Fairfax 2024

[Viking]

Brit Insurance publishes its own financial reports. These reports provide a wealth of information on the company:

• Brit 2023AR: https://www.annualreports.com/HostedData/AnnualReports/PDF/LSE_BRE_2023.pdf
• Brit Web Site: https://www.britinsurance.com
• Ki Web Site: https://ki-insurance.com

—————

For Fairfax’s various insurance operations, the ‘surprise performance award’ for 2023 goes to Brit. Importantly, the surprise this year was a very good one for Fairfax shareholders.

 

In 2023, Brit delivered group profit after tax of $895.4 million. This is a monster number.

• Insurance operating results (ex discounting) = $405.7 million; CR = 85.3
• Investment return = $394 million = 6.2%
• Gain on sale of Ambridge = $259.1 million

Dividends paid

 

During 2023, Brit paid dividends totalling of $413.6m (2022: $18.7m) in accordance with the Brit Limited shareholders’ agreement.

• Class A shareholders (OMERS) = $40.6m (2022: $18.7m)
• Class B shareholders (Fairfax) = $373.0m (2022: $nil)

Despite this payment, Brit’s “capital position remains strong, with a surplus over management entity capital requirements of $1,050.5m or 54.5% (2022: $709.8m or 39.9%).” Source: Brit’s 2023AR

 

On 21 March 2024, interim dividends of $187.9m were declared, of which:

• Class A shareholders (OMERS) = $12.9m
• Class B shareholders (Fairfax) = $175.0m

A total of $601.5 million has been paid in dividends by Brit over the past 15 months. 

 

Other Notes:

 

“Highly successful third year of trading for Ki, recording insurance premium written of $877.0m (2022: $834.1m), a combined ratio after discounting of 83.2% (2022: 91.1%) and an undiscounted combined ratio of 89.4% (2022: 95.0%).” Source: Brit’s 2023AR

 

Why was Brit the recipient of the ‘surprise performance award’ in 2023?

 

Over the 2 years of 2017 and 2018, Brit had an average combined ratio of 107.5%. Pretty bad. However, the company was executing an improvement plan and in 2019 the CR improved to 95.8%. But Brit was hit especially hard by Covid in 2020 (due to legal rulings in the UK) and the CR jumped to 112.7% in 2020. In 2023, Brit successfully executed a plan to reduce its catastrophe exposure and exit underperforming businesses. The CR in 2023 was a stellar 85.3%. It will be interesting to see how Brit does in 2024. Let’s hope they can continue the strong performance.

Context

 

As a reminder, Brit was purchased by Fairfax in 2015 for a total of $1.657 billion. So the fact the company earned $895.4 million in 2023 is significant.

 

Ownership Structure of Brit at December 31, 2023

 

At December 31, 2023, Fairfax owned 86.2% of Brit and OMERS owned the remaining 13.8%.

 

Below is my understanding of how the partnership agreement with OMERS works. My notes are based on Jen Allen’s comments made on Fairfax’s 2023YE conference call. She was referencing Odyssey and my assumptions is the Brit/OMERS deal is structured in a similar manner:

• The shares are classified as equity under IFRS.
• Fairfax has no obligation to redeem those shares.
• Fairfax has a call option - this gives Fairfax the option to buy back OMERS stake at a specified price within a specific time period. “Fairfax has the option to purchase OMERS’ interest in Brit at certain dates from October 2023.” Source: Brit’s 2023AR
• OMERS does not have the right to put the shares back to Fairfax, and Fairfax is under no obligation to exercise its call options.
• After Fairfax’s call options expire, a minority investor may IPO their shares or, failing that, request sale of the operating company with a priority on the proceeds.
• OMERS receives a dividend payment each year.

The current deal with OMERS was struck in 2021. Fairfax was paid $375 million and OMERS received an ownership interest of 13.8% in Brit. In Fairfax’s 2023AR, under ‘non-controlling interests,’ OMERS 13.8% stake in Brit has a carrying value of $881.2 million (2022: $736.4 million).

 

What will it cost Fairfax to take out OMERS and what will the accounting look like?

 

I am not sure how the accounting will work when Fairfax takes OMERS out. When Fairfax bought a chunk of Allied World back in 2022 there was a sizeable write down to equity (see quote below). Perhaps we see something similar here. Do other board members have thoughts?

