Fairfax 2023

[Viking]

6 hours ago, SafetyinNumbers said:

This is all terrific, Viking! Thanks. 
 

What about Digit? I think that investment was made in 2017 and might make @keegomaster more forgiving of the investments made in that period.

@SafetyinNumbers great point. My deep dive into the equity portfolio excluded (on purpose) the insurance holdings. The equity portfolio at Fairfax gets most of the attention. The real jewel at Fairfax is the insurance business. It has grown in size by 420% since the end of 2009 (organically and acquisitions). Net premiums written increased from $4.3 billion in 2009 to $22.3 billion in 2022. Fairfax has demonstrated they are excellent at seeding new insurance companies/management teams and then getting out of the way. They are also good at integrating acquisitions.  Andy Barnard was put into his role in 2010 - managing the insurance side of Fairfax. He manages the business through 200 profit centres… which indicates just how decentralized the insurance operations are… separate insurance businesses all over the world that are quietly growing year after year - some for decades. Lots of the value that has been building in this group for decades is NOT captured in book value - for people who need convincing see the list below. Over the past 6 years Fairfax has opportunistically monetized a few of their insurance businesses and has booked significant pre-tax gains on these sales of more than $4 billion (see list below). Yes, Digit, seeded in 2017, has become a home run. Ki, seeded in 2020, is growing like crazy. Gulf Insurance Group, seeded in 2010, has quietly grown into a very large insurance company in the MENA region. So much is going on under the hood with the insurance business at Fairfax. 

 

As i have said numerous times before: Fairfax has three engines that drive results and all three are performing exceptionally well right now: insurance (hard market), fixed income (high interest rates) and equities (much improved portfolio of holdings). Importantly, the macro environment has also aligned (value investing, cyclicals, commodities, energy). Investors in Fairfax have never had this set-up before (with everything working together at the same time). 

 

We are seeing the early benefits of the flywheel effect at Fairfax. Except their transition has not been one from good to great; rather, their transition the past couple of years has been one from bad to great (yes, the cumulative losses from the equity hedges from 2010-2020 were bad). The company is generating record levels of free cash flow. In turn, that is driving record levels of spending on (good) investments. My tracking sheet for Fairfax says they invested a record $2.4 billion in 2022 across 20 different companies. I expect more of the same in 2023. And more again in 2024. Compounding is a beautiful thing - when it is done well.

 

I think investors continue to underestimate the results Fairfax is going to deliver in the coming years. The stock is trading today at 1 x trailing BV (Dec 31, 2022) and at 0.95 x March 31 BV (est $690) and 5.5 x 2023E earnings (est $120/share). Despite the run up the past 18 months, the stock still looks crazy cheap to me. And that is because the business results keep getting better. And the story keeps getting better. So, despite the big run up in price, the stock stays cheap. Yes, i know… makes no sense. Peter Lynch loved these situations. 

—————

The flywheel effect: The Flywheel effect is a concept developed in the book Good to Great. No matter how dramatic the end result, good-to-great transformations never happen in one fell swoop. In building a great company or social sector enterprise, there is no single defining action, no grand program, no one killer innovation, no solitary lucky break, no miracle moment. Rather, the process resembles relentlessly pushing a giant, heavy flywheel, turn upon turn, building momentum until a point of breakthrough, and beyond.

 

- https://www.jimcollins.com/concepts/the-flywheel.html

—————

1.) ICICI Lombard - India

• Seeded in 2001
• Sold in 2017 (down to 10%) and remainder in 2019 for about a $950 million pre-tax gain
• Fairfax had to sell ICICI Lombard (down to 10%) to invest in Digit

2.) First Capital - Singapore

• Seeded in 2002
• Sold in 2017 for $1.02 billion after-tax gain
• delivered a compound rate of return of 30% since 2002

3.) Riverstone Europe - runoff 

• sold in 2020 & 2021 for proceeds of $1.3 billion (+$230 million contingent value instrument)

4.) Pet Insurance

• seeded with two purchases in 2013 and 2014
• sold in 2022 for a $992 million after tax gain

