Fairfax stock positions

[glider3834]

EUROB.AT - Eurobank look to have picked up around  €107M or 83% return on their Hellenic Bank investment in just over 18 mths , assuming 13.4% acquisition approved 

 

Edited February 27, 2023 by glider3834

[Viking]

50 minutes ago, glider3834 said:

EUROB.AT - Eurobank look to have picked up around  €107M or 83% return on their Hellenic Bank investment in just over 18 mths , assuming 13.4% acquisition approved 

 

@glider3834 nice catch. It appears Eurobank is looking to be a banking consolidator in SE Europe. Makes a lot of sense… scale is critical in banking. Eurobank’s strong financial position has to be a big advantage right now for them. I know Eurobank has talked about re-establishing a dividend again. But i wonder if using excess cash to consolidate banking in the region does not make more sense for long term shareholders. The issue, of course, is management. Can the acquisitions be done sensibly? I think Eurobank’s management team is good… Your post suggests their purchase of Hellenic Bank shares was opportunistic.

[glider3834]

16 minutes ago, Viking said:

@glider3834 nice catch. It appears Eurobank is looking to be a banking consolidator in SE Europe. Makes a lot of sense… scale is critical in banking. Eurobank’s strong financial position has to be a big advantage right now for them. I know Eurobank has talked about re-establishing a dividend again. But i wonder if using excess cash to consolidate banking in the region does not make more sense for long term shareholders. The issue, of course, is management. Can the acquisitions be done sensibly? I think Eurobank’s management team is good… Your post suggests their purchase of Hellenic Bank shares was opportunistic.

yes definitely - Hellenic Bank's mkt cap is around €800M & Hellenic expect pre-tax profit to exceed €200M in 2023 - so its trading at say 4x pre-tax profit but Eurobank look to have paid around 2.2x 2023 pre-tax profit 

 

 

Edited February 28, 2023 by glider3834

[Viking]

How are Fairfax's equity holdings doing so far in Q1? The positions I track are up about $1.074 billion, with the following split:

- mark to market = $382 million = $16/share

- associates =        $660 million = $28/share

- consolidated =      $32 million

 

Portfolio is up about +7.2%. Solid performance. Yes, it will be volatile. What were the big movers?

 

1.) Eurobank =  +$543 million 

- This position has been on fire and is now valued at $1.85 billion. Atlas is at $2 billion. Not that long ago @glider3834 suggested Eurobank may pass Atlas as Fairfax's largest equity holding and he might be proven right in 2023. Looks like the turnaround at Eurobank is complete. 

 

2.) FFH TRS =  +$198 million

- this is turning into a brilliant purchase. As a reminder, this position gives Fairfax exposure to 1.96 million Fairfax shares at an initial average cost of US$354. FFH shares are trading today at $695 = a double in a little more than 2 years. Since inception, this position is up about $670 million (with a notional value of $1.36 billion). 

 

3.) Stelco =      +$136 million

- as was pointed out by another board member, HRC steel prices are back up over $1,000. As a result, Stelco is up. As a reminder, Fairfax bought 13.7% of Stelco in Nov 2018 for US$193 million. Since then Fairfax has been paid more than $40 million in dividends. Despite putting no new money in, they now own 23.6% of Stelco that is today worth $560 million. Stelco also has $800 million in cash on its balance sheet. With all the infrastructure spending happening in North America the next decade, Stelco is exceptionally well positioned. Looks like a pretty attractive acquisition target to me  

 

I have attached my Excel spreadsheet below. In addition to most of Fairfax's equity holdings, lots of additional tabs that board members might find interesting.

 

Fairfax Equity Holdings March 1 2023.xlsx

Edited March 1, 2023 by Viking

[glider3834]

10 minutes ago, Viking said:

2.) FFH TRS =  +$198 million

- this is turning into a brilliant purchase. As a reminder, this position gives Fairfax exposure to 1.96 million Fairfax shares at an initial average cost of US$354. FFH shares are trading today at $695 = a double in a little more than 2 years. Since inception, this position is up about $670 million. 

from an investment return perspective it will be better than a double - with total return they collect share price appreciation plus the dividend - I am not sure what their interest cost is(LIBOR/reference rate + spread) but lets say around 7% p.a to keep it the TRS open - the return could be 5-6x bagger over that 2 plus year time frame - again just speculating hopefully Prem will provide their all in cost

[glider3834]

35 minutes ago, Viking said:

Not that long ago @glider3834 suggested Eurobank may pass Atlas as Fairfax's largest equity holding and he might be proven right in 2023. Looks like the turnaround at Eurobank is complete. 

not me lol but looks like now Mr Market is in weighing mode - also they have mooted a potential dividend in 2023 - lets see what happens 

[glider3834]

RFP transaction has closed

 

https://resolutefp.mediaroom.com/2023-03-01-Paper-Excellence-Welcomes-Resolute-Into-Its-Family-of-Companies

[gfp]

39 minutes ago, glider3834 said:

RFP transaction has closed

 

https://resolutefp.mediaroom.com/2023-03-01-Paper-Excellence-Welcomes-Resolute-Into-Its-Family-of-Companies

 

Sheesh, what happened with RFP shares going into the close today?  (besides the merger closing)

[Viking]

3 hours ago, glider3834 said:

RFP transaction has closed

 

https://resolutefp.mediaroom.com/2023-03-01-Paper-Excellence-Welcomes-Resolute-Into-Its-Family-of-Companies

GREAT NEWS on so many fronts. Proceeds to Fairfax from the sale of Resolute will be @US$630 million + $180 million CVR. Resolute was sold at $20.50/share. For perspective, back in March 2020, Resolute shares traded at US$1.20/share. Fairfax owned 30.5 million shares so Resolute’s value 2 short years ago was a total of US$37 million. Pre-pandemic, Resolute traded at an average valuation of about $6. In the record lumber market post 2020, Resolute’s share traded at an average around $12. Bottom line, at $20.50, Fairfax got an outstanding price for this company.
 