 

From Fairfax’s 2023AR: “On September 27, 2022 the company increased its ownership interest in Allied World to 82.9% from 70.9% for total consideration of $733.5, inclusive of the fair value of a call option exercised and an accrued dividend paid, and recorded a loss in retained earnings of $163.3 in net changes in capitalization in the consolidated statement of changes in equity.”

 

The value of the call options for Fairfax at Dec 31, 2023: In ‘Other Assets’, the value of ‘call options on non-controlling interests’ = $306.6 million (2022: $167.4 million). This total is for Brit, Allied World and Odyssey. See quote below for more information.

 

From Fairfax’s 2023AR: “Comprised of call options on the non-controlling interests in Allied World, Brit and Odyssey Group, which expire in 2026, 2027 and 2029, respectively. At certain dates subsequent to expiry of a call option, the non-controlling interests may request an initial public offering of their shares, the structure, process and timing of which will be controlled by the company; in certain circumstances, the non-controlling interests may request a sale of the respective operating company to a third party.”

 

—————

From page 1 of Brit’s 2023AR - the page was titled ‘2023 - A Record Result’

 

------------

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Edited April 29 by Viking

[Xerxes]

On 4/27/2024 at 8:30 PM, Viking said:

Mistakes are going to be made when playing this game. Even Buffett has made his share of big mistakes:

1. 1965: buying Berkshire Hathaway itself.
2. 1987: buying Solomon preferred shares ("What we do have a strong feeling about is the ability and integrity of John Gutfreund, CEO of Salomon Inc. Charlie and I like, admire and trust John." WB 1987)
3. 1993: buying Dexter Shoe Company; compounded by paying for it with Berkshire stock.
4. 1998: buying General Reinsurance; compounded by paying for it with Berkshire stock.

 

 

 

 

Chris Bloomstran would argue very strongly against the #4 statement.

 

Issuing stock at 3.0x BV to buy a large chunk of bond-portfolio that allowed Berkshire to "diversify" its highly skewed equity exposure to Coca Cola and others without selling it. 

 

Whether Buffett agrees with that or not, it is irrelevant. He went through the unpleasant exercise of dealing with General Reinsurance derivative portfolio, so he may have a bias.

 

But the end results is that he issued expensive equity at the right time and diversify away, whether he intended or not.

At the end he was right for the wrong reasons, ... and sometimes it is like that. You take it.

 

 

[SafetyinNumbers]

19 minutes ago, Xerxes said:

 

 

Chris Bloomstran would argue very strongly against the #4 statement.

 

Issuing stock at 3.0x BV to buy a large chunk of bond-portfolio that allowed Berkshire to "diversify" its highly skewed equity exposure to Coca Cola and others without selling it. 

 

Whether Buffett agrees with that or not, it is irrelevant. He went through the unpleasant exercise of dealing with General Reinsurance derivative portfolio, so he may have a bias.

 

But the end results is that he issued expensive equity at the right time and diversify away, whether he intended or not.

At the end he was right for the wrong reasons, ... and sometimes it is like that. You take it.

 

 

Fairfax also used expensive stock in the late 1990s to do a series of insurance acquisitions in part to pick up cheap float. A smart move by both BRK and FFH, IMO.

[Viking]

38 minutes ago, Xerxes said:

Chris Bloomstran would argue very strongly against the #4 statement.

 

Issuing stock at 3.0x BV to buy a large chunk of bond-portfolio that allowed Berkshire to "diversify" its highly skewed equity exposure to Coca Cola and others without selling it. 

 

Whether Buffett agrees with that or not, it is irrelevant. He went through the unpleasant exercise of dealing with General Reinsurance derivative portfolio, so he may have a bias.

 

But the end results is that he issued expensive equity at the right time and diversify away, whether he intended or not.

At the end he was right for the wrong reasons, ... and sometimes it is like that. You take it.

@Xerxes point taken. One of the things i love about investing is important things can meaningfully change over time. That is why getting anchored to a narrative (as an investor) can be so detrimental. 
 

It often takes 5 years or longer to properly evaluate the meaningful capital allocation decisions. Sometimes, what looks like a poor decision in the short term looks brilliant and few years later. 

 

I think a big factor is simply being in the game. Being in the game allows you to capitalize on opportunities. Luck also is a factor. Sometimes Mr Market will let you flip a poor decision into a good decision. But the most important factor is execution - at the end of the day the management team has to execute well over time.
 

