Fairfax 2023

[dartmonkey]

8 hours ago, Viking said:

@steph . And the stock still trades well under 6 x 2023E earnings. Nuts.

 

Yes, there is a recent thread on this forum about historic landmarks, but maybe one landmark that we are within spitting distance of touching is price to book, which is getting close to 1. Q1 common shareholders' equity $18,663.8m (USD), market cap $18.574 as I speak (using the FRFHF quote). We will have a new book value in a few days, and it will be much higher than $18.6b (any guesses?), so we will still be trading well beneath book value, but it's heading in that direction...

[SafetyinNumbers]

46 minutes ago, dartmonkey said:

 

Yes, there is a recent thread on this forum about historic landmarks, but maybe one landmark that we are within spitting distance of touching is price to book, which is getting close to 1. Q1 common shareholders' equity $18,663.8m (USD), market cap $18.574 as I speak (using the FRFHF quote). We will have a new book value in a few days, and it will be much higher than $18.6b (any guesses?), so we will still be trading well beneath book value, but it's heading in that direction...

My guess is the stock gaps up to book value or higher on Friday and then it spend some time backing and filling during hurricane season. 

 

My book value over/under for the quarter is US$850. If I had to bet, I would take the over. 

[cwericb]

Today both the Dow and TSX were down over 300 points.

Prime hurricane season is almost upon us.

Fairfax stock has been setting new highs for several days.

 

And yet today, Fairfax stock defies the market trend and hits another new high with a substantial 1.6% ($17.29) jump* and firmly plants itself much closer to $1,100 CDN than the $1,000 mark we had been celebrating.

 

Seems people are finally starting to take notice of Fairfax. Friday may be interesting.

 

*fair volume too

Edited August 2, 2023 by cwericb

[OCLMTL]

16 hours ago, Viking said:

@steph you are welcome. I learn so much from other posters… and what i learn usually makes its way into my future posts. This is a great community. We are very lucky right now. I have been following Fairfax for about 20 years. Only 2 other times has the set up looked as favourable as it does today: 2003 (short attack) and 2006/07 (short attack when they were sitting on giant CDS position). We all need to thank the gods for how everything with Fairfax has played out over the past 33 months. It has been a crazy wonderful ride. And the stock still trades well under 6 x 2023E earnings. Nuts.

HI Viking, 

 

my first ever post here after lurking for a long time. Thanks for the incredible contribution to this website, along with other board members.

 

To your point of things being so great for 33 months and, despite this, only trading at max 6x 2023 (and 2024-2025E) earnings is beyond my comprehension. It’s a silly % of the my portfolio as is and yet, I sometimes wonder if 100% is not the appropriate number. I’ve rarely come across such a dislocation of reality vs perception in a large cap, high quality company in my entire career. I’m trying to find FFH specific (real) risks and all I see are industry/weather/cat risks that could be major headwinds… I can totally see long/short funds piling into FFH and shorting a basket of P&Cs on the other side to make an incredibly profitable trade while staying “market neutral”. Let’s see what Thursday evening brings us…

[UK]

My best guess (and hope) it is because of the very good price performance of share price of FFH recently and in a last few years, but it is really hard to understand why it is still trading today at only 1 PBV and not at some 1.2 or 1.3 already. However you look, on absolute or on relative, it does not make sense.

[nwoodman]

10 minutes ago, UK said:

My best guess (and hope) it is because of the very good price performance of share price of FFH recently and in a last few years, but it is really hard to understand why it is still trading today at only 1 PBV and not at some 1.2 or 1.3 already. However you look, on absolute or on relative, it does not make sense.

Give it time, the "market" has been a bit slow to catch on.   Totally agree with an earlier post, more than happy for it to compound at double digits for the next decade and always trade at book.  Berkshire and Markel P/B's make my fingers itchy.

[Viking]

4 hours ago, OCLMTL said:

HI Viking, 

 

my first ever post here after lurking for a long time. Thanks for the incredible contribution to this website, along with other board members.

 

To your point of things being so great for 33 months and, despite this, only trading at max 6x 2023 (and 2024-2025E) earnings is beyond my comprehension. It’s a silly % of the my portfolio as is and yet, I sometimes wonder if 100% is not the appropriate number. I’ve rarely come across such a dislocation of reality vs perception in a large cap, high quality company in my entire career. I’m trying to find FFH specific (real) risks and all I see are industry/weather/cat risks that could be major headwinds… I can totally see long/short funds piling into FFH and shorting a basket of P&Cs on the other side to make an incredibly profitable trade while staying “market neutral”. Let’s see what Thursday evening brings us…

@OCLMTL welcome to the wild side (posting). Thanks for sharing your thoughts. I agree with you that the current valuation makes no sense… even with the big move in the share price. we are learning a few things:

1.) Fairfax shares got stupid cheap. So everyone’s starting/reference point is wrong. 