But price is just the beginning of why this is a great move for Fairfax shareholders. Resolute also owned some pretty crappy business: newsprint, paper and tissue. And the ‘good’ business, lumber, is getting killed today by higher interest rates (yes, i do like lumber looking out a year or two). I think Resolute also had a pretty large pension liability on its books. Bottom line, Fairfax also got rid of what was overall (still) a pretty shitty business. 
 

There is also the psychological benefit (to long term followers) of Fairfax selling Resolute. This shouldn’t matter but it does. Resolute was one of Fairfax’s larger purchases (total investment of $791 million) from a decade ago. It was also one of Fairfax’s great investment busts. An absolute dog with fleas. This train wreck of an investment started all the way back in 2008 when Fairfax spend $350 million on a convertible bond of Abitibi (the predecessor of Resolute). And as ‘the story’ kept getting worse, Fairfax kept buying more. Also buried in Resolute’s sad history was the smelly (putting it politely) take-out in 2012 of Fibrek (SFK Pulp). I am guessing there are lots of long term shareholders of Fairfax who are very happy that Fairfax has sold Resolute. It is yet another example of ‘old Fairfax’ being laid to rest by the current team at ‘new Fairfax’.

 

The good news part of the Resolute story is Prem admitted in his letter in the 2018AR (and again in the 2019AR) that Resolute had been a very poor investment. Terrible business. Poor management. Double down. I think the ‘lessons’ of Resolute was taken to heart by Fairfax in 2018. And shareholders have been reaping the reward ever since (with much better decisions on new equity purchases - putting a premium on management among other things).
 

Fairfax now has $630 million to redeploy into higher quality investments. Given their stellar track record over the past 5 years in deploying capital i can’t wait to see what they do. 
—————

To be fair, the management team at Resolute has done a very good job over the past 4 to 5 years. The purchase of the three lumber mills in the US south in 2020 (at the bottom of the lumber cycle) was especially well done. Bottom line, they got the company to a position where it was taken out at a very good price. Well done!

—————

From 2018AR - Prem’s Letter: ”We have invested $791 million in Resolute and received a special dividend of $46 million, for a net investment cost of $745 million. Our initial investment was a convertible bond purchased in 2008 for $347 million. We invested an additional $131 million prior to Resolute entering into creditor protection and most of the remainder during the period from December 2010 to 2013. Subsequent to write-downs and our share of profits and losses over time, at December 31, 2018 we held our 30.4 million Resolute shares in our books at $300 million ($9.87 per share). The current fair market value of these shares is $244 million ($8.03 per share). You can see that Resolute has been a very poor investment to date!”

—————

Trip down memory lane from 2008 to present…

- https://www.resolutefp.com/About_Us/Our_History/

Edited March 3, 2023 by Viking

[jbwent63]

On 3/2/2023 at 6:18 PM, Viking said:

GREAT NEWS on so many fronts. Proceeds to Fairfax from the sale of Resolute will be @US$630 million + $180 million CVR. Resolute was sold at $20.50/share. For perspective, back in March 2020, Resolute shares traded at US$1.20/share. Fairfax owned 30.5 million shares so Resolute’s value 2 short years ago was a total of US$37 million. Pre-pandemic, Resolute traded at an average valuation of about $6. In the record lumber market post 2020, Resolute’s share traded at an average around $12. Bottom line, at $20.50, Fairfax got an outstanding price for this company.
 

But price is just the beginning of why this is a great move for Fairfax shareholders. Resolute also owned some pretty crappy business: newsprint, paper and tissue. And the ‘good’ business, lumber, is getting killed today by higher interest rates (yes, i do like lumber looking out a year or two). I think Resolute also had a pretty large pension liability on its books. Bottom line, Fairfax also got rid of what was overall (still) a pretty shitty business. 
 

There is also the psychological benefit (to long term followers) of Fairfax selling Resolute. This shouldn’t matter but it does. Resolute was one of Fairfax’s larger purchases (total investment of $791 million) from a decade ago. It was also one of Fairfax’s great investment busts. An absolute dog with fleas. This train wreck of an investment started all the way back in 2008 when Fairfax spend $350 million on a convertible bond of Abitibi (the predecessor of Resolute). And as ‘the story’ kept getting worse, Fairfax kept buying more. Also buried in Resolute’s sad history was the smelly (putting it politely) take-out in 2012 of Fibrek (SFK Pulp). I am guessing there are lots of long term shareholders of Fairfax who are very happy that Fairfax has sold Resolute. It is yet another example of ‘old Fairfax’ being laid to rest by the current team at ‘new Fairfax’.

 

The good news part of the Resolute story is Prem admitted in his letter in the 2018AR (and again in the 2019AR) that Resolute had been a very poor investment. Terrible business. Poor management. Double down. I think the ‘lessons’ of Resolute was taken to heart by Fairfax in 2018. And shareholders have been reaping the reward ever since (with much better decisions on new equity purchases - putting a premium on management among other things).
 

Fairfax now has $630 million to redeploy into higher quality investments. Given their stellar track record over the past 5 years in deploying capital i can’t wait to see what they do. 
—————

To be fair, the management team at Resolute has done a very good job over the past 4 to 5 years. The purchase of the three lumber mills in the US south in 2020 (at the bottom of the lumber cycle) was especially well done. Bottom line, they got the company to a position where it was taken out at a very good price. Well done!

—————

From 2018AR - Prem’s Letter: ”We have invested $791 million in Resolute and received a special dividend of $46 million, for a net investment cost of $745 million. Our initial investment was a convertible bond purchased in 2008 for $347 million. We invested an additional $131 million prior to Resolute entering into creditor protection and most of the remainder during the period from December 2010 to 2013. Subsequent to write-downs and our share of profits and losses over time, at December 31, 2018 we held our 30.4 million Resolute shares in our books at $300 million ($9.87 per share). The current fair market value of these shares is $244 million ($8.03 per share). You can see that Resolute has been a very poor investment to date!”

