Fairfax 2021

[UK]

https://www.wsj.com/articles/how-mixing-hurricanes-with-low-rates-impacts-insurers-11630350607

 

But there is some rising pressure on recent positive pricing trends for reinsurers, according to industry reviews. A report by brokerage Willis Towers Watson in July said that in the reinsurance market “there are increasing signs of capacity supply outweighing demand. Worries about inflated costs had limited impact on recent renewal pricing, the report said. But the market for alternative capital is booming, with issuance of catastrophe bonds in the second quarter of 2021 outstripping new issuance in 2019, according to Willis. This market tends to be strong when interest rates are low, leading investors to search for alternative forms of yield. Historically this has hit reinsurance pricing through ample supply of funds.

[matthew2129]

Now that the Riverstone and Brit sales are closed, I'd really like to see to FFH ratchet up the buybacks this month. Given the large TRS in place, they shouldn't be shy to smash the ask

[IceCreamMan]

On 7/31/2021 at 6:09 PM, ERICOPOLY said:

 

They have about 8% of shares outstanding worth of TRS.  So I think if you multiply $54 by 1.08 you arrive at about $58.32, assuming the shares appreciate at precisely the rate of EPS increases. 

 

It's a bit confusing to arrive at an estimate for earnings when share increases feed back into earnings and earnings drive share increases.

 

On 9/2/2021 at 9:52 PM, matthew2129 said:

Now that the Riverstone and Brit sales are closed, I'd really like to see to FFH ratchet up the buybacks this month. Given the large TRS in place, they shouldn't be shy to smash the ask

 

It's too bad we can't buy OTM call options on Fairfax like the WSB team does. Imagine the gamma squeeze on a stock for which the underlying company is loaded up with total return swaps on its own shares.

[glider3834]

2 hours ago, IceCreamMan said:

 

 

It's too bad we can't buy OTM call options on Fairfax like the WSB team does. Imagine the gamma squeeze on a stock for which the underlying company is loaded up with total return swaps on its own shares.

Agree , although I would still probably continue to hold most of my position in shares due to the timing risk with options, I would also like to be able to buy OTM calls.

 

I am super curious about how this total return swap on Fairfax shares has been structured. Its on around 1.96mil shares and there is no institution or fund that appears to own that many shares https://www.morningstar.ca/ca/report/stocks/ownership.aspx?t=0P00006821&lang=en-CA - if the payer (of this equity swap) wants to fully hedge their exposure, I assume they own the underlying share position in Fairfax? 

[glider3834]

1 minute ago, glider3834 said:

Agree , although I would still probably continue to hold most of my position in shares due to the timing risk with options, I would also like to be able to buy OTM calls.

 

I am super curious about how this total return swap on Fairfax shares has been structured. Its on around 1.96mil shares and there is no institution or fund that appears to own that many shares https://www.morningstar.ca/ca/report/stocks/ownership.aspx?t=0P00006821&lang=en-CA - if the payer (of this equity swap) wants to fully hedge their exposure, I assume they own the underlying share position in Fairfax? 

just to put in context 1.96 mil shares - thats a CAD 1.1 billion position

[TwoCitiesCapital]

12 hours ago, glider3834 said:

Agree , although I would still probably continue to hold most of my position in shares due to the timing risk with options, I would also like to be able to buy OTM calls.

 

I am super curious about how this total return swap on Fairfax shares has been structured. Its on around 1.96mil shares and there is no institution or fund that appears to own that many shares https://www.morningstar.ca/ca/report/stocks/ownership.aspx?t=0P00006821&lang=en-CA - if the payer (of this equity swap) wants to fully hedge their exposure, I assume they own the underlying share position in Fairfax? 

 

That would be the easiest way in this instance, but they could also find a party willing to bet the opposite direction on Fairfax shares. Or partially hedge with OTM options to avoid tying up the capital simply to earn a few bps. 