2.) The phenomenal growth in the insurance companies over the past decade spiked the earnings power of the company - but low interest rates and Fairfax’s strategy of going low duration hid this increase in earnings power for a couple of years.

3.) the execution by the team at Fairfax is still being grossly under appreciated. Especially what they did with their fixed income portfolio. The spike in earnings is happening. It is sustainable. But few understand or believe. 
4.) Investment professionals are still in denial. Its almost like a badge of honour in the industry to say ‘i haven’t followed Fairfax for the past five years’ and then they follow it up with ‘oh, and don’t invest in that company… its a mess.’ Meanwhile their clients portfolios underperform. Psychology is such an important part of investing. 
 

I was talking to a family member about Fairfax tonight (they are way up on their investment) and they asked me if it was time to sell and lock in crazy big gains? I said ‘forget how much you are up for a second. You own a well run company and it is trading at 5.5 x earnings and its future prospects are very good. What do you think you should do?’  They got a blinding glimpse of the obvious - they decided to stay invested. I probably should have told them to stop looking at the stock price every day… hard when it keeps hitting fresh all time highs.

[UK]

https://www.wsj.com/articles/insurers-are-facing-more-than-one-kind-of-inflation-bb925670?mod=hp_minor_pos19

 

This has been an inflated year for natural disasters in the U.S. The number of U.S. potential billion-dollar weather and climate disasters in 2023 through June has exceeded every year tracked by that point besides 2017, with 12 such events so far, according to the National Oceanic and Atmospheric Administration’s National Centers for Environmental Information. The average from 1980 to 2022, adjusting costs for inflation, was around eight annually.

 

https://www.wsj.com/articles/home-insurers-are-charging-more-and-insuring-less-9e948113

 

“We’re still seeing the industry having an underwriting loss this year continuing out to 2025,” said Dale Porfilio, chief insurance officer at industry body the Insurance Information Institute. The institute expects that “the cycle of continuing to take rates upward is going to continue for the next two years,” Porfilio said.

...

The escalating cost of catastrophes is reflected in a steep increase in premiums for the reinsurance coverage that home-insurance companies buy to pass on some of their risk. Depending on the state regulator, those higher premiums can feed directly through to the price charged to homeowners, Fox said. His firm’s data shows reinsurance premiums were up on average 33% for June 1 renewals, which includes many Florida carriers, and 50% for renewals at the start of this year. 

The question of whether reinsurance prices will keep rising, piling more pressure on home-insurance premiums, depends a lot on what happens in the second half of this year, according to Fox. “There’s a fork in the road ahead,” he said. “If we have another major hurricane or some medium-size hurricanes or a spate of wildfires…that [reinsurance] price will go up again.”

 

Edited August 3, 2023 by UK

[UK]

WSJ:  This has been an inflated year for natural disasters in the U.S. The number of U.S. potential billion-dollar weather and climate disasters in 2023 through June has exceeded every year tracked by that point besides 2017, with 12 such events so far, according to the National Oceanic and Atmospheric Administration’s National Centers for Environmental Information. The average from 1980 to 2022, adjusting costs for inflation, was around eight annually.

 

FFH: The consolidated combined ratio of the property and casualty insurance and reinsurance operations was 93.9%, producing an underwriting profit of $337.5 million, compared to a combined ratio of 94.1% and an underwriting profit of $301.7 million in 2022, driven by continued growth in business volumes (net insurance revenue increased by 6.2%), prudent expense management and decreased catastrophe losses of $134.8 million or 2.4 combined ratio points in the quarter.

[Haryana]

 

Brett Horn strikes again!

 

https://www.morningstar.com/stocks/xtse/ffh/quote

 

Fairfax Financial Earnings: Strong Underwriting Margins Partially Offset by Investment Losses

 

Senior Equity Analyst | Brett Horn | Aug 4, 2023

Fairfax Financial reported a solid second quarter with relatively strong underwriting margins. However, this was partially offset by some investment losses. While the second quarter was weaker than the first quarter, Fairfax is having a good year so far, with book value per share up 11% since year-end, adjusted for dividends. We will maintain our CAD 790 fair value estimate for the no-moat company and see the shares as overvalued at the moment.

