Fairfax 2020

[Viking]

Paul Rivett retires.  Sad news.  I thought he was going to succeed Prem when Prem decided to retire

 

https://ca.finance.yahoo.com/news/fairfax-financial-holdings-limited-executive-220110417.html

 

That’s worrying.

 

Petec, given he is going to continue to be involved with FFH in a small way i am not worried. Yes, it is unfortunate to lose a good person. My guess is Fairfax has a deep bench to pick a replacement from.

[Viking]

Here is what one investment house had to say in their preliminary report :-)

 

"Net/Net: Core insurance underwriting results were strong and growth was good across most units although this was significantly overshadowed by weak results from non-insurance operations, affiliates, and the run-off unit. While we think that Fairfax is well positioned for current favorable market conditions, quarters like this are why valuation has continued to lag peers. A conference call will be held at 8:30 a.m. ET (dial-in 800-369-2013; passcode Fairfax) on Friday, February 14."

[StubbleJumper]

I never particularly like this release because it's not accompanied by a full quarterly report, so it's a bit tougher to get the entire picture.  I eagerly await the annual report coming in March.  A few preliminary thoughts:

 

1) What's the deal with insurance operations?  Is it just a coincidence that the favourable development for 2018 and 2019 respectively almost perfectly offset the cats for 2018 and 2019 respectively (see the final two tables at the bottom of the presser)?  Is that a freakish occurrence, or is FFH pulling from the cookie jar to manage the numbers?  Seriously, WEB always said that one of the biggest challenges in P&C investing is trying to assess whether you believe the numbers. 

 

2) What's the deal with the Gross Written and Net Written in Q4 2019?  Are we not in the midst of a hardening market?  When you look at Q4's numbers, you see a visible bump in their ceding.  Why?  Is it the case that one or more of the subs is capital constrained, but still has plenty of profitable business to write, and is therefore throwing premium at the reinsurers?  What the hell is going on here?  If capital needs to be shifted from one sub to another, then do what needs to be done.  But, it's not at all clear to me that ceding should have increased.

 

3) It's nice to see a double-digit increase in Net Written.  Fixed income returns might be in the toilet and the CRs might be a little disappointing, but there's still room for growth in operating income if you can push up the underwriting volume.  It would be super nice to see a high single digit increase in Net Written in 2020, coupled with the CR being shaved by a couple of points.  A hardening market might just do that for you?

 

4) It will be interesting to read the annual letter and to get some colour from the conference call to better understand FFH's view of financial markets.  If Prem and Brian were fussing about broad market valuations three years ago, they must be shitting a brick today.

 

5) The earnings per share number is nice, but will the market give it any cred?  Quality of earnings over the past couple of years has been a bit suspect, but will anyone care?

 

 

Looking forward to the more detailed release in a few weeks.

 

 

SJ

[petec]

Paul Rivett retires.  Sad news.  I thought he was going to succeed Prem when Prem decided to retire

 

https://ca.finance.yahoo.com/news/fairfax-financial-holdings-limited-executive-220110417.html

 

That’s worrying.

 

Petec, given he is going to continue to be involved with FFH in a small way i am not worried. Yes, it is unfortunate to lose a good person. My guess is Fairfax has a deep bench to pick a replacement from.

 

It’s not the loss of a good person. It’s the loss of the heir to the throne. Weird, perhaps, rather than worrying.

[Viking]

 

4) It will be interesting to read the annual letter and to get some colour from the conference call to better understand FFH's view of financial markets.  If Prem and Brian were fussing about broad market valuations three years ago, they must be shitting a brick today.