[glider3834]

On 9/11/2021 at 3:27 AM, TwoCitiesCapital said:

 

That would be the easiest way in this instance, but they could also find a party willing to bet the opposite direction on Fairfax shares. Or partially hedge with OTM options to avoid tying up the capital simply to earn a few bps. 

thanks Twocities  thats a nice summary & makes sense

 

If we have a hypothetical situation where there is a large sudden increase (I wish:) in the price of Fairfax shares - could there be situation for example where hedge funds (who are short Fairfax via total return swaps) become buyers of common stock to offset their exposure OR where the counterparties that are writing OTM (over-the counter) call options start buying the underlying shares to also offset their risk. Could there be a feedback loop or squeeze type situation or would all these parties (hedge funds or option writers) again use derivatives to manage their exposures to effectively avoid buying the underlying shares where liquidity may be limited?

 

Sorry if I am rambling but this TRS investment is unusual & I am trying to understand how it could impact the share price potentially ....:)

 

 

 

 

 

 

 

 

 

[maplevalue]

8 hours ago, glider3834 said:

If we have a hypothetical situation where there is a large sudden increase (I wish:) in the price of Fairfax shares - could there be situation for example where hedge funds (who are short Fairfax via total return swaps) become buyers of common stock to offset their exposure OR where the counterparties that are writing OTM (over-the counter) call options start buying the underlying shares to also offset their risk. Could there be a feedback loop or squeeze type situation or would all these parties (hedge funds or option writers) again use derivatives to manage their exposures to effectively avoid buying the underlying shares where liquidity may be limited?

 

Very unlikely in my opinion. My best guess is that the TRS is constructed so that right now there is some investment bank long the exact number of shares Fairfax has the TRS for. If the price goes up the bank wires money to Fairfax, if it goes down the bank demands payments from Fairfax. On net the investment bank's position is neutral.

[nwoodman]

42 minutes ago, maplevalue said:

Very unlikely in my opinion. My best guess is that the TRS is constructed so that right now there is some investment bank long the exact number of shares Fairfax has the TRS for. If the price goes up the bank wires money to Fairfax, if it goes down the bank demands payments from Fairfax. On net the investment bank's position is neutral.

Agree the shares will already have been bought.  The payer charges FFH, the receiver, a finance charge with downside protection if the price of the asset, in this case FFH shares drops.  When the TRS is unwound, it is likely the IB would sell the shares back into the market.

 

 

In a TRS contract, the party receiving the total return gets any income generated by the financial asset without actually owning it. The receiving party benefits from any price increases in the value of the assets during the lifetime of the contract. The receiver must then pay the asset owner the base interest rate during the life of the TRS. The asset owner forfeits the risk associated with the asset but absorbs the credit exposure risk that the asset is subjected to. For example, if the asset price falls during the lifetime of the TRS, the receiver will pay the asset owner a sum equal to the amount of the asset price decline.

https://corporatefinanceinstitute.com/resources/knowledge/finance/total-return-swap-trs/

 

Edited September 13, 2021 by nwoodman

[TwoCitiesCapital]

On 9/13/2021 at 6:28 AM, maplevalue said:

 

Very unlikely in my opinion. My best guess is that the TRS is constructed so that right now there is some investment bank long the exact number of shares Fairfax has the TRS for. If the price goes up the bank wires money to Fairfax, if it goes down the bank demands payments from Fairfax. On net the investment bank's position is neutral.

 

Agreed that it's unlikely. I'm not a bank trader to know precisely how they hedge the exposure.

 

In most cases, I doubt they would just outright buy 100% of the shares just due to how much capital that requires versus the few basis points of profit they can scalp. I'd expect it would be some combination of shares, options, and/or market making the opposite side of the trade. 

 

That being said, Fairfax has limited derivatives available since it's not NYSE traded (not sure if there are options available in Canada or not) and I doubt any combo of 1-3 hedge funds were willing to short that many shares so that might have been the path of least resistance. 

 

 

[maplevalue]

Not news but do not think this has been brought up with respect to Fairfax on this thread yet. One of the promises from the Liberals (who are poised to be reelected) 2021 platform

 

Quote

Raise corporate income taxes on the largest, most profitable banks and insurance companies who earn more than $1 billion per year and introduce a temporary Canada Recovery Dividend that these companies would pay in recognition of the fact they have recovered faster and stronger than many other industries.