 

[Parsad]

11 minutes ago, Haryana said:

 

Brett Horn strikes again!

 

https://www.morningstar.com/stocks/xtse/ffh/quote

 

Fairfax Financial Earnings: Strong Underwriting Margins Partially Offset by Investment Losses

 

Senior Equity Analyst | Brett Horn | Aug 4, 2023

Fairfax Financial reported a solid second quarter with relatively strong underwriting margins. However, this was partially offset by some investment losses. While the second quarter was weaker than the first quarter, Fairfax is having a good year so far, with book value per share up 11% since year-end, adjusted for dividends. We will maintain our CAD 790 fair value estimate for the no-moat company and see the shares as overvalued at the moment.

 

 

It's because of guys like this that make the markets so efficient!  Cheers!

[Daphne]

Horn likely still belongs to the old shorting club. Still trying to recoup his losses.

[Parsad]

Every time any investment goes up, people should just start using the phrase, "Horned it!"

 

Watsa "horned it" this quarter!  Buffett "horned it" this quarter!  Zuckerberg "horned it" this quarter!  

 

Man, I just "horned it" with my FFH the last two years!

 

Cheers! 

[StubbleJumper]

38 minutes ago, Daphne said:

Horn likely still belongs to the old shorting club. Still trying to recoup his losses.

 

No.  He's likely not part of an old shorting club, but more likely an analyst who is trying to intelligently publish opinions on 40 or 50 different stocks and cannot do a credible job of any of them.  The investment losses that preoccupy him are a nothing as they are mainly unrealized losses on bonds that will be held to maturity, and thus will reverse over the next 2 or 3 years, irrespective of what happens to interest rates over that time.  The other thing to ignore are the IFRS 17 discounting issues as they too will reverse over a few years (there is no economic significance to them).  And then the Farmers Edge charge is the third thing to ignore as that reflects a bad decision made five years ago or so.  None of those things make a whit of difference about the economic value of the company on a going-forward basis, but I understand how an analyst who cannot invest adequate time in the company might view those items as significant.

 

 

SJ

[Viking]

4 hours ago, StubbleJumper said:

 

No.  He's likely not part of an old shorting club, but more likely an analyst who is trying to intelligently publish opinions on 40 or 50 different stocks and cannot do a credible job of any of them.  The investment losses that preoccupy him are a nothing as they are mainly unrealized losses on bonds that will be held to maturity, and thus will reverse over the next 2 or 3 years, irrespective of what happens to interest rates over that time.  The other thing to ignore are the IFRS 17 discounting issues as they too will reverse over a few years (there is no economic significance to them).  And then the Farmers Edge charge is the third thing to ignore as that reflects a bad decision made five years ago or so.  None of those things make a whit of difference about the economic value of the company on a going-forward basis, but I understand how an analyst who cannot invest adequate time in the company might view those items as significant.

 

SJ

@StubbleJumper i agree with everything you said. There are a few analysts out there who clearly do not follow Fairfax all that closely. But they are at least smart enough to raise their price targets over time (to reflect improving quality of earnings). The problem with Morningstar is they are sticking with C$790/share fair value estimate for the stock. That makes them look like idiots. It reflects badly on Morningstar as a company. RBC uses Morningstar as part of its research coverage offered to investors. So it also makes RBC look foolish, given Fairfax is a very large Canadian company. 
 

The solution is for Morningstar to end coverage of Fairfax. But to @Parsad ‘s comment, some investors probably make decisions based on what companies like Morningstar have to say - and that just creates fat pitches for other investors. So i guess i should welcome their idiocy.

Edited August 6, 2023 by Viking

[UK]

I think it is very healthy when we still have such opinions from analysts, especially when they are obviously wrong:). If you read only COBF, these days consensus on FFH almost worryingly too cheery. But when I speak about FFH with some other investors, I am still getting a lot of push back and/or very low interest. These views are usually because of expierence of the decade from 2010 and they just do not want to dig deeper, or to change the old opinion, or to dig at all, but also maybe because FFH is quite complex and in the insurance business. Anyway, if or when this Morningstar analyst will upgrade FFH to some 'medium moat' and a price with the multiple of 1.3 or 1.5 BV in the next 3 years, he probably will be another 50 or 100 per cent to late and at that time expected returns will be much lower:)

[Luke]

1 hour ago, UK said:

These views are usually because of expierence of the decade from 2010 and they just do not want to dig deeper, or to change the old opinion, or to dig at all, but also maybe because FFH is quite complex and in the insurance business. 

