TwoCitiesCapital Posted January 27 Posted January 27 14 minutes ago, MMM20 said: Sorry, can someone dumb it down for me? What exactly happened with Eurobank and what are the Implications for Fairfax? There was some corporate restructuring between eurobank and a subsidiary where they merged, which resulted in the ADRs no longer being listable. The trust liquidated underlying shares for cash back in December but ha syet to distribute it. The ADRs have NOT been effectively tracking their underlying NAV, or the Eurobank shares, as a result leaving some confused/bewildered/etc.
This2ShallPass Posted January 28 Posted January 28 US investors, are you guys owning Fairfax and Fairfax India through the ADR or buying directly in TSE? I have the ADR for both and given they combine for >30% of my pf I'm wondering if I should convert.
yesman182 Posted January 28 Posted January 28 2 hours ago, This2ShallPass said: US investors, are you guys owning Fairfax and Fairfax India through the ADR or buying directly in TSE? I have the ADR for both and given they combine for >30% of my pf I'm wondering if I should convert. Frfhf for me. Why are you thinking about wanting to switch?
djokovic1 Posted January 28 Posted January 28 I posted this in one of the Berkshire pages and didn’t get a response but will repost here and it’s also more pertinent for FFH than BRK. Does anyone have any thoughts on the MidAmerican lawsuit, and its implications on Dave Sokol happy to operate in a grey area? This and the Lubrizol transaction makes me feel he’s happy to operate in a grey area- although don’t have a strong view. question is more around Prem happy to partner with Dave Sokol given these past transgressions. Any thoughts? "In April 2010, a Douglas County judge[10] found that Sokol, who was the CEO of MidAmerican Energy Holdings Company, decided to change future profit calculations in such a way that it eliminated the stake in a 1990s Philippines project for San Lorenzo Ruiz Builders & Developers Group. The judge said that Sokol and MidAmerican had acted "willfully and intentionally".[10] The court levied a $32 million[8] ruling against MidAmerican. This ruling may be worth $140 million in future profits. In a second case, courts in San Francisco and Omaha ruled against MidAmerican for a total of $52 million[10] in past profits, while also restoring ownership to La Prairie and San Lorenzo. These rights could amount to $280 million in future profits. The third lawsuit for $150 million alleges that Sokol "secretly resumed negotiations"[10] that led to a lower projected profit."
SafetyinNumbers Posted January 28 Posted January 28 3 hours ago, This2ShallPass said: US investors, are you guys owning Fairfax and Fairfax India through the ADR or buying directly in TSE? I have the ADR for both and given they combine for >30% of my pf I'm wondering if I should convert. FFXDF and FRFHF are not ADRs. They are the same shares listed on the TSX.
Hektor Posted January 28 Posted January 28 55 minutes ago, djokovic1 said: I posted this in one of the Berkshire pages and didn’t get a response but will repost here and it’s also more pertinent for FFH than BRK. Does anyone have any thoughts on the MidAmerican lawsuit, and its implications on Dave Sokol happy to operate in a grey area? This and the Lubrizol transaction makes me feel he’s happy to operate in a grey area- although don’t have a strong view. question is more around Prem happy to partner with Dave Sokol given these past transgressions. Any thoughts? "In April 2010, a Douglas County judge[10] found that Sokol, who was the CEO of MidAmerican Energy Holdings Company, decided to change future profit calculations in such a way that it eliminated the stake in a 1990s Philippines project for San Lorenzo Ruiz Builders & Developers Group. The judge said that Sokol and MidAmerican had acted "willfully and intentionally".[10] The court levied a $32 million[8] ruling against MidAmerican. This ruling may be worth $140 million in future profits. In a second case, courts in San Francisco and Omaha ruled against MidAmerican for a total of $52 million[10] in past profits, while also restoring ownership to La Prairie and San Lorenzo. These rights could amount to $280 million in future profits. The third lawsuit for $150 million alleges that Sokol "secretly resumed negotiations"[10] that led to a lower projected profit." I believe some (or all) of these were settled out of court, unless I am mistaken.