5.) Ambridge Partners

• purchased by Brit in two transactions in 2015 and 2019
• sold in 2023 for $275 million pre-tax gain (hasn’t closed yet)

Edited April 16, 2023 by Viking

[SafetyinNumbers]

10 hours ago, Viking said:

@SafetyinNumbers great point. My deep dive into the equity portfolio excluded (on purpose) the insurance holdings. The equity portfolio at Fairfax gets most of the attention. The real jewel at Fairfax is the insurance business. It has grown in size by 420% since the end of 2009 (organically and acquisitions). Net premiums written increased from $4.3 billion in 2009 to $22.3 billion in 2022. Fairfax has demonstrated they are excellent at seeding new insurance companies/management teams and then getting out of the way. They are also good at integrating acquisitions.  Andy Barnard was put into his role in 2010 - managing the insurance side of Fairfax. He manages the business through 200 profit centres… which indicates just how decentralized the insurance operations are… separate insurance businesses all over the world that are quietly growing year after year - some for decades. Lots of the value that has been building in this group for decades is NOT captured in book value - for people who need convincing see the list below. Over the past 6 years Fairfax has opportunistically monetized a few of their insurance businesses and has booked significant pre-tax gains on these sales of more than $4 billion (see list below). Yes, Digit, seeded in 2017, has become a home run. Ki, seeded in 2020, is growing like crazy. Gulf Insurance Group, seeded in 2010, has quietly grown into a very large insurance company in the MENA region. So much is going on under the hood with the insurance business at Fairfax. 

 

As i have said numerous times before: Fairfax has three engines that drive results and all three are performing exceptionally well right now: insurance (hard market), fixed income (high interest rates) and equities (much improved portfolio of holdings). Importantly, the macro environment has also aligned (value investing, cyclicals, commodities, energy). Investors in Fairfax have never had this set-up before (with everything working together at the same time). 

 

We are seeing the early benefits of the flywheel effect at Fairfax. Except their transition has not been one from good to great; rather, their transition the past couple of years has been one from bad to great (yes, the cumulative losses from the equity hedges from 2010-2020 were bad). The company is generating record levels of free cash flow. In turn, that is driving record levels of spending on (good) investments. My tracking sheet for Fairfax says they invested a record $2.4 billion in 2022 across 20 different companies. I expect more of the same in 2023. And more again in 2024. Compounding is a beautiful thing - when it is done well.

 

I think investors continue to underestimate the results Fairfax is going to deliver in the coming years. The stock is trading today at 1 x trailing BV (Dec 31, 2022) and at 0.95 x March 31 BV (est $690) and 5.5 x 2023E earnings (est $120/share). Despite the run up the past 18 months, the stock still looks crazy cheap to me. And that is because the business results keep getting better. And the story keeps getting better. So, despite the big run up in price, the stock stays cheap. Yes, i know… makes no sense. Peter Lynch loved these situations. 

—————

The flywheel effect: The Flywheel effect is a concept developed in the book Good to Great. No matter how dramatic the end result, good-to-great transformations never happen in one fell swoop. In building a great company or social sector enterprise, there is no single defining action, no grand program, no one killer innovation, no solitary lucky break, no miracle moment. Rather, the process resembles relentlessly pushing a giant, heavy flywheel, turn upon turn, building momentum until a point of breakthrough, and beyond.

 

- https://www.jimcollins.com/concepts/the-flywheel.html

—————

1.) ICICI Lombard - India

• Seeded in 2001
• Sold in 2017 (down to 10%) and remainder in 2019 for about a $950 million pre-tax gain
• Fairfax had to sell ICICI Lombard (down to 10%) to invest in Digit

2.) First Capital - Singapore

• Seeded in 2002
• Sold in 2017 for $1.02 billion after-tax gain
• delivered a compound rate of return of 30% since 2002

3.) Riverstone Europe - runoff 

• sold in 2020 & 2021 for proceeds of $1.3 billion (+$230 million contingent value instrument)

4.) Pet Insurance

• seeded with two purchases in 2013 and 2014
• sold in 2022 for a $992 million after tax gain

5.) Ambridge Partners

• purchased by Brit in two transactions in 2015 and 2019
• sold in 2023 for $275 million pre-tax gain (hasn’t closed yet)

Really great stuff as usual. I group the insurance investments with the equity investments but I like your way of looking at if much better. The returns are exceptional. 

