Fairfax 2025

[TwoCitiesCapital]

2 hours ago, SafetyinNumbers said:

What would you say are the last 5 low quality positions they have purchased?

 

 

I don't really have an opinion on them individually. Just their historical approach/results have given the vibe that they're not looking for quality compounders - they're looking for cheap companies with management Fairfax likes. They buy them and then flip them. 

 

I'm ok with this approach. 

[dartmonkey]

2 hours ago, gfp said:

Freudian slip?! 

Oy vey, that must be it.

 

Actually, while riding my bike, I thought of one more major similarity and one more major difference.

 

Similarities:

6) Centralized capital allocation, massively decentralized operations

 

Differences:

6) Capital return. Both Buffett and Watsa have expressed admiration for Henry Singleton, but Buffett has practically never paid a dividend, and only got on the buyback bus in the last 10 years or so, so if Fairfax is at all aggressive with repurchases, and maintains or increases the current 1% dividend, it can significantly postpone the size problem that Berkshire is now stuck with.

 

Also, apart from starting 21 years later than Berkshire, Fairfax started smaller and gives back capital, so it is still much smaller than Berkshire was 21 years ago. In May 2004, Berkshire had a market cap of $142.8b, or $243b adjusted for inflation, compared to Fairfax's $35b today. So Berkshire still has another 25-30 years before it reaches Berkshire's current size, if it maintains 15% annual increases, and potentially much longer if it keeps returning significant amounts of capital.

[SafetyinNumbers]

2 hours ago, Hektor said:

My understanding is that Prem/Fairfax follow the Templeton style of value investing, not the Graham/Fisher/Buffett/Munger style.

I think that’s called expected value. They expect to be wrong a third of the time unlike Buffett’s #1 and #2 rules for investing. 

[Hoodlum]

It looks like Sleep Country is expanding to the UK.  Maybe they want to become the global sleep expert.   
 

https://news.sky.com/story/mattress-brand-simba-beds-down-with-new-canadian-owner-13363197
 

Sky News has learnt that Simba Sleep, which is chaired by Asda boss Allan Leighton, has struck a deal to be taken over by a trade buyer, thought to be the privately owned group Sleep Country.

 

An agreement about the transaction is understood to have been reached in recent weeks.

 

Previously a listed company, Sleep Country is now owned by Fairfax Financial Holdings, and trades from hundreds of stores across Canada.

 

One source said Simba's new owner would seek to grow its brand outside the UK.

The deal with its new Canadian owner is said to comprise an up-front initial payment, with further payments to be made in the coming years depending upon the performance of the business.

 

[nwoodman]

6 hours ago, Hoodlum said:

It looks like Sleep Country is expanding to the UK.  Maybe they want to become the global sleep expert.   
 

https://news.sky.com/story/mattress-brand-simba-beds-down-with-new-canadian-owner-13363197
 

Sky News has learnt that Simba Sleep, which is chaired by Asda boss Allan Leighton, has struck a deal to be taken over by a trade buyer, thought to be the privately owned group Sleep Country.

 

An agreement about the transaction is understood to have been reached in recent weeks.

 

Previously a listed company, Sleep Country is now owned by Fairfax Financial Holdings, and trades from hundreds of stores across Canada.

 

One source said Simba's new owner would seek to grow its brand outside the UK.

The deal with its new Canadian owner is said to comprise an up-front initial payment, with further payments to be made in the coming years depending upon the performance of the business.

 

Cool, looks like the bank of Fairfax is doing its thing.  

 

For context:

 

In an interview with Retail Insider, Schaefer said what the new deal (referring to Fairfax acquiring Sleep Country) means is “probably status quo but maybe even with a greater sense of acceleration.”

“It’s almost like a new horizon with some familiar faces. That’s how I look at it. I’m excited about it. We’re already a strong company with some fabulous, incredible brands but the fact that we’re teaming up with another Canadian iconic super power like Fairfax is quite exciting and the possibilities they were endless before but it just became a little bit more endless with the bank of Fairfax behind you if you know what I mean.”

 

Some further color on the origins of the Simba Deal:

 

“Sleep Country’s awareness of Simba Sleep predates the recent acquisition and is rooted in a longstanding business relationship. In 2018, Sleep Country Canada entered into a strategic partnership with Simba to exclusively launch Simba’s mattresses in Canada. According to Sleep Country’s Chief Business Development Officer at the time, Stewart Schaefer, the company was “searching the world for premium products to further enhance our online offering” and discovered Simba from the UK. This partnership allowed Sleep Country to introduce Simba’s hybrid mattress-in-a-box to Canadian consumers, leveraging both brands’ strengths in their respective markets.