—————

Trip down memory lane from 2008 to present…

- https://www.resolutefp.com/About_Us/Our_History/

Now if Blackberry would do the same!

[Dazel]

 

The bond portfolio is driving Fairfax as I have said for 20 years…Brian Bradstreet is the best Bond guy in the world! He is the bond king no one knows. Expect them to start buying long bonds soon if they have not done so already. 
 

 

[Viking]

In August 2021, Fairfax invested C$100 million into Foran Mining - an exploration and development company. At the time, the purchase was a bit of a head scratcher. An exploration company? Mining? Canada? Really?

 

Well, 18 months later, what have we learned? 
1.) the energy transition to EV’s is happening. And lots of inputs, especially copper, are likely going to be in short supply looking out 2 or 3 years. Copper prices are spiking.
2.) ‘the story’ at Foran continues to get better. They are discovering more, large deposits (copper, zinc, gold and silver). Mine development is progessing, with initial production scheduled to begin in 2025. More savvy, deep pocketed partners are signing on. The company is looking to ‘graduate’ its stock listing from the venture exchange to the TSX. 
 

What is Fairfax’s exposure? As of today, Fairfax owns 25% of Foran. 

- Aug 2021: 55.6 million shares @ C$1.80 = C$100 million

- Oct 2022: exercised 16 million warrants @ C$2.09 = C$33 million

 

Shares of Foran Mining closed Friday at C$3.88, near a 52 week high. 
- 71.6 million shares x C$3.88 = C$277 million = US$204 million.

- the value of Fairfax’s initial investment has doubled over the past 18 months. 
 

What does it mean for investors in Fairfax? The story at Foran Mining continues to get better. Yes, it is still early days. And there will be lots of volatility. The significant exposure to copper could turn this investment into a big winner in the coming years for Fairfax shareholders. Foran Mining is looking like yet another example of the team at Fairfax hitting the ball out of the park with their equity purchase decisions over the past couple of years.
 

- https://foranmining.com/wp-content/uploads/2022/09/Foran-Corporate-Presentation.pdf

 

- https://foranmining.com/wp-content/uploads/2022/08/WILTW_2022-08-18_E02_BHP_Groups_bid_for_OZ_Minerals_highlights_its_forecast_for_accelerated.pdf

 

 

Edited March 4, 2023 by Viking

[glider3834]

On 2/28/2023 at 11:20 AM, Viking said:

@glider3834 nice catch. It appears Eurobank is looking to be a banking consolidator in SE Europe. Makes a lot of sense… scale is critical in banking. Eurobank’s strong financial position has to be a big advantage right now for them. I know Eurobank has talked about re-establishing a dividend again. But i wonder if using excess cash to consolidate banking in the region does not make more sense for long term shareholders. The issue, of course, is management. Can the acquisitions be done sensibly? I think Eurobank’s management team is good… Your post suggests their purchase of Hellenic Bank shares was opportunistic.

Eurobank have agreed to sell their Serbian banking business Eurobank Direktna - I think boils down to they didn't have enough scale in Serbia

 

- they own 70% should receive b/w 195-200M euro

- ‘The sale was made at  a premium , if it is calculated that it values the Serbian bank almost at its book value with a P/V of 0.98, i.e. higher than not only Greek, but even European banks trading at an average P/V of around 0.90.’ https://seenews.com/news/serbias-aik-banka-to-acquire-eurobank-direktna-for-280-mln-euro-816461

- 'The sale came as the Serbian bank had a small share of around 5.5%-6% in the local market and thus its size was a hindrance in an attempt to make Eurobank a strategic player in the market.' https://www.pagenews.gr/2023/03/04/nea-agoras/eurobank-giati-poulise-ti-thygatriki-sti-serbia-ta-epomena-bimata/

- according to Eurobank - this bank was not meeting their RoTBV target threshold 'is in line with Eurobank's strategy to direct capital to investments with higher return prospects (RoTBV) and further strengthen its presence in the main markets in which it operates, specifically in Greece, Bulgaria and Cyprus.' https://www.insider.gr/epiheiriseis/265761/eurobank-desmeytiki-symfonia-me-aik-banka-beograd-gia-tin-polisi-tis

- will add 0.5 % point to Eurobank's CET1 capital ratio

 

so on paper based on media reports above, looks like another decent capital allocation move

Edited March 4, 2023 by glider3834

[TwoCitiesCapital]

7 hours ago, Viking said:

In August 2021, Fairfax invested C$100 million into Foran Mining - an exploration and development company. At the time, the purchase was a bit of a head scratcher. An exploration company? Mining? Canada? Really?

 

Well, 18 months later, what have we learned? 
1.) the energy transition to EV’s is happening. And lots of inputs, especially copper, are likely going to be in short supply looking out 2 or 3 years. Copper prices are spiking.
2.) ‘the story’ at Foran continues to get better. They are discovering more, large deposits (copper, zinc, gold and silver). Mine development is progessing, with initial production scheduled to begin in 2025. More savvy, deep pocketed partners are signing on. The company is looking to ‘graduate’ its stock listing from the venture exchange to the TSX. 
 

What is Fairfax’s exposure? As of today, Fairfax owns 25% of Foran. 

- Aug 2021: 55.6 million shares @ C$1.80 = C$100 million

- Oct 2022: exercised 16 million warrants @ C$2.09 = C$33 million

 

Shares of Foran Mining closed Friday at C$3.88, near a 52 week high. 
- 71.6 million shares x C$3.88 = C$277 million = US$204 million.

- the value of Fairfax’s initial investment has doubled over the past 18 months. 
 

What does it mean for investors in Fairfax? The story at Foran Mining continues to get better. Yes, it is still early days. And there will be lots of volatility. The significant exposure to copper could turn this investment into a big winner in the coming years for Fairfax shareholders. Foran Mining is looking like yet another example of the team at Fairfax hitting the ball out of the park with their equity purchase decisions over the past couple of years.
 