[Dudley]

On 4/15/2023 at 5:17 AM, Viking said:

What happened? Four things:

1.) Fairfax learned lots of lessons from the poor purchases they made from 2014-2017. They are putting a premium on management. Hamblin Watsa has decided it is not a turn-around shop - looking to actively run poorly lead/challenged businesses. They are not a piggy bank for poorly run companies in search of cash. It appears to me that Fairfax has tweaked their methodologies used when allocating capital.

 

Others on this board argue that:

2.) the Fed and the ending of easy money (zero interest rates/QE) is a key driver in the stronger performance the past 2 years of Fairfax’s equity holdings. Value investing is back!

3.) the timing of the cycle is finally working in Fairfax’s favour and this is driving the stronger performance of the equity holdings. Value, resource and commodity stocks are all in a secular bull market.

4.) opportunities available in recent years are more in Fairfax’s wheelhouse (i.e. TRS on Fairfax shares, buying back shares of Fairfax India at 60% of BV etc).

 

 

@Viking Great summary of the equity portfolio. It sounds like their poor investments from 2014-2017 have either turned around or are so small that they are now insignificant as a % of BV & earnings moving forward!

 

It does indeed seem like Prem & co have learned lessons from that period. I'm a believer in the "New Fairfax". However, I'm not entirely sure whether their investing style has firmly moved from a deep value mindset to a Charlie Munger-style "buy wonderful businesses at fair prices" mindset. 

 

Do you have any thoughts on this?

[Viking]

@Dudley the short answer is Fairfax definitely has their own style when it comes to investing. Some describe it as deep value. Has it changed to “buy wonderful businesses at fair value”? I don’t think so.
 

In recent years, i really don’t know how to describe it. When i look at the investments made the past 30 months i would describe it as cannibal investing. They are eating anything related to Fairfax. Actually they have been gorging themselves. Just look at how much in the list below (well over $4 billion). And across so many companies they are involved with:

• 1.95 million shares in Fairfax (TRS) @ $373/share
• 2 million  shares in Fairfax (stock buyback) @ $500/share
• Increased ownership in Allied World from 70.9% to 82.9% for $733 million
• Increase stake in Recipe to 84% for $346 million ($100 from Recipe)
• Increase stake in Grivalia Hosiptality from 33.5% to 78.4% for $195 million
• Kennedy Wilson preferred equity = $300 million
• Increase stake in Eurolife from 50% to 80% for $143 million
• Increase stake in Singapore Re from 28.1% to 100% for $103 million
• Ownership in Atlas was also increased over this timeframe
• Fairfax spent another $300 million increased their ownership in the following companies: Fairfax India, John Keels, Mytilineos, Foran Mining, Altius, Ensign

Deep value? Sure. In their circle of competence? Definitely. Are they being opportunistic? Definitely. And i love it.

 

Bottom line, they have done an excellent job deploying capital in recent years. The list above is just one of many examples.

Edited April 18, 2023 by Viking

[glider3834]

1 hour ago, Viking said:

@Dudley the short answer is Fairfax definitely has their own style when it comes to investing. Some describe it as deep value. Has it changed to “buy wonderful businesses at fair value”? I don’t think so.
 