 

Seems like it's unclear how it will apply to international profits vs. domestic profits. Some of the recent weakness in CAD financials has been attributed to this. Fairfax I assume would be subject to this. 

[KPO]

Long time follower of this great investment community, but first time post.  I’ve owned Berkshire since ‘98 and have owned Fairfax off and on for 10 years or so, most recently getting back in during the March 2020 COVID downdraft. With that backdrop, I’m interested in what folks think about value today compared to when Prem purchased shares at ~$308 in June of 2020. The share price today is roughly $100 higher on an absolute basis, but Digit, Atlas and a generally favorable operating performance since has pushed book value up by $152 (giving full effect for Digit valuation markup) since his purchase. Is Fairfax “cheaper” than 15 months ago, is the Digit, Atlas, etc. driven book increase a mirage or something else? Appreciate your thoughts. 

[TwoCitiesCapital]

1 hour ago, KPO said:

Long time follower of this great investment community, but first time post.  I’ve owned Berkshire since ‘98 and have owned Fairfax off and on for 10 years or so, most recently getting back in during the March 2020 COVID downdraft. With that backdrop, I’m interested in what folks think about value today compared to when Prem purchased shares at ~$308 in June of 2020. The share price today is roughly $100 higher on an absolute basis, but Digit, Atlas and a generally favorable operating performance since has pushed book value up by $152 (giving full effect for Digit valuation markup) since his purchase. Is Fairfax “cheaper” than 15 months ago, is the Digit, Atlas, etc. driven book increase a mirage or something else? Appreciate your thoughts. 

 

Yes. It's cheaper and will continue to get cheaper as long as the share price remains stagnant while it's insurance companies, investments, and equity associates continue to make money every quarter. 

[glider3834]

1 hour ago, KPO said:

Long time follower of this great investment community, but first time post.  I’ve owned Berkshire since ‘98 and have owned Fairfax off and on for 10 years or so, most recently getting back in during the March 2020 COVID downdraft. With that backdrop, I’m interested in what folks think about value today compared to when Prem purchased shares at ~$308 in June of 2020. The share price today is roughly $100 higher on an absolute basis, but Digit, Atlas and a generally favorable operating performance since has pushed book value up by $152 (giving full effect for Digit valuation markup) since his purchase. Is Fairfax “cheaper” than 15 months ago, is the Digit, Atlas, etc. driven book increase a mirage or something else? Appreciate your thoughts. 

From a reward/risk point of view I think so & Fairfax's shares are cheap on a relative (compared to insurance peers) and absolute basis (vs historical ratios & based on potential BV growth rates IMO)

 

Now the risks are better known (Jun 2020 no guarantee we would have a vaccine that would actually work or how much economic damage covid would do - now we have a lot more visibility around vaccination rates & improving economic conditions.)

 

Reward/value is there as you have indicated BV has grown faster than share price. 

 

Also Fairfax have significantly bolstered their cash/capital position with sale of Riverstone insurance - credit line is paid off. Plus have also been some unexpected 'windfalls' (Digit,Stelco,Atlas) that may not have been as visible in June 2020.

 

Look there are risks in play - lower commodity pricing , delta, recent slowing in economic recovery - but offsetting these risks IMO is a pretty decent margin of safety - its frustrating seeing the Fairfax share price really not moving at all despite recent earnings report or Digit revaluation which is pretty material in my view - but I guess its results & Fairfax needs to keep delivering results 

 

 

 

 

[nwoodman]

4 hours ago, KPO said:

Is Fairfax “cheaper” than 15 months ago, is the Digit, Atlas, etc. driven book increase a mirage or something else? Appreciate your thoughts. 

 

Good question.  I agree that the visibility is better now than in March.  In terms of the "mirage", personally I think that FFH, at times, guilds the lily a little with book value, but only time will tell.  Visibility gets easier as they take their positions public.  

 

I think the bigger question is whether the compounding/capital allocation machine is broken? To this I answer a definitive no.  Take the graph below with a pinch of salt, but if you think long run they can achieve low double digit CAGR then they look cheap today.