Yep, friends of mine who also invest say they don't and cant understand insurance (fair enough, its a blackbox) and the history doesn't look appealing to them which stops them from digging deeper. I shared a lot of things from the board, but skepticism is strong against future underwriting (climate change), they still think rates will come down hard soon and that the interest income leg will fall away for fairfax (they know they locked in rates but are still skeptical)+their equity portfolio is not something where one immediately sees value. 

 

Hence the opportunity.

Edited August 6, 2023 by Luca

[longlake95]

1 hour ago, Luca said:

Yep, friends of mine who also invest say they don't and cant understand insurance (fair enough, its a blackbox) and the history doesn't look appealing to them which stops them from digging deeper. I shared a lot of things from the board, but skepticism is strong against future underwriting (climate change), they still think rates will come down hard soon and that the interest income leg will fall away for fairfax (they know they locked in rates but are still skeptical)+their equity portfolio is not something where one immediately sees value. 

 

Hence the opportunity.

I have noticed a pattern over many years - people react slowly to good news and quickly to bad news. Combine that with the heard mentality and you get the Morningstar’s of the world. 

[StubbleJumper]

3 hours ago, Luca said:

they still think rates will come down hard soon

 

On that point, historically they would be correct.  The insurance cycle is self-correcting to the extent that attractive profits have always attracted new capital which subsequently made the attractive profits disappear.

 

I will write once again what I wrote in January.  If you give one of FFH's subs an extra $1 of capital, they can use it to write $2 of premium.  That $2 of premium will earn 12-cents underwriting profit for the sub (Q2 CR=94).  As we all know, the sub collects the premium long before it pays out an indemnity, so it gets float for a year of probably roughly $1 from writing those $2 of premium.  The incremental $1 plus the original $1 of capital that you gave the sub can be invested today in a boring 12-month US treasury which closed Friday at 5.29%.   So, in total, that incremental dollar of capital that you gave the Fairfax sub can earn about 22.58 cents of operating income.

 

The profitability is ridiculous.  A 20%+ margin will eventually attract new capital to the industry.  As it always does, new capital will eventually push down underwriting profitability.  There's a reason why Prem expressed a degree of surprise during the conference call that this hard market has endured as long as it has, and that new capital does not seem to be flowing into the industry.

 

That being said, FFH has a few years of strong profits baked in.  There will be at least 2 or 3 good years of profits, but understand that it will not continue forever.  I see some truly enthusiastic valuation levels being proposed on this board for a company that sells a commodity product with few barriers to entry.  There's still room for the price to run, but that will be mainly from the earnings that will be retained over the coming 2 or 3 years rather than some marked increase in fundamental valuation.

 

 

SJ

Edited August 6, 2023 by StubbleJumper

[Viking]

The key to forecasting is getting the ‘big rocks’ right. From an earnings perspective, there is no more important item to Fairfax today than ‘interest and dividend income.’ This one ‘bucket’ now represents about 40% of Fairfax’s total pre-tax earnings. Next year it could be as high as 45% of pre-tax earnings. So, if we can get can get our estimates for this part of earnings modelled properly we should be well on our way to coming up with a quality earnings estimate for the company as a whole.  

 

When looking at ‘interest and dividends’ for Fairfax, dividends represent about 7% of the total. Interest income represents about 93% of the total, so that is what we are going to focus on. 

 

Two items drive interest income: 

• The size of the fixed income portfolio
• The average yield earned on the investments held in the portfolio

It is quite simple. It is relatively easy to calculate. It is not volatile quarter to quarter. And it is predictable, looking out a couple of years. This is why ‘interest and dividend income’ is considered the highest quality source of earnings for an insurance company.

 

So, let’s look at Fairfax and see what we can learn.

 

How big is the fixed income portfolio at Fairfax and how fast is it growing?

 

The fixed income portfolio at Fairfax is about $40 billion today. In 2016, it was $20.3 billion. Over the last 7 years, the size of the portfolio has doubled, which is growth of about 10% per year. 

 

Growth in 2024 should be similar (at 10%, or $4 billion). The GIG acquisition will add around $2.4 billion to investments when it closes later this year. Earnings are coming in strong and we are still in a hard market, which should also support modest growth of the fixed income portfolio in 2024. 

 

Next, let’s review the average yield. 