In recent years, i really don’t know how to describe it. When i look at the investments made the past 30 months i would describe it as cannibal investing. They are eating anything related to Fairfax. Actually they have been gorging themselves. Just look at how much in the list below (well over $4 billion). And across so many companies they are involved with:

• 1.95 million shares in Fairfax (TRS) @ $373/share
• 2 million  shares in Fairfax (stock buyback) @ $500/share
• Increased ownership in Allied World from 70.9% to 82.9% for $733 million
• Increase stake in Recipe to 84% for $346 million ($100 from Recipe)
• Increase stake in Grivalia Hosiptality from 33.5% to 78.4% for $195 million
• Kennedy Wilson preferred equity = $300 million
• Increase stake in Eurolife from 50% to 80% for $143 million
• Increase stake in Singapore Re from 28.1% to 100% for $103 million
• Ownership in Atlas was also increased over this timeframe
• Fairfax spent another $300 million increased their ownership in the following companies: Fairfax India, John Keels, Mytilineos, Foran Mining, Altius, Ensign

Deep value? Sure. In their circle of competence? Definitely. Are they being opportunistic? Definitely. And i love it.

 

Bottom line, they have done an excellent job deploying capital in recent years. The list above is just one of many examples.

thanks viking as always for your posts & hard work

 

agree I think in adding to existing positions, they are already familiar with is probably a lower risk approach compared to starting completely new positions 

 

also they have increased their positions in Sporting Life & Thomas Cook as well.

 

 

 

 

[Dudley]

12 hours ago, Viking said:

@Dudley the short answer is Fairfax definitely has their own style when it comes to investing. Some describe it as deep value. Has it changed to “buy wonderful businesses at fair value”? I don’t think so.
 

In recent years, i really don’t know how to describe it. When i look at the investments made the past 30 months i would describe it as cannibal investing. They are eating anything related to Fairfax. Actually they have been gorging themselves. Just look at how much in the list below (well over $4 billion). And across so many companies they are involved with:

• 1.95 million shares in Fairfax (TRS) @ $373/share
• 2 million  shares in Fairfax (stock buyback) @ $500/share
• Increased ownership in Allied World from 70.9% to 82.9% for $733 million
• Increase stake in Recipe to 84% for $346 million ($100 from Recipe)
• Increase stake in Grivalia Hosiptality from 33.5% to 78.4% for $195 million
• Kennedy Wilson preferred equity = $300 million
• Increase stake in Eurolife from 50% to 80% for $143 million
• Increase stake in Singapore Re from 28.1% to 100% for $103 million
• Ownership in Atlas was also increased over this timeframe
• Fairfax spent another $300 million increased their ownership in the following companies: Fairfax India, John Keels, Mytilineos, Foran Mining, Altius, Ensign

Deep value? Sure. In their circle of competence? Definitely. Are they being opportunistic? Definitely. And i love it.

 

Bottom line, they have done an excellent job deploying capital in recent years. The list above is just one of many examples.

 

@Viking That's a fair point. They are (maybe with the exception of Recipe) great businesses. 

 

In other news, this just dropped. Looks like IFRS 17 will have a $94/share impact on BV (or ~14% of 12/31/22 BV). Without factoring in Q1 earnings, that's a BV of $751.68.

 

"The Company’s preliminary estimate of the effect of IFRS 17 on common shareholders’ equity is that it will increase common shareholders’ equity as at December 31, 2022 by approximately $2.2 billion (an increase in book value per share of approximately $94)"

 

[newtovalue]

Looks like Christmas in April ?

 

now I don’t fully rely on book value - but still nice to see a material uptick on one measure of value.

 

 

[gfp]

Here is the full release -

https://s1.q4cdn.com/579586326/files/doc_news/2023/PRFFH-April-18-2023-Preliminary-Report-on-Effect-of-IFRS-17-on-Common-Shareholders-Equity.pdf

[Santayana]

Wow, when Prem said "material impact" he wasn't kidding.  Will be interesting to see how other insurers are impacted.

 

 

Edited April 18, 2023 by Santayana

[Candyman1]

3 hours ago, gfp said:

Here is the full release -

https://s1.q4cdn.com/579586326/files/doc_news/2023/PRFFH-April-18-2023-Preliminary-Report-on-Effect-of-IFRS-17-on-Common-Shareholders-Equity.pdf

I agree that it will likely be positive for the stock, but on a net basis, we just took likely over reserving out of the liability side of the balance sheet. I always expected FFH to be over reserved and over time the over reserving of those past years would have made it in into the income statement anyway. That overall has been going on for some time at FFH, but since they are growing their book long term, it tends to be hidden. So yes, likely people will look at book value per share is higher and stock could trade up, but operationally nothing seems to have changed. That $94 dollars in book value per share was just moved from the liability side of the balance sheet to equity.