- https://foranmining.com/wp-content/uploads/2022/09/Foran-Corporate-Presentation.pdf

 

- https://foranmining.com/wp-content/uploads/2022/08/WILTW_2022-08-18_E02_BHP_Groups_bid_for_OZ_Minerals_highlights_its_forecast_for_accelerated.pdf

 

 

 

Speaking of exposure to minerals/metals/mining - they also have $100 million in Altius from converts that were exercised after moving into the money. 

[maplevalue]

https://www.reuters.com/markets/europe/greece-months-away-investment-grade-rating-says-cbank-chief-ft-2023-03-07/
 

How times change. Maybe this leads investing in Greece back into the mainstream

 

”

March 7 (Reuters) - Greece is close to regaining its investment-grade credit rating in 2023, after 12 years of relegation to junk status, the Financial Times reported on Tuesday.

"We think that 2023 is the year will get the investment grade," Greek central bank chief Yannis Stournaras said in an interview with the paper, urging the country's next government to maintain fiscal prudence.

Stournaras told FT he was "confident" that credit rating agencies would upgrade Greek bonds within months should lawmakers signal their intent to maintain reforms and take advantage of a "window of opportunity" to significantly lower the country's debt burden.”

 

[Xerxes]

On 3/4/2023 at 8:01 AM, jbwent63 said:

Now if Blackberry would do the same!

 

Nope

Blackberry took the other side today and went down 10% today.

[glider3834]

https://www.reuters.com/markets/europe/greeces-eurobank-posts-big-jump-2022-profit-2023-03-09/

[glider3834]

 

1 minute ago, glider3834 said:

https://www.reuters.com/markets/europe/greeces-eurobank-posts-big-jump-2022-profit-2023-03-09/

'The bank initially planned to distribute a dividend this year.

"The amount earmarked for dividend distribution (in 2023) will be used in an optimal way to bid for the 1.4% HFSF stake through a share buyback scheme," said Eurobank's Chief Executive Fokion Karavias.' (Reuters)

[nwoodman]

2 hours ago, glider3834 said:

 

'The bank initially planned to distribute a dividend this year.

"The amount earmarked for dividend distribution (in 2023) will be used in an optimal way to bid for the 1.4% HFSF stake through a share buyback scheme," said Eurobank's Chief Executive Fokion Karavias.' (Reuters)

https://www.eurobankholdings.gr/-/media/holding/omilos/enimerosi-ependuton/enimerosi-metoxon-eurobank/oikonomika-apotelesmata-part-01/2023/fy-2022/4q2022-results-pr-en.pdf
 

Very solid results.  Aiming for a 25% payout in the form of divs and buybacks from next year.  I like the idea of repurchasing the HFSF stake, hopefully at a good price. Even after the run up in the stock, still looks cheap. Results were ahead of both consensus and MS.  Analyst note attached FWIW

eurobank_20230309_0000.pdf

[glider3834]

https://www.hollywoodreporter.com/business/business-news/antenna-plus-stream-investment-fairfax-greece-expansion-1235357456/

[glider3834]

At current mkt cap of around $1.3B USD - Fairfax stake in GIG looks to have increased to 573M currently from 425M (31 Dec-22) 

 

https://www.zawya.com/en/press-release/companies-news/gulf-insurance-group-announces-a-net-profit-of-kd-382mln-us-1247mln-for-the-year-2022-iim2lbrw

[Viking]

On 3/30/2023 at 2:54 PM, glider3834 said:

At current mkt cap of around $1.3B USD - Fairfax stake in GIG looks to have increased to 573M currently from 425M (31 Dec-22) 

 

https://www.zawya.com/en/press-release/companies-news/gulf-insurance-group-announces-a-net-profit-of-kd-382mln-us-1247mln-for-the-year-2022-iim2lbrw

 

Gulf Insurance Group (GIG) just finished an outstanding year in 2022. @glider3834 thanks for the 'heads up'. GIG's acquisition of AXA Gulf operations in 2021 is looking like a very good purchase (cheap price, quality businesses, solid strategic fit).

—————

But before we dig in a little on GIG, let’s take a step back. One thing that makes Fairfax very different from many of its P&C insurance peers is the scale and size of its international insurance operations. Why go international? One of Prem’s early mentors was John Templeton. Templeton was an investor in Fairfax and he and Prem had a close relationship. John’s great niece, Lauren Templeton, sits on Fairfax’s board today.

• https://www.brokenleginvesting.com/ultimate-guide-john-templeton-investing/

—————

In 2010, Fairfax invested $217 million for a 41.3% interest in Gulf Insurance. Fairfax partnered with KIPCO (Kuwait), the controlling shareholder of Gulf Insurance. Who is KIPCO? 

• Kuwait Projects Company (Holding) – KIPCO – is a holding company that focuses on investments in the Middle East and North Africa. It’s strategy of acquiring, building, scaling and selling companies in the MENA region has worked successfully for over 30 years.
• https://kipco.com

GIG became the vehicle for Fairfax to grow its insurance business in the MENA region (Middle East North Africa). The growth for the next 10 years was largely organic. Late in 2020, as the world was struggling with covid, GIG opportunistically agreed to purchase the insurance operations of AXA Gulf & Yusuf Bin Ahmed Kanoo for $475 million. This purchase almost doubled the size of GIG (it was a big, bold move). Parent AXA was looking to re-build its capital levels due to losses experienced from covid. The purchase closed in Sept of 2021. Fairfax did invest new money in GIG (as did KIPCO) in 2021 to keep its ownership in GIG steady at 43.7% (not sure exactly how much they spent).

 

2022 was the first full year of results for GIG post acquisition. How did they do? Very well.