 

From 2016 to 2022, Fairfax earned an average of about 2.4% on its fixed income portfolio (see chart below). Yes, that is a low number. Fairfax has been very conservative with the positioning of their fixed income portfolio over the past 7 years (low duration and high-quality holdings). 

 

What about 2023? The average yield in 2023 is estimated to be about 4.5%. 

What about 2024? The average yield in 2024 is estimated to be about 4.8%.

 

The average yield that Fairfax is earnings on its fixed income portfolio has doubled. 

 

This is important:

1. The size of Fairfax’s fixed income portfolio has doubled over the past 7 years. 
2. At the same time, the rate of return that Fairfax is earnings on its fixed income portfolio looks like it is also poised to double. 

Investors are getting served up a double-double with Fairfax’s fixed income portfolio (that line will only make sense to Tim’s coffee drinkers). 

 

What does it mean for Fairfax?

 

Interest income is poised to increase from $514 million in 2016 to an estimated $2.1 billion in 2024. That is a 300% increase over 8 years. Exactly what you would expect when the size of the portfolio doubles and the rate of return also doubles. 

 

Average duration

 

In the first quarter we learned that Fairfax had materially extended the average duration of their fixed income portfolio and as of June 30, 2023, it was at 2.4 years (from 1.6 years at Dec 31, 2022, and 1.2 years at Dec 31, 2021). This is important because it locks in the rate of return on a large part of the portfolio for a couple of years making the earnings stream more durable.

 

What does this mean for investors?

 

The most important bucket of earnings for Fairfax (for a P&C insurer), interest and dividend income, is poised to deliver a record amount in 2024. And 2025 looks promising as well.  

 

Efficient Market Theory

 

Of course, everything I have written above is from publicly available information. So, it is priced into the share price of Fairfax’s stock today. Right? 

 

Fairfax’s Price Earnings Ratio = 5.6 = $843 / 2023 $150E per share (as of Aug 4, 2023)

 

My current estimate (another word for guess) is Fairfax could earn about $150/share in both 2023 and 2024 (that will be the topic of a future post). Given my analysis of interest income above, I trust my earnings number (please note, that doesn’t mean you should!). 

 

So, the appropriate question for me to ask: “is 5.6 an appropriate multiple to pay to get $150 in estimated earnings from Fairfax.” Mr. Market thinks so. I disagree. I think the multiple is too low. My guess is Mr. Market does not yet fully grasp the significance of what a fixed income double-double means for the future earnings of Fairfax. 

 

 

Dividends

• Extending its close partnership with Kennedy Wilson (KW), Fairfax also invested $200 million in preferred shares of KW with a 6% dividend. This will deliver an incremental $12 million in dividend income to Fairfax each year. 
• Eurobank would like to start paying a dividend, likely in 2024. As a result, I have added $40 million in dividends to my forecast for 2024.

Interest & dividend income = interest income + dividend income - investment expenses.

 

 

—————

Interest rates are once again moving higher

 

Interest rates have moved higher in recent months. As a result, Fairfax will have the ability to continue to re-invest maturing bonds at higher yields. This suggests interest income has not peaked. 

 

Edited August 6, 2023 by Viking

[StubbleJumper]

33 minutes ago, Viking said:

So, the appropriate question for me to ask: “is 5.6 an appropriate multiple to pay to get $150 in estimated earnings from Fairfax.” Mr. Market thinks so. I disagree. I think the multiple is too low. My guess is Mr. Market does not yet fully grasp the significance of what a fixed income double-double means for the future earnings of Fairfax. 

 

 

 

Mr. Market likely doesn't believe that EPS of $150 is sustainable.  Your EPS of $150 contains $60 of underwriting income which can disappear pretty quickly if capital flows into the industry, and the $100 of interest can turn into $75 by 2027 if the fed moves away from it's tightening process and instead adopts a loosening posture.

 

FFH will almost certainly have 2 or 3 good years of income and its share price likely has some distance left to go, but we need to attenuate our long-term expectations.  Ignore the PE ratio entirely when you are at the top of the insurance cycle.  Instead develop a forecast of BV for December 2025 and select what you believe is an appropriate multiple of book for a company that is selling a commodity product (insurance policies) in an industry with minimal barriers to entry.  That BV multiple should likely be one of 0.8x, 0.9X, 1.0x, 1.1x or 1.2x.   As a point of interest, CAD$1375 is roughly 1.2x...