 

 

Based on the 11% CAGR curve, the Fair Value (FV) today would be of order $CAD800 or ($USD650).   P/B=650/540=1.2.  This is my estimate of FV using a number of different measures, so quite unremarkable.  We can then use this curve to back calculate the FV at the low in March.  FWIW we get the following:

 

 

So it was a 45c dollar at the bottom in May 2020 and is a 65c dollar now.   Still cheap but not as cheap IMHO.  

 

 

Edited September 21, 2021 by nwoodman

[nwoodman]

On 9/18/2021 at 7:12 AM, maplevalue said:

Not news but do not think this has been brought up with respect to Fairfax on this thread yet. One of the promises from the Liberals (who are poised to be reelected) 2021 platform

 

 

Seems like it's unclear how it will apply to international profits vs. domestic profits. Some of the recent weakness in CAD financials has been attributed to this. Fairfax I assume would be subject to this. 

Given Trudeau’s win could we argue that the 3% tax surcharge doesn’t apply to Fairfax due to underperformance . Happy to pay it once the share price is back to BV

[StubbleJumper]

3 hours ago, nwoodman said:

Given Trudeau’s win could we argue that the 3% tax surcharge doesn’t apply to Fairfax due to underperformance . Happy to pay it once the share price is back to BV

 

Without wanting to go down the political rabbit hole, the proposed new tax does raise a bit of a timing issue for FFH's typical approach of triggering paper gains to bolster its EPS and ROE numbers.  If there are opportunities to trigger paper gains, it might be best to do so in the next three months so they appear on tax filings for 2021 rather than deferring them to 2022 or later (assuming that the new government will be unable to appoint a cabinet and push the new tax legislation through before parliament's Christmas break).

 

 

SJ

[nwoodman]

Short article on the use of AI by Brit 

 

https://www.insurancejournal.com/news/international/2021/09/21/633025.htm

 

Brit Ltd., the London-based specialty insurer and reinsurer, announced the creation and successful proof-of-concept launch of a proprietary machine-learning algorithm, designed to accelerate the identification of post-catastrophe property damage, based on the use of ultra-high-resolution imagery.

 

This proof of concept is being used by the Brit claims team and its delegated claims adjusters in the wake of Hurricane Ida, to further improve claims service and expedite payments for customers. In this innovation, Brit’s Data Science team developed and overlaid a machine learning algorithm to access the ultra-high-resolution ariel images and data such that it pinpoints, color-codes, and displays properties by damage classification within days after a catastrophe event. This enables the Brit claims team to proactively identify, triage and assign response activity even before claims are reported.

 

Since April 2019, Brit has worked with the Geospatial Insurance Consortium (GIC), a non-profit organization that captures best in class post-event ariel imagery for first responders and insurance companies.

With the GIC images and the machine learning algorithm, the Brit claims team has a virtual claims adjusting platform that can expedite claims payments in locations that cannot be immediately serviced by local field adjusters in the initial days following catastrophe events.

 

“A claim is the single most important interaction that an end client will have with their insurer and this will often be at a time of significant difficultly. We are therefore continually focused on improving the service we offer and how quickly we can provide resolution for our customers. Innovation and technology are critical to the equation,” commented Sheel Sawhney, group head of Claims and Operations. “This use of machine learning techniques and the best available imagery is further evidence of how our award-winning claims team is finding new ways to increase the speed and accuracy of claims payments,” added Sawhney.

A subsidiary of Fairfax Financial Holdings, Brit underwrites a broad class of commercial specialty insurance with a strong focus on property, casualty and energy business. It has a major presence in Lloyd’s of London, the world’s specialist insurance market provider.

Edited September 22, 2021 by nwoodman

[nwoodman]

MS are out with a chart pack for the Indian Economy.  A few caught my eye, Chart pack  attached.  

 

We expect cyclical recovery in subsequent quarters: We expect economic activity to start to pick up from QE Sep, supported by pent-up demand, ramping up of the vaccination drive (daily vaccination tracking at 9mn on a 7 day avg basis), a favourable policy mix, and robust global growth. Indeed, we expect GDP to move into positive territory on a 2Y CAGR basis from QE Sept. The key risks to watch will be the pace of vaccination (any slowdown could increase risks) and trend in Covid-19 cases - potential re-acceleration, threat from new variants and restrictions on activity.