 

SJ

 

SJ, regarding market valuations my guess is Fairfax is expecting the US and global economy to continue to chug along which should be good for stock markets. When you look at their specific holdings (Dec 31, 2019 valuations) there is nothing that i would call grossly overvalued and not much that i would call overvalued. The large position in Indian equities (Quess, Thomas Cook and the twin IIFL positions) have been in an 18 month bear market that looks to have finally turned in the last 6 weeks (for Quess and IIFL anyways). Similar for their position in Recipe - casual dining restaurant stocks in Canada have been getting crushed all 2019. Hard to see Recipe getting much cheaper and when they get back to same store sales growth (and improve profitability) there will be lots of upside (2H 2020?). Seaspan had a wonderful run in 2019 but i dont know if i would call it super expensive (perhaps a little expensive). Eurobank also had a great run in 2019 (it was crazy cheap at the end of 2018) and is probably fairly valued now with decent prospects. Blackberry is not expensive and if the Cylance acquisition works out it could increase 50% or more. Bottom line, valuations of the stocks they hold look pretty reasonable in aggregate. 2020 should be another decent year for investment gains.

[petec]

I never particularly like this release because it's not accompanied by a full quarterly report, so it's a bit tougher to get the entire picture.  I eagerly await the annual report coming in March.  A few preliminary thoughts:

 

1) What's the deal with insurance operations?  Is it just a coincidence that the favourable development for 2018 and 2019 respectively almost perfectly offset the cats for 2018 and 2019 respectively (see the final two tables at the bottom of the presser)?  Is that a freakish occurrence, or is FFH pulling from the cookie jar to manage the numbers?  Seriously, WEB always said that one of the biggest challenges in P&C investing is trying to assess whether you believe the numbers. 

 

2) What's the deal with the Gross Written and Net Written in Q4 2019?  Are we not in the midst of a hardening market?  When you look at Q4's numbers, you see a visible bump in their ceding.  Why?  Is it the case that one or more of the subs is capital constrained, but still has plenty of profitable business to write, and is therefore throwing premium at the reinsurers?  What the hell is going on here?  If capital needs to be shifted from one sub to another, then do what needs to be done.  But, it's not at all clear to me that ceding should have increased.

 

3) It's nice to see a double-digit increase in Net Written.  Fixed income returns might be in the toilet and the CRs might be a little disappointing, but there's still room for growth in operating income if you can push up the underwriting volume.  It would be super nice to see a high single digit increase in Net Written in 2020, coupled with the CR being shaved by a couple of points.  A hardening market might just do that for you?

 

4) It will be interesting to read the annual letter and to get some colour from the conference call to better understand FFH's view of financial markets.  If Prem and Brian were fussing about broad market valuations three years ago, they must be shitting a brick today.

 

5) The earnings per share number is nice, but will the market give it any cred?  Quality of earnings over the past couple of years has been a bit suspect, but will anyone care?

 

 

Looking forward to the more detailed release in a few weeks.

 

 

SJ

 

Re 2: I think we know for a fact that some subs are capacity constrained, and I don’t know how easy it is to move capital between them. Does anyone?

[Dazel]

 

Petec,

 

I don’t agree. Rivett has done a great job as a caretaker and lawyer. He is not in the league of Prem

And others at Markel and Berkshire...to take the stock where it should go. I called these earnings last year and a record year...no one cares. SNC Lavalin was a tap in in their backyard...SNC did not need the money but it was the kind of transaction that Buffett like operators make...Fairfax has been asleep. Blackberry is so undervalued it is attributable to Fairfax passive (do nothing) approach....hurting performance instead of helping. It is all great and everything to have a good reputation but as Buffett said about David Winters when he challenged Coke’s board....what has he done for his shareholders?

I am frustrated to say the least....if Prem is done give me a leader. The bones are there....

[StubbleJumper]

I never particularly like this release because it's not accompanied by a full quarterly report, so it's a bit tougher to get the entire picture.  I eagerly await the annual report coming in March.  A few preliminary thoughts:

 

1) What's the deal with insurance operations?  Is it just a coincidence that the favourable development for 2018 and 2019 respectively almost perfectly offset the cats for 2018 and 2019 respectively (see the final two tables at the bottom of the presser)?  Is that a freakish occurrence, or is FFH pulling from the cookie jar to manage the numbers?  Seriously, WEB always said that one of the biggest challenges in P&C investing is trying to assess whether you believe the numbers. 

