman]

2 hours ago, Hoodlum said:

I was actually surprised when AGT mentioned in their press release that they had over $3B in annual revenue.  This could be another asset to monitor for valuation. 
 

I came across this recent interview with Grivalia Hospitality’s CEO, that provides some insight on how they develop their properties. 
 

https://www.hospitalityinvestor.com/investment/interview-grivalia

Great interview.  Natalia Strafti is a class act, quick bio:

 

2000: Began her career at EFG Eurobank as Investment Analyst, later becoming Deputy Head of Advisory and Asset Management.

2008-2014: Head of Investments and Asset Management, managing 1.5B+ in real estate investments, including green-certified office redevelopments.

2014-2021: Chief Operating Officer (COO) of Grivalia Properties REIC, leading operations and sustainability initiatives, and driving successful share capital increases and IPO efforts.

2021: Appointed Deputy CEO of Grivalia Hospitality, overseeing acquisitions, development, and luxury hospitality projects.

2025: Promoted to CEO of Grivalia Hospitality, focusing on innovation, sustainability, and expanding in the ultra-luxury sector.

 

Intuitively a rise to CEO after 25 years with the same company just seems so much more culturally valuable than an outside appointment.  Very consistent with Fairfax’s approach and their value of tenure.

 

 

 

 

Edited yesterday at 01:28 AM by nwoodman