 

INDIA_20210922_0000.pdf

Edited September 22, 2021 by nwoodman

[Gregmal]

Big move AH for BB.....all the way back to.....$10!

[glider3834]

just noticed this updated SEC filing from 17 Sep in connection with Fairfax issuing 2031 Notes https://www.sec.gov/Archives/edgar/data/0000915191/000110465921116747/tm2127687-3_f10.htm#tDOTB

 

Factoring in adjustments below, I estimate BVPS at 30 June increases to US$545.51 per share ($14,142 Common equity as adjusted below/25.924 mils shares at 30 June) - I suspect most of this is coming from Eurolife consolidation which is adjusted into this number along with Riverstone Barbados & Brit sales. 

 

What looks good are the debt/capital ratios which all showing significant improvement. Net Debt drops by $924mil with Adjusted 30 June figures.

(Sale of Brit 375 plus sale of Riverstone of 700 less purchase of Eurolife 142 equals 933 which looks close to this number) 

 

 

 

 

 

 

 

Edited September 23, 2021 by glider3834

[Viking]

On 9/20/2021 at 7:21 PM, KPO said:

Long time follower of this great investment community, but first time post.  I’ve owned Berkshire since ‘98 and have owned Fairfax off and on for 10 years or so, most recently getting back in during the March 2020 COVID downdraft. With that backdrop, I’m interested in what folks think about value today compared to when Prem purchased shares at ~$308 in June of 2020. The share price today is roughly $100 higher on an absolute basis, but Digit, Atlas and a generally favorable operating performance since has pushed book value up by $152 (giving full effect for Digit valuation markup) since his purchase. Is Fairfax “cheaper” than 15 months ago, is the Digit, Atlas, etc. driven book increase a mirage or something else? Appreciate your thoughts. 

KPO, a solid case can be made that shares are much ‘cheaper’ today than when Prem bought in June 2020. 
 

Fairfax stock price: Prem’s = US$308; today = $413; increase = +$105

Book value March 31 ‘20 = $422; Q2 ‘21 = $540; BV increase = +$118

 

So just looking at BV it kind of looks close (stock is just as undervalued today as it was when Prem bought). 

 

But BV does not capture what happens in the Investment in Associates bucket (this does not capture the undervaluation of Fairfax India). The fair value of this ‘bucket’ of stocks was minus $1.1 billion in Q1 ‘20 (to its carrying value). However, in Q2 ‘21 it was plus $900 million. The fair value of this bucket of stocks went up by $2 billion in the past 5 quarters or $77/share. Cha ching!
 

So if you add $75/share to the increase in BV you get an improvement of $193/share. With the stock up only $105. This heavily tilts the argument that shares are cheaper today.

 

And how have the insurance businesses performed over the past 5 quarters? Does that matter? Hell yes, it matters:

- hard market in insurance has been confirmed over the past 5 quarters with net written premiums growing in the more than 20%. Investment float has grown by 15% year over year. And CR has come down to the 95% range which is an improvement from where it was pre-covid. 
 

Bottom line, Fairfax’s insurance businesses are more valuable today than they were when Prem bought his shares last year. 
 

Has Fairfax done anything else to improve the value of its business over the past 5 quarters? Yup:

- taken advantage of crazy low rates: refinanced a large chunk of debt at lower rates which lowers interest costs in future years

- deleveraged/paid off line of credit - using proceeds from $700 million Riverstone sale

- Blackberry warrants were renewed with conversion price dropped from $10 to $6. Holy shit batman!

- Fairfax Africa was merged into Helios; Farmers Edge and Boat Rocker completed large IPO’s; sale of Toy’s ‘R Us retail business.

- Resolute, Stelco and Fairfax India all completed large share repurchases. As a result Fairfax now owns more of these three businesses than it did 5 quarters ago.

- invested C$100 million in Foran Mining

- ownership of Eurolife increased from 50 to 80%

- sold chunk of Brit for $375 million (tied to Riverstone sale for $700 million)

Fairfax has been very busy the past 5 quarters adding value for shareholders. 
 