What cracks me up with so many Fairfax detractors (haters?) is they gave up following the company years ago. So their views on the company are completely stale dated/wrong. So much at Fairfax has changed (insurance and investments) - and they don’t see it… because they refuse to do the work/look at things with an open mind. Of course, that kind of thinking is what has given us all such a home run with Fairfax over the past 4 years. So i am actually very thankful to Fairfax’s many detractors/haters… couldn’t have done it without you!

[Viking]

3 hours ago, SafetyinNumbers said:

Fairfax also used expensive stock in the late 1990s to do a series of insurance acquisitions in part to pick up cheap float. A smart move by both BRK and FFH, IMO.

 

@SafetyinNumbers I did not understand Fairfax's approach to using their own equity. You taught me this.   Fairfax really tries to take advantage of Mr. Market's mood swings - when the shares are valued high they issue and when the shares are valued low they buy back. Especially pre-2000. 

 

This is also something they do with their equity and insurance holdings. I think it stems from having a basic value investing framework in how they do everything. Something to keep in mind moving forward. 

Edited April 30 by Viking

[SafetyinNumbers]

1 hour ago, Viking said:

 

@SafetyinNumbers I did not understand Fairfax's approach to using their own equity. You taught me this.   Fairfax really tries to take advantage of Mr. Market's mood swings - when the shares are valued high they issue and when the shares are valued low they buy back. Especially pre-2000. 

 

This is also something they do with their equity and insurance holdings. I think it stems from having a basic value investing framework in how they do everything. Something to keep in mind moving forward. 

It’s one of things that gets me very excited about owning shares for a long time and being very resistant to selling too soon. In the late 1990’s we used expensive equity to buy float cheap but the combined ratios were high. The equity got expensive because FFH booked 4 years in a row of 20%+ ROE. Back then, the starting point was 1.8x BV and the stock went to 5x BV.
 

It was really smart to sell back then but this time the earnings quality is so much higher. Instead of buying underperforming insurance companies if our stock gets expensive we may buy large quality companies at a fair price. This will dramatically increase surplus capital and increase returns. The snowball could get huge quickly which should probably be expected to happen easier in Canada vs Omaha from the same starting point.

 

[Jaygo]

7 hours ago, SafetyinNumbers said:

The snowball could get huge quickly which should probably be expected to happen easier in Canada vs Omaha from the same starting point.

Just curious on why that could be easier this side of the border. Valuation? Less scrutiny? 

[Hoodlum]

National Bank Analyst Jaeme Gloyn increased his target to $2100 Cdn.

https://www.theglobeandmail.com/investing/markets/inside-the-market/article-tuesdays-analyst-upgrades-and-downgrades-for-april-30/?login=true

 

Quote

“We expect continued outperformance through 2024 driven by three catalysts ... i) significantly increased operating income, ii) valuation re-rate, and iii) potential S&P/TSX 60 Index inclusion,” he said. “While we expect softer than consensus results in Q1-24, largely due to unrealized losses on fixed income assets, robust underwriting performance and outlook commentary will support our longer-term view.”

 

Mr. Gloyn increased his target for Fairfax shares to a Street-high of $2,100 from $2,000, keeping an “outperform” rating.

 

[SafetyinNumbers]

2 hours ago, Jaygo said:

Just curious on why that could be easier this side of the border. Valuation? Less scrutiny? 

It was a dumb joke that we get more snow in Toronto than Omaha (about 2x actually!). 

In reality, when BRK first hit the same market cap as FFH is now in 1995, it wasn’t set up as well as FFH is. BRK was trading at ~2.5x BV and had insurance premiums of only $3b. With that set up, I think FFH has a good chance of outperforming what BRK already accomplished in the last 29 years.

[nwoodman]

43 minutes ago, Hoodlum said:

National Bank Analyst Jaeme Gloyn increased his target to $2100 Cdn.

https://www.theglobeandmail.com/investing/markets/inside-the-market/article-tuesdays-analyst-upgrades-and-downgrades-for-april-30/?login=true

 

 

Thanks for posting the rump of the article .  Agree there will be a hit to the bond portfolio.  My guesstimate is $40 per share but not phased +\-$10.  It is all moving in the right direction.

[Hoodlum]

7 minutes ago, nwoodman said:

Thanks for posting the rump of the article .  Agree there will be a hit to the bond portfolio.  My guesstimate is $40 per share but not phased +\-$10.  It is all moving in the right direction.

 

But would it be that large under IFRS reporting?