• net profit = US$125 million (Fairfax’s share = $55 million)
• net profit increased $48.4 million from 2021, due to improvement in underwriting and investments performance results
• gross written premiums = $2.7 billion = +52% vs PY
• dividend = 54 fils/share = US$0.175/share (up from 40 fils paid in 2021?)
• https://www.gulfinsgroup.com/Renderers/Showmedia.ashx?Id=72136334-9e40-4a0b-829f-5ba8afaad28e&download=false

The shares of GIG are publicly traded. However, they are thinly traded, with Kipco and Fairfax owning together something like 95%(?). Shares recently increased in price from  105 fils to 142 fils, which puts total market cap of GIG at $1.3 billion at March 31. Seems reasonable for a growing business that is earning $125 million/year.

• Fairfax’s stake has increased in value over the past quarter to $570 million (March 31) from $400 million (Dec 31) - assuming the current share price is accurate.
• Fairfax has a carrying value for GIG of $403.4 million (Dec 31, 2022) versus $380 million (Dec 31, 2021).
• Dividend payment to Fairfax in 2023 will be = $0.175/share x 123 million = $21.5 million

It appears GIG has become a permanent holding for Fairfax.

—————

 

 

—————

Prem’s Letters in Past Annual Reports

 

2022

 

Gulf Insurance Group had another excellent year led by CEO Khaled Saoud Al-Hasan and GIG Gulf CEO Paul Adamson. 2022, the first full year with GIG Gulf results, produced gross premiums of over $2.5 billion and a combined ratio of approximately 92%. We have a wonderful partnership with Kipco, led by CEO Sheikha Dana, in the ownership of Gulf Insurance.

 

Bijan (Khosrowshahi), along with Jean Cloutier, have been deeply involved with Gulf Insurance Group in the Middle East as well. After the acquisition of AXA Gulf (now GIG Gulf) in 2021, Gulf Insurance is one of the most prominent players in the region. Led by Khaled Al-Hasan, with Paul Adamson running GIG Gulf as a standalone unit, Gulf Insurance will be an increasingly important contributor to Fairfax.

—————

2021

 

I mentioned this to you in last year’s annual report but it bears repeating. We have had a wonderful partnership with Kipco in the ownership of Gulf Insurance Group (GIG) in Kuwait. GIG is run by Khaled Saoud Al- Hasan, until just recently under the chairmanship of Faisal Al-Ayyar, the CEO of Kipco. GIG had $1.8 billion (including four months of AXA Gulf) in premiums in 2021, more than 3 times the premiums in 2010 when we became a partner (our interest is 44%). Khaled has an outstanding track record with an average combined ratio of 95%, with excellent reserving. As mentioned last year, GIG acquired AXA Gulf (now GIG Gulf) on September 7, 2021, which had $1 billion in premiums in 2021 and a combined ratio of 93%. The new GIG, operating in 13 countries with $2.6 billion in gross premiums, will be a force to be reckoned with. Paul Adamson and his team have done an outstanding job at AXA Gulf. From Fairfax, Bijan Khosrowshahi, Jean Cloutier and Quinn McLean have been very involved in the success of our partnership with GIG. It is with great regret that I have to announce that our partner, Faisal Al-Ayyar, has recently retired after a stellar 30+ year career with Kipco. He has been a wonderful friend and partner to Fairfax and myself and we will miss him greatly. We wish Faisal and his family much happiness and good health in his retirement. Sheikha Dana is the new CEO of Kipco and our partner at GIG. We look forward to working with her in the years to come.

 

Working closely with Fairfax Latam and Colonnade, Bijan Khosrowshahi has provided valuable experience and insights that have been a significant factor in the success of these operations. Bijan, along with Jean Cloutier, has also been intimately involved with GIG in the Middle East. We own 44% of GIG, alongside Kipco. In 2021, GIG completed the acquisition of AXA Gulf, vaulting the combined operations well over the $2.5 billion gross premium mark. AXA Gulf (now GIG Gulf ) will operate on a decentralized basis within GIG, and will continue to be managed by Paul Adamson. We are thrilled to welcome Paul and his colleagues into the greater Fairfax family.

 

During 2021 the company exercised judgment in determining it had significant influence over Gulf Insurance pursuant to arrangements related to its sale of RiverStone Barbados as described in note 6.

 

On February 8, 2021 the company entered into an arrangement to purchase (unless sold earlier) certain portfolio investments owned by RiverStone Barbados as described in note 23 and subsequently commenced applying the equity method of accounting to its interest in Gulf Insurance pursuant to that arrangement.

 

Investing activities for the year ended December 31, 2021

Purchases of investments in associates of $175.4 primarily related to increased investments in Gulf Insurance, HFP and a Fairfax India associate.

—————

2020

 

Last year, I discussed our wonderful partnership which we entered into in 2010 with Kipco in Kuwait through its Vice Chairman Faisal Al-Ayyar. The performance of Gulf Insurance Group (‘‘GIG’’), run by Khaled Saoud Al Hasan, has been excellent, tripling gross premiums to $1.4 billion with a combined ratio of 95% since 2010. On November 30, 2020, the company announced the acquisition of AXA’s operations in the Gulf region. This will add over $900 million in gross premiums written with a combined ratio running below 95%, providing GIG access to new markets in Oman and Qatar and increasing its operations in Saudi Arabia, Bahrain and the UAE. We are very excited about the tremendous long term opportunity this presents for GIG. We welcome Paul Adamson and the AXA Gulf Group employees to our partnership with Kipco.

—————

2019

 

Gulf Insurance Group (‘‘GIG’’) is a wonderful partnership we entered into in 2010 with Kipco in Kuwait through its Chairman, Faisal Al-Ayyar. GIG, run by Khaled Saoud Al-Hasan, operates in 11 countries in the Middle East. In 2019 it wrote $1.3 billion in gross premiums and had a combined ratio of 95%. Since we acquired our interest, Gulf has had an average combined ratio of 95% and gross premiums have almost tripled.