This collaboration was not incidental-Sleep Country actively sought out innovative international brands to expand its product lineup, and Simba’s reputation as a leading European mattress-in-a-box provider made it an attractive partner. Simba’s co-CEO, Steve Reid, also highlighted that Sleep Country was always their “#1 choice for Canada,” underscoring the mutual recognition and established business ties between the two companies.

 

In summary, Sleep Country’s knowledge of Simba Sleep comes from years of direct partnership and collaboration, making the company well-acquainted with Simba’s products, business model, and market potential long before the acquisition took place.”

 

May the tuck-in acquisitions blossom!

 

 

 

 

Edited May 7, 2025 by nwoodman

[gfp]

Press release out of Gulf Insurance this morning -

 

https://www.zawya.com/en/press-release/companies-news/gulf-insurance-group-sustains-momentum-in-2024-positions-for-next-phase-of-global-growth-c0x148hn

[bluedevil]

The Markel Brunch for 2025 just posted on Youtube.

 

I think it is interesting to see the presentation at the beginning and the explanation of why Markel has struggled in insurance over the past few years.  My boil down:

 

1 - Over centralization.  Moving too many shared services to central functions for lower costs, which took away power from front line professionals.  Makes Prem's comments about the critical importance of decentralization and maintaining that seem prescient. 

 

2 - They are getting their lunch eaten by Kinsale Capital Group in their core US specialty business.  Kinsale seems like it is disruptive, tech based company (honestly had not heard of them), and is blowing Markel away -- taking share, while having underwriting ratios that are 20 points less!

 

For those of us with huge positions in Fairfax for the long-term, it is this second point that concerns me.  Seems tech and AI -- which i didn't think of much until this year, when my tesla for all intents and purposes started to drive itself and AI models got good enough that i now use them at work every day -- will be hugely disruptive for insurance underwriting, and hard to tell how prepared for that Fairfax is outside of Ki and Digit.

[SafetyinNumbers]

4 hours ago, bluedevil said:

The Markel Brunch for 2025 just posted on Youtube.

 

I think it is interesting to see the presentation at the beginning and the explanation of why Markel has struggled in insurance over the past few years.  My boil down:

 

1 - Over centralization.  Moving too many shared services to central functions for lower costs, which took away power from front line professionals.  Makes Prem's comments about the critical importance of decentralization and maintaining that seem prescient. 

 

2 - They are getting their lunch eaten by Kinsale Capital Group in their core US specialty business.  Kinsale seems like it is disruptive, tech based company (honestly had not heard of them), and is blowing Markel away -- taking share, while having underwriting ratios that are 20 points less!

 

For those of us with huge positions in Fairfax for the long-term, it is this second point that concerns me.  Seems tech and AI -- which i didn't think of much until this year, when my tesla for all intents and purposes started to drive itself and AI models got good enough that i now use them at work every day -- will be hugely disruptive for insurance underwriting, and hard to tell how prepared for that Fairfax is outside of Ki and Digit.

Kinsale’s edge is being able to write policies with smaller ticket prices because they use technology to increase the productivity of their underwriters. By being fast and productive they end up with positive selection bias which increases their profitability. 
 

Fairfax seems to be spending more money recently on technology and have stated they expect to take learnings from Ki and Digit across the rest of the company. 

[bluedevil]

Yeah, i hope Fairfax is moving aggressively on this front.

 

Underwriting is so data-centric, that it seems it will be heavily disrupted by AI, and soon.  

 

Ki is a good example.  Huge success for us, but the fact that it has gone from nothing to the success it has now in such a short period is a warning sign for all incumbents, including Fairfax's other companies.  

 

Markel's new insurance guy seems very bright.  But it is hard for me to see how they turn things around to compete without rebooting their technology stack, which will take years.  One of the things the Kinsale CEO has mentioned is that because of their advanced technology, they can give quotes to brokers much faster than competitors, and that brokers value this, resulting in higher-margin business.  Something he thinks other people can't replicate for years.

 

Hopefully Fairfax is ahead of the curve!

 

 

[Hoodlum]

Blackrock is involved in another startup focused on AI driven reinsurance in the Middle East and Asia.