[gfp]

3 minutes ago, Hoodlum said:

 

But would it be that large under IFRS reporting?

 

I don't think Q1 will be that bad.  Partly because of the offsetting IFRS discount effect but primarily because the real meat of the bond sell-off started the day after the quarter ended.  Q1 was pretty tame.  We'll see how Q2 and the rest of the year unfolds but I'm not expecting 2-7 year treasuries to stick around with a 5-handle on the yield for more than a few days.  There is a lot of demand for those securities at 5%.  I know I'm a broken record on that but watch the 2 year - at 5% buyers come flooding back in, which is unsurprising.

[nwoodman]

6 minutes ago, gfp said:

I know I'm a broken record on that but watch the 2 year - at 5% buyers come flooding back in, which is unsurprising.

You have a pretty good handle on these things, so keep that record spinning

[Hoodlum]

It looks like a ratings upgrade may may be coming from Fitch, based on their Outlook switching from Stable to Positive.

Fitch Revises Fairfax's Outlook to Positive; Affirms Ratings

Edited April 30 by Hoodlum

[nwoodman]

6 hours ago, Hoodlum said:

It looks like a ratings upgrade may may be coming from Fitch, based on their Outlook switching from Stable to Positive.

Fitch Revises Fairfax's Outlook to Positive; Affirms Ratings

Very good news indeed

[nwoodman]

Why Fairfax Financial should see an extraordinary run over the next decade

 

https://www.theglobeandmail.com/amp/investing/investment-ideas/article-why-fairfax-financial-should-see-an-extraordinary-run-over-the-next/

 

“Fairfax Financial is on the other side of an inflection point in its earnings and valuation that position it for an extraordinary run over the next decade. It’s following in the footsteps of Warren Buffett’s Berkshire Hathaway, which shot up 27 times after it reached the size Fairfax is now in 1995.”

 

@SafetyinNumbers nice work

 

 

 

Edited May 1 by nwoodman

[SafetyinNumbers]

1 hour ago, nwoodman said:

Why Fairfax Financial should see an extraordinary run over the next decade

 

https://www.theglobeandmail.com/amp/investing/investment-ideas/article-why-fairfax-financial-should-see-an-extraordinary-run-over-the-next/

 

“Fairfax Financial is on the other side of an inflection point in its earnings and valuation that position it for an extraordinary run over the next decade. It’s following in the footsteps of Warren Buffett’s Berkshire Hathaway, which shot up 27 times after it reached the size Fairfax is now in 1995.”

 

@SafetyinNumbers nice work

 

 

 

Thanks! Many thanks to @NormR for helping so much with the editing and connecting me with his editor.
 

I’m so excited to see it in the paper when it gets delivered tomorrow. Long time subscriber, first time contributor

[nwoodman]

16 minutes ago, SafetyinNumbers said:

Thanks! Many thanks to @NormR for helping so much with the editing and connecting me with his editor.
 

I’m so excited to see it in the paper when it gets delivered tomorrow. Long time subscriber, first time contributor

As you should be.  It reads really well

[Cigarbutt]

On 4/29/2024 at 3:41 PM, Viking said:

...

What will it cost Fairfax to take out OMERS and what will the accounting look like?

I am not sure how the accounting will work when Fairfax takes OMERS out. When Fairfax bought a chunk of Allied World back in 2022 there was a sizeable write down to equity (see quote below). Perhaps we see something similar here. Do other board members have thoughts?

From Fairfax’s 2023AR: “On September 27, 2022 the company increased its ownership interest in Allied World to 82.9% from 70.9% for total consideration of $733.5, inclusive of the fair value of a call option exercised and an accrued dividend paid, and recorded a loss in retained earnings of $163.3 in net changes in capitalization in the consolidated statement of changes in equity.”

The value of the call options for Fairfax at Dec 31, 2023: In ‘Other Assets’, the value of ‘call options on non-controlling interests’ = $306.6 million (2022: $167.4 million). This total is for Brit, Allied World and Odyssey. See quote below for more information.

From Fairfax’s 2023AR: “Comprised of call options on the non-controlling interests in Allied World, Brit and Odyssey Group, which expire in 2026, 2027 and 2029, respectively. At certain dates subsequent to expiry of a call option, the non-controlling interests may request an initial public offering of their shares, the structure, process and timing of which will be controlled by the company; in certain circumstances, the non-controlling interests may request a sale of the respective operating company to a third party.”

...

