Fairfax 2024

[LC]

5 hours ago, Hoodlum said:

As long as we have a hard market and the share price is below intrinsic value, then I would want them to keep the TRS position in place as is.  Any available cash would be best spent on expanding the insurance business.  The TRS can be closed once the share price is much close to the value of Fairfax.   It would be better to buy back shares during a softer market when share price is down from the peak. 

 

 

Agreed. Almost every company makes the same mistake - they find themselves in super favorable business conditions, generating tons of cash. Shareholders clamoring to buyback shares. Buybacks inevitably commence.

 

12, 24 months later? The business landscape changes. The share price is half what it was, same with competitors/adjacents. Rather than being able to take advantage, the company spent hundreds of millions, billions, on buybacks at prices 2x above the current price. 

[Hektor]

Does anyone here know if TRS has a time bound expiration? I vaguely remember Prem saying FFH can renew TRS as long as they wish (or something similar). I wonder if the outflow due to a stock slump might be limited to a particular time window, and will not continue if they don't renew TRS.

[lessthaniv]

Early note redemption announced yesterday for ~ $350m C$
 

https://www.globenewswire.com/news-release/2024/02/14/2829510/0/en/Fairfax-Announces-Early-Redemption-Of-Senior-Notes-Due-March-3-2025.html

[StubbleJumper]

26 minutes ago, lessthaniv said:

Early note redemption announced yesterday for ~ $350m C$
 

https://www.globenewswire.com/news-release/2024/02/14/2829510/0/en/Fairfax-Announces-Early-Redemption-Of-Senior-Notes-Due-March-3-2025.html

 

 

It's always nice to see them proactively managing the debt maturities, but this one is a little funny as they are redeeming debt that costs 4.95% one year early, while last month they were floating new debt at 6%.  I guess managing maturities costs a bit of money.

 

 

SJ

[SafetyinNumbers]

17 minutes ago, StubbleJumper said:

 

 

It's always nice to see them proactively managing the debt maturities, but this one is a little funny as they are redeeming debt that costs 4.95% one year early, while last month they were floating new debt at 6%.  I guess managing maturities costs a bit of money.

 

 

SJ

60bps difference between Canada and US 10 year benchmarks so it’s not apples to apples. 

[StubbleJumper]

31 minutes ago, SafetyinNumbers said:

60bps difference between Canada and US 10 year benchmarks so it’s not apples to apples. 

 

No, it's not apples to apples at all because it's comparing existing 1-yr debt vs. the new 10-yr debt.  But, it is a cash for cash difference, in that if they had waited a year to refinance and if prevailing interest rates remained the same (ie, if they are still able to float debt for 6% next year), they'd have saved a bit more than US$2.5 million in interest.  Of course, that comes with a certain level of risk, and managing the debt-maturities is all about managing risk (and rarely is risk management free!).

 

 

SJ

[Xerxes]

clawed its way back and locked in a hair above $1,400. 
 

[Thrifty3000]

Quick question: Do reserve releases flow through the income statement?

[Thrifty3000]

2 minutes ago, Thrifty3000 said:

Quick question: Do reserve releases flow through the income statement?

I’m assuming it only impacts balance sheet (and book value).

[StubbleJumper]

5 minutes ago, Thrifty3000 said:

Quick question: Do reserve releases flow through the income statement?

 

Yes, they flow through the income statement.

 

 

SJ

[gfp]

https://www.globenewswire.com/news-release/2024/02/15/2830440/0/en/Fairfax-Financial-Holdings-Limited-Financial-Results-for-the-Year-Ended-December-31-2023.html

 

https://www.fairfax.ca/wp-content/uploads/02_February_15_2024-PRFFH-2023_Q4_Press_Release_Final.pdf

Edited February 15, 2024 by gfp

[gfp]

"We have increased our annual interest and dividend income run-rate to approximately $2.0 billion and we anticipate it will remain at this level for approximately the next four years."

 

"

At December 31, 2023 there were 23,003,248 common shares effectively outstanding"

Edited February 15, 2024 by gfp

[MMM20]

The stock should be +50% tomorrow. Again, to be clear, it won’t be, but it should be. Anything below US$1500 is a farce with these results and outlook. 
 

Edited February 15, 2024 by MMM20

[keegomaster]

Very strong annual results. This is what caught my eye:

• The excess of fair value over carrying value of investments in non-insurance associates and market traded consolidated non-insurance subsidiaries increased significantly to $1,006.0 million at December 31, 2023 from $310.0 million at December 31, 2022, with $315.2 million of that increase related to publicly traded Eurobank.