————

2010

Gulf Insurance consolidates our interests in the Middle East

 

In 2008 we mentioned to you that we had purchased approximately a 20% interest in Arab Orient run excellently by Isam Abdelkhaliq and controlled by Karim Kabariti (Chairman of Jordan Kuwait Bank). Through Karim we met Faisal Al Ayyar, Vice Chairman of Kipco, the controlling shareholder of Gulf Insurance and Jordan Kuwait Bank and the ultimate controller of Arab Orient. Under Faisal’s leadership, Kipco has had an outstanding track record over the past 20 years, increasing shareholder value by building businesses with an Arab world focus. Kipco’s book value per share has compounded by 16% per year over the past 13 years and the stock price has followed suit. We paid $217.1 million for a 41% interest in Gulf Insurance, with Kipco having a 43% interest, and Gulf Insurance purchased our shares of Arab Orient at our cost of $11.2 million to increase Gulf’s ownership of Arab Orient to 89%. Gulf Insurance, which has been in business since 1962, operates in seven countries in the Middle East and North Africa and is the premier property and casualty company in the region. In 2010, Gulf Insurance wrote $417.6 million in gross premiums and earned $33.2 million, with a consolidated investment portfolio of $552.0 million; its combined ratio has averaged 94% over the past ten years. We are excited to be partners with Faisal and his management team at Kipco and our team of Bijan Khosrowshahi, Jean Cloutier and Steve Ridgeway look forward to working with Khaled Saoud Al-Hasan, the CEO of Gulf Insurance, and the presidents of the seven insurance companies belonging to Gulf Insurance. We continue to separately own a 20% interest in Alliance Insurance Company in Dubai, led by Wisam Al Haimus. Wisam had another outstanding year with a combined ratio of approximately 74% in 2010.

 

Investment in Gulf Insurance

On September 28, 2010, the company completed the acquisition of a 41.3% interest in Gulf Insurance Company (“Gulf Insurance”) for cash consideration of $217.1 (61.9 million Kuwaiti dinar) inclusive of a 2.1% interest in Gulf Insurance which the company had previously acquired for cash consideration of $8.5 (2.0 million Kuwaiti dinar). Subsequent to making its investment, the company determined that it had obtained significant influence over Gulf Insurance and commenced recording its 41.3% interest in Gulf Insurance using the equity method of accounting. The equity accounted investment in Gulf Insurance was reported in the corporate and other reporting segment. Following the closing of this transaction, the company sold its ownership interest in Arab Orient Insurance Company (“Arab Orient”) to Gulf Insurance for proceeds equal to the original cost paid to acquire this investment. Gulf Insurance is headquartered in Kuwait and underwrites a full range of primary property and casualty and life and health insurance products in the Middle East and North Africa.

 

==========

 

Acquisition of AXA Gulf & Yusuf Bin Ahmed Kanoo

 

Gulf Insurance Group CEO Khaled Saud Al-Hassan said in an interview with “Al Arabiya” today, Tuesday, that the acquisition of the entire stake in “AXA Gulf” by Gulf Insurance is part of the group’s strategy to increase revenue and its presence in the Arab region.

He added that Gulf Insurance is currently present in 11 countries and its revenues totaled $ 1.5 billion in 2020, and the acquisition is part of the board’s policy for regional expansion and leadership in Arab insurance markets. operations and net profit.

 

Gulf Insurance Group CEO explained that Gulf Insurance Group is present in countries including Egypt, Algeria and Turkey, as well as other Arab markets, and these countries account for 50% of the group’s total revenues and Kuwait accounts for the remaining percentage.

 

Khaled Saud Al-Hassan indicated that the acquisition of AXA Gulf will increase the group’s revenues to $ 2.5 billion, making it the largest player in the Arab insurance market and is present in 13 countries, adding Qatar, Oman and Abu Dhabi after the acquisition, in in order to serve customers and shareholders.

- https://asumetech.com/gulf-insurance-in-al-arabiya-the-acquisition-of-axa-brings-revenues-to-2-5-billion-dollars/

—————

 

Edited March 31, 2023 by Viking

[glider3834]

54 minutes ago, Viking said:

 

Gulf Insurance Group (GIG) just finished an outstanding year in 2022. @glider3834 thanks for the 'heads up'. GIG's acquisition of AXA Gulf operations in 2021 is looking like a very good purchase (cheap price, quality businesses, solid strategic fit).

—————

But before we dig in a little on GIG, let’s take a step back. One thing that makes Fairfax very different from many of its P&C insurance peers is the scale and size of its international insurance operations. Why go international? One of Prem’s early mentors was John Templeton. Templeton was an investor in Fairfax and he and Prem had a close relationship. John’s great niece, Lauren Templeton, sits on Fairfax’s board today.

• https://www.brokenleginvesting.com/ultimate-guide-john-templeton-investing/

—————

In 2010, Fairfax invested $217 million for a 41.3% interest in Gulf Insurance. Fairfax partnered with KIPCO (Kuwait), the controlling shareholder of Gulf Insurance. Who is KIPCO? 

• Kuwait Projects Company (Holding) – KIPCO – is a holding company that focuses on investments in the Middle East and North Africa. It’s strategy of acquiring, building, scaling and selling companies in the MENA region has worked successfully for over 30 years.
• https://kipco.com

GIG became the vehicle for Fairfax to grow its insurance business in the MENA region (Middle East North Africa). The growth for the next 10 years was largely organic. Late in 2020, as the world was struggling with covid, GIG opportunistically agreed to purchase the insurance operations of AXA Gulf & Yusuf Bin Ahmed Kanoo for $475 million. This purchase almost doubled the size of GIG (it was a big, bold move). Parent AXA was looking to re-build its capital levels due to losses experienced from covid. The purchase closed in Sept of 2021. Fairfax did invest new money in GIG (as did KIPCO) in 2021 to keep its ownership in GIG steady at 43.7% (not sure exactly how much they spent).

 

2022 was the first full year of results for GIG post acquisition. How did they do? Very well.