gfp Posted January 28 Posted January 28 (edited) 9 minutes ago, SafetyinNumbers said: FFXDF and FRFHF are not ADRs. They are the same shares listed on the TSX. Yeah they are OTC foreign ordinary shares but of course FRFHF is traded in a different currency. So market makers are basically managing the price of FRFHF and the real time FX-conversion vs. FFH and the spreads can be a little wider and the executions less "certain." Fairfax india's OTC stock isn't offered on Interactive Brokers but at least that is all in one currency. It's done some weird things from time to time that FIH.U didn't do. I use FRFHF in IRAs and FFH everywhere else. I don't want to worry about buying the exact amount of CAD I need before each trade and converting random tag-ends of CAD back. So we bid in USD for FRFHF which then ends up being converted to CAD to buy FFH which then pays us our dividend in USD... totally makes sense right? Edited January 28 by gfp
SafetyinNumbers Posted January 28 Posted January 28 28 minutes ago, gfp said: Yeah they are OTC foreign ordinary shares but of course FRFHF is traded in a different currency. So market makers are basically managing the price of FRFHF and the real time FX-conversion vs. FFH and the spreads can be a little wider and the executions less "certain." Fairfax india's OTC stock isn't offered on Interactive Brokers but at least that is all in one currency. It's done some weird things from time to time that FIH.U didn't do. I use FRFHF in IRAs and FFH everywhere else. I don't want to worry about buying the exact amount of CAD I need before each trade and converting random tag-ends of CAD back. So we bid in USD for FRFHF which then ends up being converted to CAD to buy FFH which then pays us our dividend in USD... totally makes sense right? Using limit orders makes sense.
dartmonkey Posted January 28 Posted January 28 28 minutes ago, gfp said: So we bid in USD for FRFHF which then ends up being converted to CAD to buy FFH which then pays us our dividend in USD... totally makes sense right? In TDW I buy the more liquid FFH shares with my CAD currency and then journal them over to the US side uniquely because the annual dividend is paid in USD and I don't want TDW to do the currency conversion at their very unfavourable forex rate, with a loss of about 2%. For most of my accounts which are with Interactive Brokers, I don't have this problem, I just buy the FFH shares in CAD and the USD dividend stays as USD unless I decide to do the forex conversion myself, at the exact current exchange rate for a commission of about $2.
yesman182 Posted January 28 Posted January 28 1 hour ago, gfp said: I use FRFHF in IRAs and FFH everywhere else. What US brokers are you aware of that allow you to buy FFH? I know IBKR but are you buying FFH with anyone else?
gfp Posted January 28 Posted January 28 9 minutes ago, yesman182 said: What US brokers are you aware of that allow you to buy FFH? I know IBKR but are you buying FFH with anyone else? I use IBKR. Haven't tried anywhere else. I use FRFHF at Fidelity but never checked if they allow FFH on the same terms (no commission, no fee, etc)
Hoodlum Posted January 28 Posted January 28 I see there was 13.5k traded early this morning on the CBOE exchange. There is generally not much volume on this exchange except when Fairfax has done the buybacks in the past. I no longer have access to determine which broker was the buyer for this. It will be interesting the see what Fairfax bought back this month.
gfp Posted January 28 Posted January 28 I feel like at the beginning of each year Fairfax stops buying back shares for cancellation and instead buys for the treasury (future compensation related awards). Then at some point they have the shares they budgeted for accumulated in treasury and at that point the repurchases for cancellation resume. Is that correct or am I just making it up?
Viking Posted January 28 Posted January 28 29 minutes ago, gfp said: I feel like at the beginning of each year Fairfax stops buying back shares for cancellation and instead buys for the treasury (future compensation related awards). Then at some point they have the shares they budgeted for accumulated in treasury and at that point the repurchases for cancellation resume. Is that correct or am I just making it up? @gfp, I think this is spot on.
gfp Posted January 28 Posted January 28 Just got a fill at CAD 2222 in case people are bummed to have missed last week's dip ..
This2ShallPass Posted January 29 Posted January 29 11 hours ago, yesman182 said: Frfhf for me. Why are you thinking about wanting to switch? OTC / ADR gives me some concern, especially after the recent Eurobank issue I'm wondering if I should just buy in main exchange. >50% of my pf is in this bucket (mostly FF / FF India).