 

2) What's the deal with the Gross Written and Net Written in Q4 2019?  Are we not in the midst of a hardening market?  When you look at Q4's numbers, you see a visible bump in their ceding.  Why?  Is it the case that one or more of the subs is capital constrained, but still has plenty of profitable business to write, and is therefore throwing premium at the reinsurers?  What the hell is going on here?  If capital needs to be shifted from one sub to another, then do what needs to be done.  But, it's not at all clear to me that ceding should have increased.

 

3) It's nice to see a double-digit increase in Net Written.  Fixed income returns might be in the toilet and the CRs might be a little disappointing, but there's still room for growth in operating income if you can push up the underwriting volume.  It would be super nice to see a high single digit increase in Net Written in 2020, coupled with the CR being shaved by a couple of points.  A hardening market might just do that for you?

 

4) It will be interesting to read the annual letter and to get some colour from the conference call to better understand FFH's view of financial markets.  If Prem and Brian were fussing about broad market valuations three years ago, they must be shitting a brick today.

 

5) The earnings per share number is nice, but will the market give it any cred?  Quality of earnings over the past couple of years has been a bit suspect, but will anyone care?

 

 

Looking forward to the more detailed release in a few weeks.

 

 

SJ

 

Re 2: I think we know for a fact that some subs are capacity constrained, and I don’t know how easy it is to move capital between them. Does anyone?

 

Many ways to do it, including:

 

1) Use the dividend capacity already approved by regulators to send a divvy from the capital-rich subs to the holdco and then it's no trouble at all to shift if from the holdco to the capital-poor sub;

2) If the capital poor sub operates in the same jurisdiction as a capital-rich sub, merge them;

3) Float another holdco bond issue for $500m, and sprinkle the proceeds into the subs that require more capacity;

 

Maybe it's just a one-time freaky thing in Q4 that they were laying off premium on the reinsurers?  But, that's not exactly how I imagined the company attacking a hardening market.

 

 

SJ

[StubbleJumper]

Paul Rivett retires.  Sad news.  I thought he was going to succeed Prem when Prem decided to retire

 

https://ca.finance.yahoo.com/news/fairfax-financial-holdings-limited-executive-220110417.html

 

That’s worrying.

 

Petec, given he is going to continue to be involved with FFH in a small way i am not worried. Yes, it is unfortunate to lose a good person. My guess is Fairfax has a deep bench to pick a replacement from.

 

It’s not the loss of a good person. It’s the loss of the heir to the throne. Weird, perhaps, rather than worrying.

 

 

I haven't seen anyone say it yet, so I will say it:  "Did he jump or was he pushed?"

 

Frankly, in situations like this, my instinct would be that he was pushed.

 

SJ

[Cigarbutt]

...

Re 2: I think we know for a fact that some subs are capacity constrained, and I don’t know how easy it is to move capital between them. Does anyone?

Many ways to do it, including:

 

1) Use the dividend capacity already approved by regulators to send a divvy from the capital-rich subs to the holdco and then it's no trouble at all to shift if from the holdco to the capital-poor sub;

2) If the capital poor sub operates in the same jurisdiction as a capital-rich sub, merge them;

3) Float another holdco bond issue for $500m, and sprinkle the proceeds into the subs that require more capacity;

 

Maybe it's just a one-time freaky thing in Q4 that they were laying off premium on the reinsurers?  But, that's not exactly how I imagined the company attacking a hardening market.

 

SJ

That's a concern I had about the capital flexibility to grow in a hard market.