• net profit = US$125 million (Fairfax’s share = $55 million)
• net profit increased $48.4 million from 2021, due to improvement in underwriting and investments performance results
• gross written premiums = $2.7 billion = +52% vs PY
• dividend = 54 fils/share = US$0.175/share (up from 40 fils paid in 2021?)
• https://www.gulfinsgroup.com/Renderers/Showmedia.ashx?Id=72136334-9e40-4a0b-829f-5ba8afaad28e&download=false

The shares of GIG are publicly traded. However, they are thinly traded, with Kipco and Fairfax owning together something like 95%(?). Shares recently increased in price from  105 fils to 142 fils, which puts total market cap of GIG at $1.3 billion at March 31. Seems reasonable for a growing business that is earning $125 million/year.

• Fairfax’s stake has increased in value over the past quarter to $570 million (March 31) from $400 million (Dec 31) - assuming the current share price is accurate.
• Fairfax has a carrying value for GIG of $403.4 million (Dec 31, 2022) versus $380 million (Dec 31, 2021).
• Dividend payment to Fairfax in 2023 will be = $0.175/share x 123 million = $21.5 million

It appears GIG has become a permanent holding for Fairfax.

—————

 

 

—————

Prem’s Letters in Past Annual Reports

 

2022

 

Gulf Insurance Group had another excellent year led by CEO Khaled Saoud Al-Hasan and GIG Gulf CEO Paul Adamson. 2022, the first full year with GIG Gulf results, produced gross premiums of over $2.5 billion and a combined ratio of approximately 92%. We have a wonderful partnership with Kipco, led by CEO Sheikha Dana, in the ownership of Gulf Insurance.

 

Bijan (Khosrowshahi), along with Jean Cloutier, have been deeply involved with Gulf Insurance Group in the Middle East as well. After the acquisition of AXA Gulf (now GIG Gulf) in 2021, Gulf Insurance is one of the most prominent players in the region. Led by Khaled Al-Hasan, with Paul Adamson running GIG Gulf as a standalone unit, Gulf Insurance will be an increasingly important contributor to Fairfax.

—————

2021

 

I mentioned this to you in last year’s annual report but it bears repeating. We have had a wonderful partnership with Kipco in the ownership of Gulf Insurance Group (GIG) in Kuwait. GIG is run by Khaled Saoud Al- Hasan, until just recently under the chairmanship of Faisal Al-Ayyar, the CEO of Kipco. GIG had $1.8 billion (including four months of AXA Gulf) in premiums in 2021, more than 3 times the premiums in 2010 when we became a partner (our interest is 44%). Khaled has an outstanding track record with an average combined ratio of 95%, with excellent reserving. As mentioned last year, GIG acquired AXA Gulf (now GIG Gulf) on September 7, 2021, which had $1 billion in premiums in 2021 and a combined ratio of 93%. The new GIG, operating in 13 countries with $2.6 billion in gross premiums, will be a force to be reckoned with. Paul Adamson and his team have done an outstanding job at AXA Gulf. From Fairfax, Bijan Khosrowshahi, Jean Cloutier and Quinn McLean have been very involved in the success of our partnership with GIG. It is with great regret that I have to announce that our partner, Faisal Al-Ayyar, has recently retired after a stellar 30+ year career with Kipco. He has been a wonderful friend and partner to Fairfax and myself and we will miss him greatly. We wish Faisal and his family much happiness and good health in his retirement. Sheikha Dana is the new CEO of Kipco and our partner at GIG. We look forward to working with her in the years to come.

 

Working closely with Fairfax Latam and Colonnade, Bijan Khosrowshahi has provided valuable experience and insights that have been a significant factor in the success of these operations. Bijan, along with Jean Cloutier, has also been intimately involved with GIG in the Middle East. We own 44% of GIG, alongside Kipco. In 2021, GIG completed the acquisition of AXA Gulf, vaulting the combined operations well over the $2.5 billion gross premium mark. AXA Gulf (now GIG Gulf ) will operate on a decentralized basis within GIG, and will continue to be managed by Paul Adamson. We are thrilled to welcome Paul and his colleagues into the greater Fairfax family.

 

During 2021 the company exercised judgment in determining it had significant influence over Gulf Insurance pursuant to arrangements related to its sale of RiverStone Barbados as described in note 6.

 

On February 8, 2021 the company entered into an arrangement to purchase (unless sold earlier) certain portfolio investments owned by RiverStone Barbados as described in note 23 and subsequently commenced applying the equity method of accounting to its interest in Gulf Insurance pursuant to that arrangement.

 

Investing activities for the year ended December 31, 2021

Purchases of investments in associates of $175.4 primarily related to increased investments in Gulf Insurance, HFP and a Fairfax India associate.

—————

2020

 

Last year, I discussed our wonderful partnership which we entered into in 2010 with Kipco in Kuwait through its Vice Chairman Faisal Al-Ayyar. The performance of Gulf Insurance Group (‘‘GIG’’), run by Khaled Saoud Al Hasan, has been excellent, tripling gross premiums to $1.4 billion with a combined ratio of 95% since 2010. On November 30, 2020, the company announced the acquisition of AXA’s operations in the Gulf region. This will add over $900 million in gross premiums written with a combined ratio running below 95%, providing GIG access to new markets in Oman and Qatar and increasing its operations in Saudi Arabia, Bahrain and the UAE. We are very excited about the tremendous long term opportunity this presents for GIG. We welcome Paul Adamson and the AXA Gulf Group employees to our partnership with Kipco.

—————

2019

 

Gulf Insurance Group (‘‘GIG’’) is a wonderful partnership we entered into in 2010 with Kipco in Kuwait through its Chairman, Faisal Al-Ayyar. GIG, run by Khaled Saoud Al-Hasan, operates in 11 countries in the Middle East. In 2019 it wrote $1.3 billion in gross premiums and had a combined ratio of 95%. Since we acquired our interest, Gulf has had an average combined ratio of 95% and gross premiums have almost tripled.