And what about the management teams of the various equity holdings? Have they been hard at work adding value to their companies? Yes! 
- Atlas - 20% growth (top and bottom line) likely coming the next 3-4 years

- Eurobank - continues to fix balance sheet; poised to do very well as Greek economy emerges from covid

- most of Fairfax’s equity holdings are positioned very well right now. 

 

Almost forgot… Digit revaluation will add another $46 to BV likely in Q3!

 

To sum it all up: increase in BV + increase in investment in associates + improvements in insurance business + Fairfax management actions + management teams of equity holdings + Digit revaluation = yes, in buying Fairfax today an investor is buying at a cheaper price than when Prem made his purchase back in June 2020. 

Edited September 23, 2021 by Viking

[KPO]

2 hours ago, Viking said:

KPO, a solid case can be made that shares are much ‘cheaper’ today than when Prem bought in June 2020. 
 

Fairfax stock price: Prem’s = US$308; today = $413; increase = +$105

Book value March 31 ‘20 = $422; Q2 ‘21 = $540; BV increase = +$118

 

So just looking at BV it kind of looks close (stock is just as undervalued today as it was when Prem bought). 

 

But BV does not capture what happens in the Investment in Associates bucket (this does not capture the undervaluation of Fairfax India). The fair value of this ‘bucket’ of stocks was minus $1.1 billion in Q1 ‘20 (to its carrying value). However, in Q2 ‘21 it was plus $900 million. The fair value of this bucket of stocks went up by $2 billion in the past 5 quarters or $77/share. Cha ching!
 

So if you add $75/share to the increase in BV you get an improvement of $193/share. With the stock up only $105. This heavily tilts the argument that shares are cheaper today.

 

And how have the insurance businesses performed over the past 5 quarters? Does that matter? Hell yes, it matters:

- hard market in insurance has been confirmed over the past 5 quarters with net written premiums growing in the more than 20%. Investment float has grown by 15% year over year. And CR has come down to the 95% range which is an improvement from where it was pre-covid. 
 

Bottom line, Fairfax’s insurance businesses are more valuable today than they were when Prem bought his shares last year. 
 

Has Fairfax done anything else to improve the value of its business over the past 5 quarters? Yup:

- taken advantage of crazy low rates: refinanced a large chunk of debt at lower rates which lowers interest costs in future years

- deleveraged/paid off line of credit - using proceeds from $700 million Riverstone sale

- Blackberry warrants were renewed with conversion price dropped from $10 to $6. Holy shit batman!

- Fairfax Africa was merged into Helios; Farmers Edge and Boat Rocker completed large IPO’s; sale of Toy’s ‘R Us retail business.

- Resolute, Stelco and Fairfax India all completed large share repurchases. As a result Fairfax now owns more of these three businesses than it did 5 quarters ago.

- invested C$100 million in Foran Mining

- ownership of Eurolife increased from 50 to 80%

- sold chunk of Brit for $375 million (tied to Riverstone sale for $700 million)

Fairfax has been very busy the past 5 quarters adding value for shareholders. 
 

And what about the management teams of the various equity holdings? Have they been hard at work adding value to their companies? Yes! 
- Atlas - 20% growth (top and bottom line) likely coming the next 3-4 years

- Eurobank - continues to fix balance sheet; poised to do very well as Greek economy emerges from covid

- most of Fairfax’s equity holdings are positioned very well right now. 

 

Almost forgot… Digit revaluation will add another $46 to BV likely in Q3!

 

To sum it all up: increase in BV + increase in investment in associates + improvements in insurance business + Fairfax management actions + management teams of equity holdings + Digit revaluation = yes, in buying Fairfax today an investor is buying at a cheaper price than when Prem made his purchase back in June 2020. 

Viking, Thank you so much for your comprehensive write-up of the recent value creation. I guess I was lazily focused on the big chunks of value from Digit, ATCO, and insurance operations, so your many points add to this. I was fortunate to be able to add to my sub $300USD positions from last year at $405 on Monday. I plan to buy more if this divergence continues at the same rate. At minimum I’ll enjoy the 2.5% yield in 4 months! Thanks again for this and your many other helpful updates!

