Fairfax 2024

[Parsad]

3 hours ago, Hektor said:

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)

 

They can do both.  Depends on what Brian is thinking.  They could buy derivatives that lock in the current bond gains, while still reaping the interest for the next four years and any further bond gains if interest rates fall.  They are the best at managing these types of issues on the fixed income side.  No one is better...not even Berkshire!  Cheers!

[Parsad]

2 hours ago, Haryana said:

A 50% increase in cash and investments in the holding company from $1.2 billion at the end of Q3.

 

 

“We remain focused on being soundly financed and ended 2023 in a strong financial position with $1.8 billion in cash and investments in the holding company, our debt to capital ratio at 23.1%,” said Prem Watsa, Chairman and Chief Executive Officer.

 

 

Headed in the right direction Prem.  I'd like to see it between $2-3B.  Cheers!

[Cigarbutt]

2 hours ago, StubbleJumper said:

MW stuff...

I love it!  A homework assignment for FFH!  Prem is going to tell them that there is more than enough disclosure that has been provided over the years and that they should go pound sand.

SJ

They could also simply explain?

For example, when referring to the CVC-Riverstone Barbados transaction, they (management, on the call tomorrow) could (opinion) simply infirm the insinuation by explaining that the total consideration paid of 1329 millions for 100% of the joint venture as reported by Gatland in 2021, implied, for Fairfax 60% interest, 695.7 millions (as reported) + the discounted value of the CVR of 235.7.

So, 695.7 (1329-169.5) * 60% + 463.8 (Omers 40% part, (1329-169.5) * 40% + discounted 235.7 ie 169.5 = 1329

That is because the fair value of the CVR is generally be determined by discounting the probability-weighted future payments at an appropriate risk-adjusted rate, or by using derivative valuation methods such as the Black-Scholes option pricing model and because the fair value of the CVR is considered part of the consideration paid in the transaction, under the purchase accounting method for business combinations.

The 1329 number is from a 2021 annual report. The eventual realized value of the CVR is very likely linked to potential adverse development of reserves over a few years. In the event of unfavorable development, the CVR value for FFH would decrease but that does not have an effect on the 1329 reported for the 2021 year.

 

[glider3834]

So Fairfax's book value per share (BVPS) CAGR growth (incl dividends) for 2017-2022 period was 11.7%

 

If we now update & look at 2017-2023 period, I get BVPS CAGR (incl dividends) as 15.5%

 

Calc below

 

=(1009.65*/367.4)^(1/7)-1 = 15.54%

 

*2023 YE BVPS 939.65 + 70 divs = 1009.65

Edited February 16, 2024 by glider3834

[Thrifty3000]

5 hours ago, gfp said:

"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"

This is. Four years is an eternity in Mr. Market years. This stock is going to be worth SO MUCH more 4 years from now.

[Viking]

32 minutes ago, glider3834 said:

So Fairfax's book value per share (BVPS) CAGR growth (incl dividends) for 2017-2022 period was 11.7%

 

If we now update & look at 2017-2023 period, I get BVPS CAGR (incl dividends) as 15.5%

 

Calc below

 

=(1009.65*/367.4)^(1/7)-1 = 15.54%

 

*2024 YE BVPS 939.65 + 70 divs = 1009.65

@glider3834 great point. Fairfax is now starting to build a pretty impressive long term track record in terms of CAGR for BVPS. And they are leaving peers like Markel, WR Berkley and Chubb in the dust. It is impressive how long old narratives stick around. But Mr Market will eventually figure it out.

[dealraker]

7 hours ago, Viking said:

@glider3834 great point. Fairfax is now starting to build a pretty impressive long term track record in terms of CAGR for BVPS. And they are leaving peers like Markel, WR Berkley and Chubb in the dust. It is impressive how long old narratives stick around. But Mr Market will eventually figure it out.

About the only thing an investor needs to know/be aware of.  Seemed inevitable to me, just nearly certain to happen over time...a long time.  

[MMM20]

14 hours ago, MMM20 said:

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. 
 

 

"We maintain our C$1,600.00 target price based on 1.1x but see potential upside should FFH begin to be valued off of earnings, where the peer group median is ~12x in 2024 vs. FFH currently below 8x." 

 

[Junior R]

should be interesting conference calls and interesting day for muddy waters lol

[Spooky]

Just dialed in for the conference call... should be interesting!

[Hektor]

11 hours ago, Parsad said:

They can do both.  Depends on what Brian is thinking.  They could buy derivatives that lock in the current bond gains, while still reaping the interest for the next four years and any further bond gains if interest rates fall.  They are the best at managing these types of issues on the fixed income side.  No one is better...not even Berkshire!  Cheers!

Interesting. This might be less complicated than the CDS or TRS, I guess.

[Luke]

3 minutes ago, Spooky said:

Just dialed in for the conference call... should be interesting!

Let us know any interesting developments, cant dial in right now but want to

[Thrifty3000]

Raised the earnings guidance floor from $100 per share to $125 per share, excluding investment gains, for the next few years. (Prem said “of course there are no guarantees.”) 

[Gamecock-YT]

the call dropped

[gfp]

Just now, Gamecock-YT said:

the call dropped

It's back now

[ValueMaven]

Please keep the live updates for those of us who cant dial in!!  

-VM

[gfp]

The call is still in the prepared remarks, just wrapping them up now.  Jen Allen speaking

[Spooky]

Prem strongly refuting the MW report.

[gfp]

Jen Allen is now going through the allegations in the report by grouping them into 4 categories.  Started with Digit valuation and now going through valuations of associates like Recipe.

[Junior R]

it will be interesting if MW joins and asks a question lol

[Gamecock-YT]

CFO really leaning on their auditors to carry a lot of these answers

[Daphne]

Rightly so…third party endorsements 

[newtovalue]

Jen Allen giving a MasterClass in Insurance accounting. 

 

"If you come for the king - you best not miss"

[gfp]

Q&A now

 

Odyssey re quota share non-renewal question - $340m unearned premium returned to client - residential property quota share (was 2 year deal, didn't see the profits there).  Odyssey non-renewed it and returned the unearned premium.

 

Brit pullback on D&O, Cyber and Cat risk question

 

where do you see best opportunities, where do you see other areas where you want to be cautious

 

Pricing on reinsurance, mostly still seeing double digit price increases on the property side.

 

Insurance - mid-single digit price increases.  D&O and cyber price growth slowing and actually reducing 

[gfp]

Carson Block question!