————

2010

Gulf Insurance consolidates our interests in the Middle East

 

In 2008 we mentioned to you that we had purchased approximately a 20% interest in Arab Orient run excellently by Isam Abdelkhaliq and controlled by Karim Kabariti (Chairman of Jordan Kuwait Bank). Through Karim we met Faisal Al Ayyar, Vice Chairman of Kipco, the controlling shareholder of Gulf Insurance and Jordan Kuwait Bank and the ultimate controller of Arab Orient. Under Faisal’s leadership, Kipco has had an outstanding track record over the past 20 years, increasing shareholder value by building businesses with an Arab world focus. Kipco’s book value per share has compounded by 16% per year over the past 13 years and the stock price has followed suit. We paid $217.1 million for a 41% interest in Gulf Insurance, with Kipco having a 43% interest, and Gulf Insurance purchased our shares of Arab Orient at our cost of $11.2 million to increase Gulf’s ownership of Arab Orient to 89%. Gulf Insurance, which has been in business since 1962, operates in seven countries in the Middle East and North Africa and is the premier property and casualty company in the region. In 2010, Gulf Insurance wrote $417.6 million in gross premiums and earned $33.2 million, with a consolidated investment portfolio of $552.0 million; its combined ratio has averaged 94% over the past ten years. We are excited to be partners with Faisal and his management team at Kipco and our team of Bijan Khosrowshahi, Jean Cloutier and Steve Ridgeway look forward to working with Khaled Saoud Al-Hasan, the CEO of Gulf Insurance, and the presidents of the seven insurance companies belonging to Gulf Insurance. We continue to separately own a 20% interest in Alliance Insurance Company in Dubai, led by Wisam Al Haimus. Wisam had another outstanding year with a combined ratio of approximately 74% in 2010.

 

Investment in Gulf Insurance

On September 28, 2010, the company completed the acquisition of a 41.3% interest in Gulf Insurance Company (“Gulf Insurance”) for cash consideration of $217.1 (61.9 million Kuwaiti dinar) inclusive of a 2.1% interest in Gulf Insurance which the company had previously acquired for cash consideration of $8.5 (2.0 million Kuwaiti dinar). Subsequent to making its investment, the company determined that it had obtained significant influence over Gulf Insurance and commenced recording its 41.3% interest in Gulf Insurance using the equity method of accounting. The equity accounted investment in Gulf Insurance was reported in the corporate and other reporting segment. Following the closing of this transaction, the company sold its ownership interest in Arab Orient Insurance Company (“Arab Orient”) to Gulf Insurance for proceeds equal to the original cost paid to acquire this investment. Gulf Insurance is headquartered in Kuwait and underwrites a full range of primary property and casualty and life and health insurance products in the Middle East and North Africa.

 

==========

 

Acquisition of AXA Gulf & Yusuf Bin Ahmed Kanoo

 

Gulf Insurance Group CEO Khaled Saud Al-Hassan said in an interview with “Al Arabiya” today, Tuesday, that the acquisition of the entire stake in “AXA Gulf” by Gulf Insurance is part of the group’s strategy to increase revenue and its presence in the Arab region.

He added that Gulf Insurance is currently present in 11 countries and its revenues totaled $ 1.5 billion in 2020, and the acquisition is part of the board’s policy for regional expansion and leadership in Arab insurance markets. operations and net profit.

 

Gulf Insurance Group CEO explained that Gulf Insurance Group is present in countries including Egypt, Algeria and Turkey, as well as other Arab markets, and these countries account for 50% of the group’s total revenues and Kuwait accounts for the remaining percentage.

 

Khaled Saud Al-Hassan indicated that the acquisition of AXA Gulf will increase the group’s revenues to $ 2.5 billion, making it the largest player in the Arab insurance market and is present in 13 countries, adding Qatar, Oman and Abu Dhabi after the acquisition, in in order to serve customers and shareholders.

- https://asumetech.com/gulf-insurance-in-al-arabiya-the-acquisition-of-axa-brings-revenues-to-2-5-billion-dollars/

—————

 

[glider3834]

Exco Resources - Chou Funds AR 2022

 

 

 

[Viking]

I have updated my equity spreadsheet for Fairfax to March 31, 2023. The equity portfolio that I track is up about $680 million in Q1. This gain is not surprising as equity markets are up nicely in Q1. Of the total increase, about $375 million is mark-to-market (about $16/share pre-tax). For a whole bunch of reasons, earnings for Q1 look very good; I'll have my Q1 earnings update for Fairfax out in another day or so.

 

Big movers in Q1:

1.) Eurobank      +$234 million

2.) FFH TRS       +$139 million - mark-to-market

3.) Stelco             +$78 million

4.) Fairfax India   +$75 million

5.) Mytilineos      +$63 million - mark-to-market

 

Importantly:

1.) Resolute Forest Products sale closed in Q1. I will remove Resolute from the list after Fairfax reports Q1 results (in May).

2.) Altas take-private has closed in Q1. This is Fairfax's largest equity holding at $2 billion = 13% of total equity portfolio. With recent take-private transactions (Recipe in Q4) moving forward we will see much lower volatility in the equity portfolio from a reporting perspective. 

-----------

For board members who might not know... my spreadsheet attached below has a number of tabs you might find useful:

Tab 1: FFH 23 = where I track Fairfax's various equity holdings

Tab 2: Size = equity weightings - not completed (in process)

Tab 3: Moves = various purchases/sales Fairfax has made going back to 2010

Tab 4: 2023 Earnings Estimate = with history back to 2016

Tab 5: Premiums = net premiums written going back to 2014

- also includes losses from equity hedges and CPI positions (2010 to 2020)

Tab 6: Interest = interest and dividends going back to 2010

Tab 7: Associates = Associate holding and earnings going back to 2017

There are other tabs... most of which have not been updated in a while. 

Fairfax Equity Holdings March 31 2023.xlsx

Edited April 1, 2023 by Viking