 

https://www.reinsurancene.ws/ihc-blackrock-lunate-partner-for-1bn-abu-dhabi-ai-native-reinsurance-launch/

 

The new reinsurance company has been backed by an initial $1 billion of equity capital and will seek to underwrite $10 billion of liabilities.

 

With a technology-first approach, IHC said the new reinsurance start-up will be an artificial intelligence native company (AI-native), with tech and software sitting at the core of the reinsurance platform, to enable the company to enhance its data and market analytics, as well as to optimise its capital efficiency.

 

The company is being designed to match its underwriting capabilities with cutting-edge AI technologies, with a goal to become a key global player and also to accelerate development of markets in the Gulf region.

 

The new reinsurance company has been backed by an initial $1 billion of equity capital and will seek to underwrite $10 billion of liabilities.

 

With a technology-first approach, IHC said the new reinsurance start-up will be an artificial intelligence native company (AI-native), with tech and software sitting at the core of the reinsurance platform, to enable the company to enhance its data and market analytics, as well as to optimise its capital efficiency.

 

The company is being designed to match its underwriting capabilities with cutting-edge AI technologies, with a goal to become a key global player and also to accelerate development of markets in the Gulf region.

[Hamburg Investor]

To me this ai topic seems it cpuld get the biggest threat to Fairfax, Markel and Berkshires insurancs business.

 

My biggest concern is, that ai may change the whole characteristics within the insurance business.
 

Who needs brokers anymore? If everything gets transparent online - why bother just take the cheapest offer? 
 

This is what changed e. g. the tourism industry. 25 years ago people where going to a travel agency (think: broker) and there was no full transparency about the e. g. flight and hotel costs. 
 

I am not a deep expert in the question, how disruptive ai could get. But what has been written here is exactly what my concerns where all about. If ai technology helps being cheaper and more efficient and getting the better clients on the cheap, then my best guess is, that old structured (e.g. brokers business) looses part of its value. Prices may erode especially in niche areas. It might get easier going into that niches for a newbe and there offerings might get seen and welcomed. Nobody is married with his insurer, other then e. g. a car brand; and even the latter erodes, but maybe that takes even longer.

 

To me this seems mabe the point where we should focus on the most in ghe upcoming years (the performance of the people following Prem might be a second, but my concerns are way less within that field at the moment).

[gfp]

4 minutes ago, Hamburg Investor said:

To me this ai topic seems it cpuld get the biggest threat to Fairfax, Markel and Berkshires insurancs business.

 

 

It sounds like you are actually more concerned with the risk to the insurance brokers' business models than that of the carriers like Fairfax.

 

The insurance brokers have an amazing business - you would think that capitalism is coming for them to disrupt their profits.  But so far it hasn't.  That would have been a good question for Ajit and Warren at the meeting, since Berkshire has been trying to sell business insurance direct for so long.  It never seems to gain traction.   The most recent attempt is here, but there have been many (biBRK, etc..)

https://threeinsurance.com

[Blugolds]

There is still an element of specialty with guys like Ajit vs straight up AI IMO. I agree that AI could significantly change the business but I still think there is a need for it to be supplementary vs the ultimate say in policy. For instance, we’ve seen tech streamline industry in real estate, vacation rentals, flights, ride services and vehicle purchases. One thing that sticks out to me, I have overheard two coworkers that had vehicles that were diagnosed with serious expensive repairs needed in the near future, dealership was offering them a low trade in value, they purchased and sold a new vehicle via carvana that made an offer without even seeing the vehicle. Carvana dropped off the new vehicle and picked up the previous vehicle, no questions just put in a rollback. Unless Carvana has an Army of mechanics I don’t know how that model is sustainable and how you maintain a decent margin. And these are two instances that I have heard of in the last cuu ok low months in passing. carvana has become the go-to way to dump problem vehicles without accountability. They weren’t making a ton on the sale either as that price was very competitive, so they are competitive on the sale price but taking it in the shorts on the trade in value. This example shows how even with tech advancements and streamlined direct to consumer business can take a piece of the pie, it might not be a piece that you want anyway. There is value in professionals in positions ensuring things are done right rather than turning it all over to AI etc. If competitors want to just write business via AI without checks and balances let them, I’m not sure that’s a sustainable model, if you want quantity that might work..for a bit..if you want quality, I don’t think a ton changes because you’ll still need the Ajits of the business to oversee everything, that becomes your advantage. I might not have articulated the concept well, but I think a lot of these models that sound good in theory for business open up ways to exploit them and while it may seem fine to start, eventually the consumer learns how to take advantage of them and already slim margins fall and models can fail. 
 