[nwoodman]

@valuesource any chance you can delete your post.  There are links to the release no need to cut and paste the whole thing and it makes the flow of this thread very distracting.  Thanks in advance

[Hamburg Investor]

 

Quote

 

"Book value per basic share at December 31, 2023 was $939.65 compared to $762.28 at December 31, 2022 (an increase of 24.7% adjusted for the $10 per common share dividend paid in the first quarter of 2023)."
 

1. Book value grew $63.10 in q4 alone or 35.6% of the $177.37 bvps of 2023. That's an increase of 8.3% in q4 alone (in relation to year end 2023).
2. Weightes shares outstanding in q4 just reduced by 1.1% / 23,076 in q4 2023 vs. 23,387 in q4 2022 (I don't have the YE numbers of 2022; still that will not move the needle)

 

[valuesource]

5 minutes ago, nwoodman said:

@valuesource any chance you can delete your post.  There are links to the release no need to cut and paste the whole thing and it makes the flow of this thread very distracting.  Thanks in advance

Done.  Sorry, everyone seemed to be chomping at the bit to see the numbers and sometimes it takes 15 mins for Fairfax to put it up.

[nwoodman]

1 minute ago, valuesource said:

Done.  Sorry, everyone seemed to be chomping at the bit to see the numbers and sometimes it takes 15 mins for Fairfax to put it up.

Many thanks .  Great results and the increase in duration is just brilliant.  When it comes to Bonds these guys really are Masters of the Universe.  It is a treat to watch the balance sheet get stronger quarter by quarter.

[Santayana]

It's a real shame to see the Allied acquisition ruining the combined ratio like that.   Excited to hear what Carson Block has to say about that on the call tomorrow.

[Ross812]

Seeking alpha is reporting an earnings miss of $4.23. Not sure where the ~$177 estimate is coming from... 

[Malmqky]

Guys, the book value is *intentionally* inflated because of IFRS 17 so the growth doesn’t matter and it’s probably overstated anyways!!! Just like the investment portfolio!!!

[valuesource]

Newswire services have a way of really cutting to the bone...

 

[StubbleJumper]

I never particularly like the Q4 release because it doesn't provide all of the details that are usually published during a quarter.  We will have to wait another month to get all of the details that we like to see.

 

That being said, the headline EPS number in the quarter is great.  The market should respond favourably to it in the coming week and the putzes that have been stirring up shit should return to the woodwork.  When you dig into the numbers a bit more, it's a bit of a mixed bag. 

 

-The most obvious point is that there's basically one bil of unrealised gains on fixed income, and it is unlikely that those bonds will be sold any time soon.  We will see a nice pile of interest and divvies over the coming years, which is outstanding.  But the $997m of unrealised gains on the bonds is low quality of earnings.  I do, however, like how the fixed income port is structured for the coming years.

 

-UW earnings are fantastic.  That being said, the Gross Written numbers seem to be slowing.  Crum grew its book during 2023, but it looks like the book grew at the cost of its CR.  NB, Zenith and Allied had much smaller growth in Gross written, which probably means that price was the entire driver and that they actually wrote fewer policies (ie, if price is up 8% but your gross written is up 6%, that means you non-renewed 2% of your policies).  ORH and Brit obviously dumped some business, and I guess we have to accept that it was a rational decision.  Looking at company-wide core underwriting CRs, the lack of cats in 2023 appears to be a good thing, otherwise the consolidated CR in 2023 would have been higher than 2022.  The only real bright spot were the international insurers which both grew their book and shrunk their CR.  It will be interesting to listen to the conference call to hear whether the execs at FFH figure that the hard market still has legs because the numbers are really starting to slow.  

 

-Nice to see the share-count drop and looking forward to the more verbose report next month.

 

 

SJ

[valuesource]

9 minutes ago, Ross812 said:

Seeking alpha is reporting an earnings miss of $4.23. Not sure where the ~$177 estimate is coming from... 

I think it depends where you look for estimates.  Reuters had a mean estimate of $52.15.

[Hektor]

7 minutes ago, StubbleJumper said:

The most obvious point is that there's basically one bil of unrealised gains on fixed income, and it is unlikely that those bonds will be sold any time soon.  We will see a nice pile of interest and divvies over the coming years, which is outstanding.  But the $997m of unrealised gains on the bonds is low quality of earnings.  I do, however, like how the fixed income port is structured for the coming years.

I guess they can give up the nice interest stream and have the unrealized gains. Or, take the interest stream for as long as possible (either maturity or interest rates going down significantly), realize the (larger) gains and deploy it into a bigger income stream (hopefully)