When you look at yr-end 2018 regulatory dividend capacity at the (re)insurance subs, only Allied World (685.6M) and OdysseyRe (329.7M) had significant capacity. Crum and Forsters had some dividend capacity but up to Q3, after an early upstream dividend, overall, net capital has flowed to the sub to 'support' growth. Up to Q3, OdysseyRe has paid 50M in dividends to the parent and Allied World has paid 126.4M to minority interests. I'm not sure how easy it would be for the parent to obtain dividends from Allied without some kind of permission or sharing to the 32.2% minority interest. If this hard market continues, in order to participate, FFH needs profitability from operations and investments which renders the premium growth (and its retention) conditional.

Even if their equity investments are not likely to be correlated with markets, the level of equity investments to total capital is high and unusual in its composition and that aspect has regulatory capital implications.

[TwoCitiesCapital]

...

Re 2: I think we know for a fact that some subs are capacity constrained, and I don’t know how easy it is to move capital between them. Does anyone?

Many ways to do it, including:

 

1) Use the dividend capacity already approved by regulators to send a divvy from the capital-rich subs to the holdco and then it's no trouble at all to shift if from the holdco to the capital-poor sub;

2) If the capital poor sub operates in the same jurisdiction as a capital-rich sub, merge them;

3) Float another holdco bond issue for $500m, and sprinkle the proceeds into the subs that require more capacity;

 

Maybe it's just a one-time freaky thing in Q4 that they were laying off premium on the reinsurers?  But, that's not exactly how I imagined the company attacking a hardening market.

 

SJ

That's a concern I had about the capital flexibility to grow in a hard market.

When you look at yr-end 2018 regulatory dividend capacity at the (re)insurance subs, only Allied World (685.6M) and OdysseyRe (329.7M) had significant capacity. Crum and Forsters had some dividend capacity but up to Q3, after an early upstream dividend, overall, net capital has flowed to the sub to 'support' growth. Up to Q3, OdysseyRe has paid 50M in dividends to the parent and Allied World has paid 126.4M to minority interests. I'm not sure how easy it would be for the parent to obtain dividends from Allied without some kind of permission or sharing to the 32.2% minority interest. If this hard market continues, in order to participate, FFH needs profitability from operations and investments which renders the premium growth (and its retention) conditional.

Even if their equity investments are not likely to be correlated with markets, the level of equity investments to total capital is high and unusual in its composition and that aspect has regulatory capital implications.

 

I haven't dug into the numbers in any depth yet to know how true this is -

 

but it would be a massive slap in the face if all of these years we were told the company needed a fortress balance, that having tons of cash on hand was necessary, that hedging was necessary, all to be able to support subs in a hard market...only to get to the hard market and find out that they still can't do so?

[Viking]

A couple of notes from the conference call:

- Annual report and Q4 info will be available March 6

- net written premiums grew at accelerating rate each quarter; sees trend continuing in 2020

- supporting growth of insurance subs top priority; this is because hard markets occur infrequently and only last a short period of time (a couple of years)

- share repurchases will be done with cash not needed to grow insurance subs

- in the non-insurance segment, TCook/Quess demerger resulted in $191 million impairment

- US runoff had $216 million loss due to asbestos strengthening; example of social inflation

- $600 million will be coming to FFH in Q1 when the Riverstone UK deal closes; after sale closes Riverstone UK will have opportunity (with OMERS) to grow business. Fairfax may take Riverstone public at some point.

- minority insurance partners buyout: 10% of Brit soon at $100 million (seems low?); Eurolife will be small amount; Allied agreement opens up mid year and Fairfax has 3-4 years to buy out minority partner

- Go Digit: the company recently raised 10% at $800 million valuation. The $300 million gain recognized by Fairfax was Go Digit convertible shares (owned via Quess) not the common stock owned by Fairfax (hope i got this right)

- BIAL sale was to third party investor; purchaser was not named

 

[petec]

 

Petec,

 

I don’t agree. Rivett has done a great job as a caretaker and lawyer. He is not in the league of Prem

And others at Markel and Berkshire...to take the stock where it should go. I called these earnings last year and a record year...no one cares. SNC Lavalin was a tap in in their backyard...SNC did not need the money but it was the kind of transaction that Buffett like operators make...Fairfax has been asleep. Blackberry is so undervalued it is attributable to Fairfax passive (do nothing) approach....hurting performance instead of helping. It is all great and everything to have a good reputation but as Buffett said about David Winters when he challenged Coke’s board....what has he done for his shareholders?