[bluedevil]

One more thing about the Markel Brunch presentation that i think is worth calling out from a Fairfax perspective. 

 

The new structure that Markel is putting in is to try to empower approximately 60 profit centers that are focused on a unique set of customers, geographies or products and that have full accountability for their P&L.  This is to empower and hold accountable frontline underwriters.

 

This is the exact model that Andy Bernard brought to Fairfax's insurance operations when he took that over 13 years ago.  Fairfax according to Prem's 2024 letter now has approximately 250 such centers.  Likely an important reason for the divergence we've seen in the underwriting of the two organizations.  Fairfax has gone from mediocre to great, while Markel has gone from great to mediocre because it went from this model (which it historically had) to a more centralized model. 

 

 

[Viking]

1 hour ago, bluedevil said:

One more thing about the Markel Brunch presentation that i think is worth calling out from a Fairfax perspective. 

 

The new structure that Markel is putting in is to try to empower approximately 60 profit centers that are focused on a unique set of customers, geographies or products and that have full accountability for their P&L.  This is to empower and hold accountable frontline underwriters.

 

This is the exact model that Andy Bernard brought to Fairfax's insurance operations when he took that over 13 years ago.  Fairfax according to Prem's 2024 letter now has approximately 250 such centers.  Likely an important reason for the divergence we've seen in the underwriting of the two organizations.  Fairfax has gone from mediocre to great, while Markel has gone from great to mediocre because it went from this model (which it historically had) to a more centralized model. 

To make the decentralized model work you need to have entrepreneurs running each of the 60 profit centers. They then need to drill that mindset down through each of the profit centers. The question for Markel is were these people (the entrepreneurs) driven out of the organization over the past 5 years? Is Markel now staffed with people who prefer/skills align with a centralized structure? I have no idea. It will be interesting to see what happens moving forward. 
 

In my past life I worked for both types of companies:

- Kraft Foods - highly centralized structure

- Saputo Foods - highly decentralized structure

 

What I learned is most people fit one or the other structure. Not both. It is not a simple matter of re-training. Especially the leadership roles. 

 

Edited May 10, 2025 by Viking

[Txvestor]

16 hours ago, bluedevil said:

One more thing about the Markel Brunch presentation that i think is worth calling out from a Fairfax perspective. 

 

The new structure that Markel is putting in is to try to empower approximately 60 profit centers that are focused on a unique set of customers, geographies or products and that have full accountability for their P&L.  This is to empower and hold accountable frontline underwriters.

 

This is the exact model that Andy Bernard brought to Fairfax's insurance operations when he took that over 13 years ago.  Fairfax according to Prem's 2024 letter now has approximately 250 such centers.  Likely an important reason for the divergence we've seen in the underwriting of the two organizations.  Fairfax has gone from mediocre to great, while Markel has gone from great to mediocre because it went from this model (which it historically had) to a more centralized model. 

 

 

Just for some perspective, I think MKL aka still underwriting somewhere in the low 90s CR. Fairfax is perhaps a point or two over that. I think what's safer to say is that Fara's has grown their underwriter premium dramatically faster through both organic growth and acquisitions while improving the CR. On the other hand I think a few nimble competitors like Kinsale have grown considerably in their traditional stronghold markets. It remains to be seen if they can capture/recapture market share. 

Theirs is nonetheless a solid insurance franchise. 

[SafetyinNumbers]

3 hours ago, Txvestor said:

Just for some perspective, I think MKL aka still underwriting somewhere in the low 90s CR. Fairfax is perhaps a point or two over that. I think what's safer to say is that Fara's has grown their underwriter premium dramatically faster through both organic growth and acquisitions while improving the CR. On the other hand I think a few nimble competitors like Kinsale have grown considerably in their traditional stronghold markets. It remains to be seen if they can capture/recapture market share. 

Theirs is nonetheless a solid insurance franchise. 

I think FFH will end up in the low 90s over the next few years as the benefits of the hard market make their way into reserve releases. Just another spot where consensus estimates are probably too low. 

[bluedevil]

Yeah, i think if you just look at their combined ratio, the performance is still ok.  But if look at the total package, Fairfax has increased premiums written (even organically) much faster, and uw has gotten tighter.  Markel has grown much more slowly, but if anything its uw performance has gotten more spotty compared to peers.  Not a great trajectory, and very concerning if they can't arrest it.