[modiva]

3 hours ago, Viking said:

KPO, a solid case can be made that shares are much ‘cheaper’ today than when Prem bought in June 2020. 
 

Fairfax stock price: Prem’s = US$308; today = $413; increase = +$105

Book value March 31 ‘20 = $422; Q2 ‘21 = $540; BV increase = +$118

 

So just looking at BV it kind of looks close (stock is just as undervalued today as it was when Prem bought). 

 

But BV does not capture what happens in the Investment in Associates bucket (this does not capture the undervaluation of Fairfax India). The fair value of this ‘bucket’ of stocks was minus $1.1 billion in Q1 ‘20 (to its carrying value). However, in Q2 ‘21 it was plus $900 million. The fair value of this bucket of stocks went up by $2 billion in the past 5 quarters or $77/share. Cha ching!
 

So if you add $75/share to the increase in BV you get an improvement of $193/share. With the stock up only $105. This heavily tilts the argument that shares are cheaper today.

 

And how have the insurance businesses performed over the past 5 quarters? Does that matter? Hell yes, it matters:

- hard market in insurance has been confirmed over the past 5 quarters with net written premiums growing in the more than 20%. Investment float has grown by 15% year over year. And CR has come down to the 95% range which is an improvement from where it was pre-covid. 
 

Bottom line, Fairfax’s insurance businesses are more valuable today than they were when Prem bought his shares last year. 
 

Has Fairfax done anything else to improve the value of its business over the past 5 quarters? Yup:

- taken advantage of crazy low rates: refinanced a large chunk of debt at lower rates which lowers interest costs in future years

- deleveraged/paid off line of credit - using proceeds from $700 million Riverstone sale

- Blackberry warrants were renewed with conversion price dropped from $10 to $6. Holy shit batman!

- Fairfax Africa was merged into Helios; Farmers Edge and Boat Rocker completed large IPO’s; sale of Toy’s ‘R Us retail business.

- Resolute, Stelco and Fairfax India all completed large share repurchases. As a result Fairfax now owns more of these three businesses than it did 5 quarters ago.

- invested C$100 million in Foran Mining

- ownership of Eurolife increased from 50 to 80%

- sold chunk of Brit for $375 million (tied to Riverstone sale for $700 million)

Fairfax has been very busy the past 5 quarters adding value for shareholders. 
 

And what about the management teams of the various equity holdings? Have they been hard at work adding value to their companies? Yes! 
- Atlas - 20% growth (top and bottom line) likely coming the next 3-4 years

- Eurobank - continues to fix balance sheet; poised to do very well as Greek economy emerges from covid

- most of Fairfax’s equity holdings are positioned very well right now. 

 

Almost forgot… Digit revaluation will add another $46 to BV likely in Q3!

 

To sum it all up: increase in BV + increase in investment in associates + improvements in insurance business + Fairfax management actions + management teams of equity holdings + Digit revaluation = yes, in buying Fairfax today an investor is buying at a cheaper price than when Prem made his purchase back in June 2020. 

 

Thanks @Viking for such comprehensive insights.  You are doing so much service to everyone else.  I have been slowly accumulating.  

 

[Viking]

6 hours ago, glider3834 said:

just noticed this updated SEC filing from 17 Sep in connection with Fairfax issuing 2031 Notes https://www.sec.gov/Archives/edgar/data/0000915191/000110465921116747/tm2127687-3_f10.htm#tDOTB

 

Factoring in adjustments below, I estimate BVPS at 30 June increases to US$545.51 per share ($14,142 Common equity as adjusted below/25.924 mils shares at 30 June) - I suspect most of this is coming from Eurolife consolidation which is adjusted into this number along with Riverstone Barbados & Brit sales. 

 

What looks good are the debt/capital ratios which all showing significant improvement. Net Debt drops by $924mil with Adjusted 30 June figures.

(Sale of Brit 375 plus sale of Riverstone of 700 less purchase of Eurolife 142 equals 933 which looks close to this number) 

 

 

 

 

 

 

 

Glider, thanks for posting. It is nice to get a look at Fairfax’s financial position after Riverstone and Brit sales and Eurolife purchase. Pretty solid