I am frustrated to say the least....if Prem is done give me a leader. The bones are there....

 

Yes - fair. I’m not saying Rivett was the right man. I’ve no view on that. It’s just optically odd when the presumed heir resigns.

[petec]

...

Re 2: I think we know for a fact that some subs are capacity constrained, and I don’t know how easy it is to move capital between them. Does anyone?

Many ways to do it, including:

 

1) Use the dividend capacity already approved by regulators to send a divvy from the capital-rich subs to the holdco and then it's no trouble at all to shift if from the holdco to the capital-poor sub;

2) If the capital poor sub operates in the same jurisdiction as a capital-rich sub, merge them;

3) Float another holdco bond issue for $500m, and sprinkle the proceeds into the subs that require more capacity;

 

Maybe it's just a one-time freaky thing in Q4 that they were laying off premium on the reinsurers?  But, that's not exactly how I imagined the company attacking a hardening market.

 

SJ

That's a concern I had about the capital flexibility to grow in a hard market.

When you look at yr-end 2018 regulatory dividend capacity at the (re)insurance subs, only Allied World (685.6M) and OdysseyRe (329.7M) had significant capacity. Crum and Forsters had some dividend capacity but up to Q3, after an early upstream dividend, overall, net capital has flowed to the sub to 'support' growth. Up to Q3, OdysseyRe has paid 50M in dividends to the parent and Allied World has paid 126.4M to minority interests. I'm not sure how easy it would be for the parent to obtain dividends from Allied without some kind of permission or sharing to the 32.2% minority interest. If this hard market continues, in order to participate, FFH needs profitability from operations and investments which renders the premium growth (and its retention) conditional.

Even if their equity investments are not likely to be correlated with markets, the level of equity investments to total capital is high and unusual in its composition and that aspect has regulatory capital implications.

 

I haven't dug into the numbers in any depth yet to know how true this is -

 

but it would be a massive slap in the face if all of these years we were told the company needed a fortress balance, that having tons of cash on hand was necessary, that hedging was necessary, all to be able to support subs in a hard market...only to get to the hard market and find out that they still can't do so?

 

They have capital, but as discussed by others it’s at Odyssey and reinsurance isn’t hardening as fast as primary. I do find it annoying that after years of implying that all subs have the capital to grow, we now discover they don’t.

[Viking]

Here is a summary of Q4 results from one of the big Canadian banks:

 

“Our view: The insurance part of the business is shifting into a higher gear with strong growth, improving margins and still solid reserves. Quarterly results were negatively impacted by some non-insurance items that are largely one-time in nature. We think valuation is among the most attractive in the P&C space at a discount to book value with rising earnings momentum.”

[KFS]

A couple of notes from the conference call:

- Annual report and Q4 info will be available March 6

- net written premiums grew at accelerating rate each quarter; sees trend continuing in 2020

- supporting growth of insurance subs top priority; this is because hard markets occur infrequently and only last a short period of time (a couple of years)

- share repurchases will be done with cash not needed to grow insurance subs

- in the non-insurance segment, TCook/Quess demerger resulted in $191 million impairment

- US runoff had $216 million loss due to asbestos strengthening; example of social inflation

- $600 million will be coming to FFH in Q1 when the Riverstone UK deal closes; after sale closes Riverstone UK will have opportunity (with OMERS) to grow business. Fairfax may take Riverstone public at some point.