On this Board, some work had been done in FFH's threads concerning the first round of Brit's sale and then re-acquisition of a minority interest.

-----

Summary (From Feb 15th 2021):

Taking OMERS' perspective as FFH contributed capital and assigned its own dividends to Brit (all numbers in USD)

Summer 2015: OMERS (buys) pays 4.30 per share for 120M shares (29.92% interest), with a shareholders' agreement stipulating an annual dividend at 0.43 per share. Total 516.0M

In 2016: OMERS (sells) gets 4.30 per share for 13.449M shares, 57.8M

In 2018: OMERS (sells) gets 4.30 per share for 58.551M shares, 251.8M

In 2020: OMERS (sells) gets 4.30 per share for the remaining 48.000M shares, 206.4M

Total re-sold = 120M shares for 516.0M getting yearly 0.43 US cents per 4.30 USD share along the way.

So effectively a post-tax financing rate of 10%. For some time, this didn't seem to make much economic sense but...eventually it did?

Note: This line of thinking required some work in both FFH's and Brit's various filings. The numbers are clear about the price paid and the prices received by OMERS, showing how these co-investors' transactions are of the financing type. For the 10% yearly 'dividend' rate, some inferences need to be made but (opinion) the inference is likely right.

Note: This type of work was not quite straightforward and the application of IFRS accounting has made it (at least for me) much more byzantine.

-----

Based on the above, what about the 'cost' to re-acquire Brit's minority interest.

Short story: there is a lot of IFRS-related accounting noise but, in substance, FFH will likely buy back the minority interest at the price for which it was sold (fixed price), with a fixed dividend rate along the way.

-----

The following is based on hunch as much as knowledge so feel free to improve.

With IFRS, selling a minority interest is considered an equity transaction and transaction gains of the revaluation type have to be recognized (as well as a non-controlling revalued interest). For FFH, this comes with a call option to buy back the non-controlled interest (at a fixed price) which appears to be treated like a derivative asset with a value taking into consideration the changing value of the non-controlled interest which, itself, is influenced by the NCI's share of earnings. So, my understanding is that the call option value will tend to increase over time based on the subsidiary's positive income and this will be recognized in net income (and retained earnings) at the parent level from the financial asset gain. But this is not really an economic gain and it looks like the way to deal with this from an accounting point of view is to deduct this financial gain (reduced income and reduced retained earnings) when the call option to buy back the minority stake is exercised.

Short story (opinion): this accounting noise is just that.

 

Edited May 1 by Cigarbutt
spelling

[yqsun]

10 hours ago, SafetyinNumbers said:

Thanks! Many thanks to @NormR for helping so much with the editing and connecting me with his editor.
 

I’m so excited to see it in the paper when it gets delivered tomorrow. Long time subscriber, first time contributor

Thank you for the write-up! I just attached the comments to the article for non-subscribers to the newspaper.  Please click the following link:
https://ibb.co/3fGFCGf

 

Edited May 1 by yqsun
Picture attached is not clear so a link is provided.

[Xerxes]

On 4/30/2024 at 8:19 AM, SafetyinNumbers said:

It was a dumb joke that we get more snow in Toronto than Omaha (about 2x actually!). 

In reality, when BRK first hit the same market cap as FFH is now in 1995, it wasn’t set up as well as FFH is. BRK was trading at ~2.5x BV and had insurance premiums of only $3b. With that set up, I think FFH has a good chance of outperforming what BRK already accomplished in the last 29 years.

congrats sir,

 

Your article is also pegged to the Berkshire stock news. 
 

On an unrelated note, I am must admit, i am bit confused on the “architect” difference between BRK (pre-GenRe) and FFH today. 
 

Same market cap, but the float size was vastly different as a ratio to each other. 
 

Is that in your opinion an accident of history in their life cycle at those points in time or preferred “architecture” whereby in BRK case most of the market cap was hinged on retained earning as oppose to the size of the float. 
 

Edited May 1 by Xerxes

[Viking]

Q1 Earnings Preview. Below are a few of the things i will be watching for when Fairfax reports after markets close on Thursday. Anything missing from my list?

 

1.) How is Fairfax allocating new capital?

 

What did Fairfax do with $1 billion notes offering that was completed the end of March? Fairfax also received a $175 million dividend payment from Brit later in March.

 

Fairfax has some pretty big cash outlays in Q1:

• Dividend ($15/share) = $375 million
• Stock buybacks = $125 million? 125,000 shares @ $1,000/share?