Edited April 18, 2023 by Candyman1

[Parsad]

9 minutes ago, Candyman1 said:

I agree that it will likely be positive for the stock, but on a net basis, we just took likely over reserving out of the liability side of the balance sheet. I always expected FFH to be over reserved and over time the over reserving of those past years would have made it in into the income statement anyway. That overall has been going on for some time at FFH, but since they are growing their book long term, it tends to be hidden. So yes, likely people will look at book value per share is higher and stock could trade up, but operationally nothing seems to have changed. That $94 dollars in book value per share was just moved from the liability side of the balance sheet to equity.

 

Correct.  The one net benefit is that analysts and investors could never properly value their over-reserving as it wouldn't be apparent till years down the road. 

 

Now it is clear in the underlying book value, so the stock should price more accurately relative to actual book value compared to how it was priced historically.

 

Fairfax has become easier to understand...from the quality of the insurance businesses, earning power of the insurance businesses, income power from the bond portfolio with higher rates, simplifying the investment holdings, laying out succession plans, etc. 

 

All of this may help elevate FFH to A credit ratings and more consistent valuation relative to book value.  I think if they reduced debt over the next few years we would get those A ratings and it would be priced more in line with MKL or BRK.  

 

Cheers!

[gfp]

Is it correct that 'all else being equal' this would reduce return on equity?  Higher equity, lower future earning power from reserve releases, same assets..

[Parsad]

2 minutes ago, gfp said:

Is it correct that 'all else being equal' this would reduce return on equity?  Higher equity, lower future earning power from reserve releases, same assets..

 

Yes, but nominally.  If book value is up 10% per share, you can assume ROE would be lower by a little less than 10%.  Cheers!

[Viking]

Guys, great discussion on IFRS 17 as i was having a hard time understanding its impact on different pieces of Fairfax. The 4% pop in the stock price is interesting.

[Candyman1]

1 hour ago, Parsad said:

 

Correct.  The one net benefit is that analysts and investors could never properly value their over-reserving as it wouldn't be apparent till years down the road. 

 

Now it is clear in the underlying book value, so the stock should price more accurately relative to actual book value compared to how it was priced historically.

 

Fairfax has become easier to understand...from the quality of the insurance businesses, earning power of the insurance businesses, income power from the bond portfolio with higher rates, simplifying the investment holdings, laying out succession plans, etc. 

 

All of this may help elevate FFH to A credit ratings and more consistent valuation relative to book value.  I think if they reduced debt over the next few years we would get those A ratings and it would be priced more in line with MKL or BRK.  

 

Cheers!

+1

[Saluki]

So my back of the envelope math says that even with today's pop in price, FFH is back to .9 price vs book value

[Xerxes]

It took roughly 12 years or so from inception to 1996-97 for the book value to get to $US 90 per share. 
 

What took 12 years will be added in one day with a stroke of a pen in terms of IFRS adjustments. 

Edited April 18, 2023 by Xerxes

[Viking]

So what kind of an investor is Fairfax? (For those who have not seen it before, here is another old post.) Bottom line, it looks to me like The team at Fairfax does a little bit of everything. It would be interesting better understand how Hamblin Watsa is run. Especially how it has evolved over the past 5 years. Fairfax’s investment portfolio has doubled in size over the past 10 years to $55 billion - this is a significant amount of money.

 

My goal with the list below is to try and capture the full range / types of investments Fairfax has made over the years. Successfully investing in each bucket requires a very different skill set. Yes, some positions could be included in more than one bucket.

----------

Not included below is the usual buy/sell large cap US/Can stocks (too many buys and sell to try and list everything). With the list below I am trying to highlight what Fairfax is doing in addition to this traditional strategy.