 

 

SJ

[Viking]

2 hours ago, StubbleJumper said:

 

On that point, historically they would be correct.  The insurance cycle is self-correcting to the extent that attractive profits have always attracted new capital which subsequently made the attractive profits disappear.

 

I will write once again what I wrote in January.  If you give one of FFH's subs an extra $1 of capital, they can use it to write $2 of premium.  That $2 of premium will earn 12-cents underwriting profit for the sub (Q2 CR=94).  As we all know, the sub collects the premium long before it pays out an indemnity, so it gets float for a year of probably roughly $1 from writing those $2 of premium.  The incremental $1 plus the original $1 of capital that you gave the sub can be invested today in a boring 12-month US treasury which closed Friday at 5.29%.   So, in total, that incremental dollar of capital that you gave the Fairfax sub can earn about 22.58 cents of operating income.

 

The profitability is ridiculous.  A 20%+ margin will eventually attract new capital to the industry.  As it always does, new capital will eventually push down underwriting profitability.  There's a reason why Prem expressed a degree of surprise during the conference call that this hard market has endured as long as it has, and that new capital does not seem to be flowing into the industry.

 

That being said, FFH has a few years of strong profits baked in.  There will be at least 2 or 3 good years of profits, but understand that it will not continue forever.  I see some truly enthusiastic valuation levels being proposed on this board for a company that sells a commodity product with few barriers to entry.  There's still room for the price to run, but that will be mainly from the earnings that will be retained over the coming 2 or 3 years rather than some marked increase in fundamental valuation.

 

SJ

@StubbleJumper i agree that the insurance market will soften at some point in the future. I also think the investment side of Fairfax is being underestimated. Investors don’t know what they are going to do with all the cash that will be rolling in so they are very conservative with their return estimates from investments. My big miss with Fairfax the past couple of years is how well they are executing on the capital allocation front and the impact that is having on earnings. As a result my past earnings estimates (looking foolishly high when made) have been too conservative. I expect Fairfax will continue to allocate capital well in the coming years. My guess is increasing returns from investments will more than offset any slow down in underwriting profit looking out a few years.

[Viking]

12 minutes ago, StubbleJumper said:

Mr. Market likely doesn't believe that EPS of $150 is sustainable.  Your EPS of $150 contains $60 of underwriting income which can disappear pretty quickly if capital flows into the industry, and the $100 of interest can turn into $75 by 2027 if the fed moves away from it's tightening process and instead adopts a loosening posture.

 

FFH will almost certainly have 2 or 3 good years of income and its share price likely has some distance left to go, but we need to attenuate our long-term expectations.  Ignore the PE ratio entirely when you are at the top of the insurance cycle.  Instead develop a forecast of BV for December 2025 and select what you believe is an appropriate multiple of book for a company that is selling a commodity product (insurance policies) in an industry with minimal barriers to entry.  That BV multiple should likely be one of 0.8x, 0.9X, 1.0x, 1.1x or 1.2x.   As a point of interest, CAD$1375 is roughly 1.2x...

 

SJ

@StubbleJumper i have enormous respect for your knowledge about all things insurance. So please keep the comments coming. I agree there is a risk that the hard market could quickly reverse and become a shit show - which would hit underwriting income. But what is the probability of that actually happening? My understanding is when the last hard market ended things went sideways for 3 or 4 years - it did not deteriorate into a shit show. My point is risks need to be considered. And probabilities attached. 
 

Insurance companies are laser focussed on generating an acceptable return for shareholders. Pricing (rate increases) look like it actually accelerated a little higher in Q2. 
 

With my estimates/forecasts i lean heavily on what i think i know. That is why i only like to look out about 2 years. As new information becomes available i will make updates. 

[LC]

Fair points from @StubbleJumper re: potential for future combined ratio increases and NII decreases.

Appreciate the pushback - nobody should feel comfortable in an echo chamber.

 

One has to weigh the probability of those two negative occurrences (i.e. the timing of a softening market and timing of Fed rate reductions) against growth in premiums written and growth in the bond portfolio. 

 

Perhaps we don't see as much reduction in 150/sh earnings that Viking estimates, due to growth in business and size of the bond portfolio. 

[Tommm50]

14 hours ago, Parsad said:

 

It's because of guys like this that make the markets so efficient!  Cheers!

Parsad, you know I have deep suspicions surrounding the hedge funds market manipulations. They have before and likely now have analysts in their pockets. This analysis of Fairfax is so far off it simply seems to be there to justify a short campaign.