Do we see Fairfax buy back another chunk from one of their minority partners in Brit, Allied or Odyssey?

 

2.) Impact of change in interest rates on reported results?

 

US Treasury rates 2 years + out on the curve moved about 30 basis points higher in the quarter. This will be a headwind to fixed income (resulting in unrealized investment losses) but will be a tailwind to IFRS 17 reporting (resulting in a benefit). How will it all shake out? Not sure - but not concerned.

 

I think Fairfax’s average duration is about as follows:

• Fixed income = 3 years
• Insurance liabilities = 4 years

More importantly, the significant increase in bond yields since Dec 31, 2023 is giving the fixed income team at Fairfax another juicy opportunity to extend duration at pretty attractive rates. Bond yields 3 years and further out have increased about 70 basis points over the past 4 months. Bond yields are only 15 to 30 basis points from the highs they reached in mid-October 2023.

 

 

3.) What is interest and dividend income?

 

Interest and dividend income came in at $536.4 million in Q4. Is it still increasing quarter over quarter? The Q1 number x 4 will provide the best estimate for full year interest and dividend income.

 

Is Fairfax’s investment in Kennedy Wilson’s debt platform continuing to grow?

 

4.) Insurance

• What is growth in net premiums written? GIG + organic…
• What is CR? Is it below 94%?
• What is level of reserve releases? Trend?

Commentary on hard market?

 

5.) What is share of profit of associates?

• Eurobank? Chug, chug, chug?
• Poseidon? Do we see green shoots yet?

6.) Equities

• What are investment gains from equities? The equities I track suggests mark to market gains of $390 million in Q1.
• For Associate holdings, what is the excess of market value to carrying value? This is value that is being created by Fairfax that is not being captured in book value.

 

 

7.) What is book value per share?

• The dividend payment in January will dent this by $15/share.

Edited May 1 by Viking

[SafetyinNumbers]

26 minutes ago, Xerxes said:

congrats sir,

 

Your article is also pegged to the Berkshire stock news. 
 

On an unrelated note, I am must admit, i am bit confused on the “architect” difference between BRK (pre-GenRe) and FFH today. 
 

Same market cap, but the float size was vastly different as a ratio to each other. 
 

Is that in your opinion an accident of history in their life cycle at those points in time or preferred “architecture” whereby in BRK case most of the market cap was hinged on retained earning as oppose to the size of the float. 
 

I’m glad the article is being associated with Berkshire. Quite frankly, it’s the biggest source of like-minded long term investors for FFH after the Canadian institutions. I rather get those individual shareholders first since the institutions don’t really care about the price they pay just the performance they get. 
 

I wanted to highlight how much better the set up is for FFH vs BRK both based on the size of the insurance business on a relative basis and the starting valuation. Of course, the forward macro conditions, execution and asset allocation decisions will determine what the future returns look like but I can see how quality investors might flock to FFH if they execute on the strategy of adding quality stocks on a big market dislocation.

 

i think it’s important to note that BRK has been way better on the equity investments which is why it has so much more surplus capital than FFH. It’s the reason Bloomstran prefers BRK. FFH is now in a position to stack surplus capital which will increase durability and the potential to add high return equities.

[TwoCitiesCapital]

1 hour ago, SafetyinNumbers said:

I think it’s important to note that BRK has been way better on the equity investments which is why it has so much more surplus capital than FFH. It’s the reason Bloomstran prefers BRK. FFH is now in a position to stack surplus capital which will increase durability and the potential to add high return equities.

 

I know the analyst who used to work for Semper Augustus. The view of FFH was too much blow-up risk at FFH. 

 

I dunno if that was from the insurance side or beunf uncomfortable with shorting/derivatives/investments etc, but that was the reason they were uninterested in FFH and Fairfax India when I was discussing them with him. 

Edited May 1 by TwoCitiesCapital

[gamma78]

wow i didn't realise the scale of some things until I read @SafetyinNumbers article. BRK has 5x the float of FFH but 33x the market cap. Really points to the importance that choosing continuously compounding equities is going to have going forwards. To replicate BRK returns in the future FFH can't really be trading in and out of companies with cyclicality and otherwise poor economics. They need the compounders over long periods of time. My reflection on FFH is that I don't really see these just yet - and more importantly in the past that mentality of owning the type of business hasn't really been there (i.e. more focused on "trades" than compounders). The investments in India are pretty intriguing with regards to long term high return on capital compounding.