----------

1.) Fairfax is a venture capital investor: funding given to startups or other young businesses that show potential for long-term growth

• ICICI Lombard (1994) - sold for @ $1.2 billion 2017/18
• Quess - formerly IKYA  (2013) - via Thomas Cook - still owns - home run
• Digit (2016) - IPO likely coming in 2023
• Davos Brands, Rouge Media, Blue Ant Media (2016)
• Farmers Edge (2017) - looks like a big miss
• Boat Rocker (2018)
• Ki (2020)

2.) venture debt investor: using warrants as sweetener.

pre-2016 i think there were lots of these deals; too many to list.

• EXCO Resources (I think)
• APR (2016)
• Chorus Aviation (2016)
• Mosaic Capital (2017)
• Altius minerals (2017)
• AGT Food and Ingredients (2017)
• Westaim (2017)
• Seaspan (2018) - massive $500 million
• Leon’s (2020)

3.) Incubator/accelerator investor: fostering early-stage companies through the different developmental phases (including funding to accelerate growth) until the companies have sufficient financial, human, and physical resources to function on their own.

• First Capital - Singapore (2002) - sold for $1.7 billion 2016
• Riverstone UK - run-off (GFIC 2010) - sold for @ $1.5 billion 2020/21
• Group (2013) & Pet Health (2014) - sold for $1.4 billion 2022
• Others?

4.) distressed/bankruptcy investor: don't have the cash flow to service their debts and are fighting the clock

• Bank of Ireland (2011) - sold for +$1.4 billion 2014-17
• Eurobank (2014)
• Golf Town (2016) - merged with Sporting Life
• Performance Sports (2017) - Bauer/Easton/Cascade
• Carillion Canada/Dexterra (2018) - merged with Horizon North 2020
• Toys “R” Us (2018) - sold retail operations 2021 - now a real estate play

5.) Real estate investor

• Kennedy Wilson (2010) - ongoing, growing and  very successful partnership
• Grivalia - Greece (2011) - very successful; merged with Eurobank in 2019
• Grivalia Hospitality (2022)

6.) asset manager

• Fairfax India (2015) - ownership has increase from 28% to 42%
• Fairfax Africa (2017) - merged with Helios 2020 - spectacular failure

7.) private equity investor (via external fund managers) - funds allocated here continue to meaningfully grow

• BDT Capital (2009)
• ShawKwei
• JAB JCP V investment fund (2022)
• Lots more

8.) turnaround investor: not fighting the clock. Many of Fairfax’s investments became ‘turnaround’ situations after Fairfax made their initial investment especially 2015-2017 vintage.

• Sandridge Energy (2008/09) - bankrupt 2016?
• Abitibi/Resolute (2008) - sale closed 2023
• The Brick - merged with Leon’s 2012 - sold Leon’s 2021
• Blackberry (2011) - still owns full position
• Torstar - sold 2020
• Reitmans (2013) - sold 2019
• EXCO Resources - bankruptcy - take private 2019 (Fairfax owns 44%)
• Fairfax Africa (2015) - merged with Helios 2020
• APR (2016) - sold to Seaspan/Atlas 2019
• AGT Food Ingredients (2017) - take private 2019
• Mosaic Capital (2017) - take private 2021 (not managed by Fairfax) 

9.) Resource investor

• International Coal Group (2006-09) - coal play - sold for big gains
• Sandridge Energy (2008/09) - bankrupt 2016?
• Abitibi/SFK Pulp/Resolute (2006-09) - paper, pulp & later lumber - sold 2022
• Tembec (2015) - lumber - sold 2017
• EXCO Resources - natural gas - bankruptcy/take private 2019
• Altius Resources (2017) - resource royalty play
• Ensign Energy Services (2018) - oil and gas services
• Stelco (2018) - steel play
• Foran Mining (2021) - copper play

10.) international investor (2014 was a big year)

• Bank of Ireland (2011)
• Grivalia (2011)
• Mytileneos (2013)
• Eurobank (2014)
• Thomas Cook (2014)
• CIB Bank (2014)
• IIFL 
• John Keells

11.) Cannibal investor: opportunistically increasing ownership in businesses it already owns. Low risk / high return.