- minority insurance partners buyout: 10% of Brit soon at $100 million (seems low?); Eurolife will be small amount; Allied agreement opens up mid year and Fairfax has 3-4 years to buy out minority partner

- Go Digit: the company recently raised 10% at $800 million valuation. The $300 million gain recognized by Fairfax was Go Digit convertible shares (owned via Quess) not the common stock owned by Fairfax (hope i got this right)

- BIAL sale was to third party investor; purchaser was not named

 

 

Some additional notes:

- Repurchased 479k shares in 2019.  1.2 million since 2017.  Repurchases are expected to be significant but over a long term (i.e. 10 years) as stated in previous annual report, not necessarily in short term or every quarter.  (Singleton repurchased 85% of shares outstanding over a 10-15 year stretch.) 

- Coronavirus:  minimal or insignificant impact on insurance. 

- Stock market overall valuations are high, but... for example, from 1999 to 2002 the overall market dropped 50% while Fairfax value-focused investments increased 100% over the same period. 

- Fairfax india clearly undervalued.  Great potential for BIAL, 3rd largest city in India, community of software engineers; re-election of Modi. 

 

[petec]

Just started reading the transcript. “Realised gains in Seaspan and Brookfield” - sounds like they’ve sold some SSW and owner BAM? Unless there’s been a transcription error...

[StubbleJumper]

Just started reading the transcript. “Realised gains in Seaspan and Brookfield” - sounds like they’ve sold some SSW and owner BAM? Unless there’s been a transcription error...

 

 

Perhaps gains on SSW have something to do with the APR merger.  That's the sort of thing that I was alluding to in my comments from yesterday about quality of earnings.  There have been a few transactions over the past couple of years which have triggered accounting gains without any real change to the economic reality.  Keg and Recipe are an example.  Eurolife and Grivalia is another.  SSW and APR might be a third example, if that transaction has already hit the books? 

 

It's almost worthwhile inventing a pro-forma income statement to strip out some of this.

 

 

SJ

[petec]

There wasn’t a gain on APR so that’s not it and I don’t think the transaction will contribute earnings, high quality or low.

 

I suspect what they’re referring to is gains on the exercise of SSW warrants.

[StubbleJumper]

There wasn’t a gain on APR so that’s not it and I don’t think the transaction will contribute earnings, high quality or low.

 

I suspect what they’re referring to is gains on the exercise of SSW warrants.

 

 

That could very well be the case.  They would definitely have a gain from exercising the SSW warrants, but it doesn't much change the economic reality (outside of FFH having to add some cash to the existing investment).

 

Keg/Recipe wasn't the correct transaction for me to reference.  In 2018 the "accounting" transactions were Grivalia being consolidated, and Thomas Cook/Quess triggering a bunch of paper gains.  In 2019, it was Quess triggering a bunch of paper losses and Eurolife/Grivalia triggering a bunch of paper gains. 

 

For the past few years, most of us have cooked up an adjusted BV to get an idea of the significance of some of the excess in value over book.  But, really it might be time to create an adjusted net income to strip out the impact of some of the one-time transactions to better portray ongoing economic performance.

 

 

SJ

[petec]

While we’re at it I don’t recall Grivalia/Eurobank generating a paper gain either, and it’s clearly been value-enhancing because it was effectively a capital raise for the bank.

[StubbleJumper]

While we’re at it I don’t recall Grivalia/Eurobank generating a paper gain either, and it’s clearly been value-enhancing because it was effectively a capital raise for the bank.

 

"Net gains on long equity exposures of $1,631.1 million in 2019 was primarily comprised of unrealized appreciation of preferred shares of Go Digit Infoworks ($350.9 million), the sale of the company's remaining interest in ICICI Lombard ($240.0 million), a non-cash gain on the merger of Grivalia Properties into Eurobank ($171.3 million) and significant unrealized appreciation of common stocks."