 

The good news for Markel is that they (now more than in the past) seem aware of the problem and determined to clean it up.  And the new insurance leader has a great track record and seems to have a clear vision for how to fix the problems (never heard a clear diagnosis from their prior leaders over the past few years).

 

[mananainvesting]

 

 

[Hoodlum]

2 hours ago, mananainvesting said:

 

 

 

Do you have a direct link to the video of their Investor Day.  That link above didn't have it.

[mananainvesting]

57 minutes ago, Hoodlum said:

 

Do you have a direct link to the video of their Investor Day.  That link above didn't have it.

 

You gotta register to view. Link: https://live.webcastcanada.ca/webcast/registration/39c489d6-bd76-4d01-a053-424ac9b905ea

 

[Hoodlum]

1 hour ago, mananainvesting said:

 

You gotta register to view. Link: https://live.webcastcanada.ca/webcast/registration/39c489d6-bd76-4d01-a053-424ac9b905ea

 

Thanks. A good summary of how Fairfax has transitioned their business since 2011. 

[Parsad]

Fairfax Completes $900M Senior Notes Offering:

 

https://www.fairfax.ca/press-releases/fairfax-completes-us900000000-senior-notes-offering-2025-05-20/?utm_source=press-release&utm_medium=email&utm_term=Tue+May+20+2025&utm_campaign=Fairfax+Completes+US%24900+000+000+Senior+Notes+Offering

 

Cheers!

[Marco Van Basten]

It is a brilliant piece of financing - particularly the 2055 paper is very cheap.  My only complaint is I wish instead of 2035 and 2055, they did the whole offering as 2055.  

[cwericb]

CIBC have a target of $2700 for Fairfax. Here is their take on Eurobank.

EQUITY RESEARCH
May 20, 2025 Company Update
FAIRFAX FINANCIAL HOLDINGS LIMITED

Unrealized Gains Continue To Accumulate On Eurobank
Shares

Our Conclusion
This is a brief note to highlight the continued momentum building in
Eurobank shares, which are hitting multi-year highs not seen in almost a
decade. As Fairfax’s largest equity investment, we now estimate that
“unrealized gains” amount to more than 5% of book value. This magnitude
might sound more additive than transformational per se, but still reflects a
healthy amount of upside that has not yet been crystallized or recognized in
earnings / book value. Fairfax’s equity portfolio has always garnered a lot of
attention owing to the company’s unconventional approach of acquiring large
economic interests in higher-conviction holdings. In this context, the strong
performance of Fairfax’s single-largest equity investment could bode well for
investor sentiment and the multiple re-rating opportunity.

Key Points
Eurobank shares hitting multi-year highs. Eurobank shares are now
trading at US$3.00/share (see the line chart in Exhibit 1), which is the highest
level in nearly a decade. Fairfax owns a sizeable economic interest in
Eurobank, representing the company’s largest equity investment with a
carrying value amounting to ~10% of book value. Eurobank is a diversified
banking group with operations anchored in Greece and a growing presence
across Cyprus, Luxembourg, Bulgaria and the U.K. Fairfax owns a 32%
economic interest which necessitates equity accounting, meaning that the
investment is not marked-to-market. As a result, fluctuations in Eurobank’s
share price do not have any short-term implications for earnings or book
value. However, the unrealized gains accumulate just the same – whether
they are recognized in the short-term or long-term from an accounting
standpoint. Considering that Eurobank is likely not on the radar of most North
American investors, we thought it would be worthwhile to highlight the
continued build in share price momentum.

Unrealized gains now amount to over 5% of book value. The current
market value of Eurobank shares implies that the fair value of Fairfax’s
investment stands at US$3.6 billion, significantly exceeding the carrying
value of US$2.4 billion (as outlined by the table in Exhibit 2). The difference
between fair value and carrying value (i.e., US$1.2 billion) amounts to 5.1%
of book value.

We continue to like FFH at these levels. Fairfax’s largest equity investment
continues to perform well and demonstrates positive momentum. We also
see potential for Fairfax to eventually be added to the S&P/TSX 60 Index
which could drive a significant amount of passive buying activity into the
stock (our index analyst had previously estimated 15x ADV). Valuation also
remains inexpensive, with the stock trading at a P/B multiple of 1.5x versus
peers at a median multiple of 2.2x (despite generating a comparable ROE
and a healthy / growing divergence between fair value and carrying value for
certain investments like Eurobank).