• 1.95 million shares in Fairfax (TRS) @ $373/share
• 2 million  shares in Fairfax (stock buyback) @ $500/share
• Increased ownership in Allied World from 70.9% to 82.9% for $733 million
• Increase stake in Recipe to 84% for $346 million ($100 from Recipe)
• Increase stake in Grivalia Hosiptality from 33.5% to 78.4% for $195 million
• Kennedy Wilson preferred equity = $300 million
• Increase stake in Eurolife from 50% to 80% for $143 million
• Increase stake in Singapore Re from 28.1% to 100% for $103 million
• Ownership in Atlas was also increased over this timeframe
• Fairfax spent another $300 million increased their ownership in the following companies: Fairfax India, John Keels, Mytilineos, Foran Mining, Altius, Ensign

Edited April 18, 2023 by Viking

[glider3834]

I am deleting my IFRS 17 post - need to take futher look at it

Edited April 19, 2023 by glider3834

[Warner]

My accounting knowledge is limited, but we can assume IFRS 17 being implemented will increase Fairfax's subsidiary statutory surplus' considerably.

 

So, can this potentially allow Fairfax to write additional premiums in this hard market, or potentially return capital to the holding company further increasing shareholder returns?

 

 

[Mick92]

3 hours ago, Warner said:

My accounting knowledge is limited, but we can assume IFRS 17 being implemented will increase Fairfax's subsidiary statutory surplus' considerably.

 

So, can this potentially allow Fairfax to write additional premiums in this hard market, or potentially return capital to the holding company further increasing shareholder returns?

 

 

 

I'd say it likely will allow them to do that but also that they won't do it. They've been clear in every communication about IFRS 17 that they intend to stick internally with their current underwriting processes.

[gfp]

Hooray

https://s1.q4cdn.com/579586326/files/doc_news/2023/PRFFH-April-19-2023-Fairfax-to-Acquire-Additional-46-32-Interest-in-Gulf-Insurance-Group-from-KIPCO.pdf

[Daphne]

Viking nailed it!. Bravo   

[newtovalue]

I don’t know enough about Gulf insurance- is this a good purchase?

 

Although I have to give prem credit - he is executing at a very high level right now 

[Viking]

On 4/17/2023 at 8:03 PM, Viking said:

@Dudley the short answer is Fairfax definitely has their own style when it comes to investing. Some describe it as deep value. Has it changed to “buy wonderful businesses at fair value”? I don’t think so.
 

In recent years, i really don’t know how to describe it. When i look at the investments made the past 30 months i would describe it as cannibal investing. They are eating anything related to Fairfax. Actually they have been gorging themselves. Just look at how much in the list below (well over $4 billion). And across so many companies they are involved with:

• 1.95 million shares in Fairfax (TRS) @ $373/share
• 2 million  shares in Fairfax (stock buyback) @ $500/share
• Increased ownership in Allied World from 70.9% to 82.9% for $733 million
• Increase stake in Recipe to 84% for $346 million ($100 from Recipe)
• Increase stake in Grivalia Hosiptality from 33.5% to 78.4% for $195 million
• Kennedy Wilson preferred equity = $300 million
• Increase stake in Eurolife from 50% to 80% for $143 million
• Increase stake in Singapore Re from 28.1% to 100% for $103 million
• Ownership in Atlas was also increased over this timeframe
• Fairfax spent another $300 million increased their ownership in the following companies: Fairfax India, John Keels, Mytilineos, Foran Mining, Altius, Ensign

Deep value? Sure. In their circle of competence? Definitely. Are they being opportunistic? Definitely. And i love it.

 

Bottom line, they have done an excellent job deploying capital in recent years. The list above is just one of many examples.

We can add GIG to this list. I see Fairfax buying another chunk of Allied World this year. They have an enormous amount of cash to invest:

- Resolute sale just closed $625 million

- Ambridge sale is pending $400 million

- interest and dividend income in 2023 = $1.5 billion

- underwriting profit = $1.1 billion (95 CR)

- earnings from consolidated equity holdings (Recipe etc) = $250 million

- additional asset sales / monetizations