[petec]

There wasn’t a gain on APR so that’s not it and I don’t think the transaction will contribute earnings, high quality or low.

 

I suspect what they’re referring to is gains on the exercise of SSW warrants.

 

 

That could very well be the case.  They would definitely have a gain from exercising the SSW warrants, but it doesn't much change the economic reality (outside of FFH having to add some cash to the existing investment).

 

Keg/Recipe wasn't the correct transaction for me to reference.  In 2018 the "accounting" transactions were Grivalia being consolidated, and Thomas Cook/Quess triggering a bunch of paper gains.  In 2019, it was Quess triggering a bunch of paper losses and Eurolife/Grivalia triggering a bunch of paper gains. 

 

For the past few years, most of us have cooked up an adjusted BV to get an idea of the significance of some of the excess in value over book.  But, really it might be time to create an adjusted net income to strip out the impact of some of the one-time transactions to better portray ongoing economic performance.

 

 

SJ

 

Ah I see what you’re getting at.

 

Personally I care more about BV than earnings so I’m happy with the disclosure they’ve often provided on what BV would be if they marked to market.

[StubbleJumper]

There wasn’t a gain on APR so that’s not it and I don’t think the transaction will contribute earnings, high quality or low.

 

I suspect what they’re referring to is gains on the exercise of SSW warrants.

 

 

That could very well be the case.  They would definitely have a gain from exercising the SSW warrants, but it doesn't much change the economic reality (outside of FFH having to add some cash to the existing investment).

 

Keg/Recipe wasn't the correct transaction for me to reference.  In 2018 the "accounting" transactions were Grivalia being consolidated, and Thomas Cook/Quess triggering a bunch of paper gains.  In 2019, it was Quess triggering a bunch of paper losses and Eurolife/Grivalia triggering a bunch of paper gains. 

 

For the past few years, most of us have cooked up an adjusted BV to get an idea of the significance of some of the excess in value over book.  But, really it might be time to create an adjusted net income to strip out the impact of some of the one-time transactions to better portray ongoing economic performance.

 

 

SJ

 

Ah I see what you’re getting at.

 

Personally I care more about BV than earnings so I’m happy with the disclosure they’ve often provided on what BV would be if they marked to market.

 

 

Agreed that the BV metric is the more important metric for valuing the insurance end of the operations, and it's been important to cook up an adjusted-BV estimate for the past few years to better reflect reality.  But, it's also important to try to measure operational performance against any number of metrics, including EPS, ROE, CR and investment return.  That's where some of these non-cash items muddy the water.  This year, the dollars are small, with Eurobank/Grivalia being $6 or $7 per share...but the Thomas Cook/Quess number from 2018 was absolutely enormous, and the Grivalia consolidation number from 2018 was a smaller number added to it.  A large head-line EPS number is nice to see and it definitely feels good, but...

 

 

SJ

 

 

SJ

[petec]

While we’re at it I don’t recall Grivalia/Eurobank generating a paper gain either, and it’s clearly been value-enhancing because it was effectively a capital raise for the bank.

 

"Net gains on long equity exposures of $1,631.1 million in 2019 was primarily comprised of unrealized appreciation of preferred shares of Go Digit Infoworks ($350.9 million), the sale of the company's remaining interest in ICICI Lombard ($240.0 million), a non-cash gain on the merger of Grivalia Properties into Eurobank ($171.3 million) and significant unrealized appreciation of common stocks."

 

Sorry - I doing a very poor job of expressing myself (possibly because I’m also trying to feed a 3 month old!).

 

What I meant to say was:

1) I couldn’t remember whether they booked a gain on the Eurobank/Grivalia deal, but

2) if they did I’m pretty sure it did reflect economic reality in the sense that it moved book value closer to the mark-to-market book value. Until the deal Grivalia was consolidated so the rise in the share price since acquisition wasn’t reflected in FFH BV.

 

I may be remembering wrong - don’t have my notes to hand.