TwoCitiesCapital Posted January 29 Posted January 29 OTC FFH is not an ADR and there are differences. ADRs are NOT the underlying stock. Just a trust that holds the stock that issues securities against it. 5-digit Tickers ending in F are just the foreign shares traded over the counter. You can't be forced liquidated without realizing it on those securities 1
Crip1 Posted January 29 Posted January 29 My sincerest apologies to anyone who was looking to buy more depressed FFH today. I should have warned everyone that I was putting in a buy order after hours yesterday which normally, and today was no exception, results in a share price increase. -Crip
Viking Posted January 29 Posted January 29 Fairfax Financial’s Business Model A Long-Term Capital Compounding Machine Built on Insurance Float, Decentralized Operations, and Disciplined Capital Allocation Why Focus on the Business Model? My recent work has focussed on Fairfax’s business model for a simple reason: most investors—and many analysts—do not understand Fairfax particularly well. I include myself in that group; there is still plenty to learn. The confusion is understandable: Fairfax is underfollowed It is complex and does not fit neatly into standard industry boxes models It has evolved meaningfully over four decades. It has been transformed again over the past 5 years. As a result, the company is frequently misunderstood and underappreciated – and undervalued. Too often, Fairfax is analyzed as if it were a conventional P/C insurance company. It is not. That framing overemphasizes underwriting results and materially underestimates the importance of the investment portfolio and, especially, capital allocation. Using the wrong model does not lead to better understanding, better decisions, or better outcomes. (Keep that in mind the next time you read an analyst report – or hear pundits discuss Fairfax on social media.) So, what is Fairfax? That is the question this post aims to answer. Overview: What Fairfax Actually Is Fairfax is not a conventional P/C insurance company. It is best understood as a capital-compounding system organized around three complementary business engines: Insurance operations that generate large, durable, growing amounts of low-cost (often negative-cost) float A flexible investment portfolio, spanning fixed income and public and private equities A growing collection of wholly owned operating companies across industries and geographies At the center of this system sits Prem Watsa and Fairfax’s senior leadership team, including Hamblin Watsa, acting as central capital allocators. Crucially, Fairfax’s business model is not designed to maximizing near-term reported results. It is designed to compounding capital at above-average rates and to optimize per-share value creation over the long term – very much in the spirit of William Thorndike’s The Outsiders. Management states this objective clearly: “We expect to compound our mark‑to‑market book value per share over the long term by 15% annually by running Fairfax and its subsidiaries for the long term benefit of customers, employees, shareholders and the communities where we operate – at the expense of short term profits if necessary.” Fairfax corporate website This philosophy is not marketing. It is embedded in how Fairfax is structured, capitalized, and run. If this sounds familiar, it should. Fairfax clearly drew inspiration from Berkshire Hathaway’s model of the 1980s and 1990s—while adapting that framework to its own temperament, opportunity set, and history. Conglomerate-Light Structure: The Organizational Advantage Fairfax operates what can best be described as a conglomerate‑light structure—capturing most of the benefits of conglomerates while avoiding many of their traditional drawbacks. Core Characteristics Small head office Highly decentralized operating businesses (attractive to founder-owners and entrepreneurial managers) Centralized capital allocation, with capital flowing to the best available opportunity Benefits Optimize cash generation from operating units (insurance and investments) Efficient capital deployment – capital is not trapped in silos (for example, excess insurance capital in a soft market) Meaningful diversification across businesses, industries and geographies Greater financial strength and resilience A long term orientation that allows capital to be patient and opportunistic Insurance: discipline through soft markets Investments: ability to exploit volatility and pursue higher-return opportunities Avoided Pitfalls Excessive bureaucracy and organizational bloat Difficulty identifying and fixing underperforming units Unchecked empire-building Keeping it small, size does not become an impediment This organizational design is a foundational reason Fairfax’s model works. Engine 1: Insurance Float – The Structural Foundation Insurance is the backbone of Fairfax’s entire business model. How Float Creates the Core Advantage Insurance float represents premiums collected today that will be paid out in the future as claims. When underwriting is disciplined and profitable (combined ratio < 100), float becomes free capital—and in many years, better than free, because Fairfax generates underwriting profits while holding it. Fairfax is able to invest the float and keep the return that it generates. Why Float Is Superior Leverage Insurance float is a form of leverage that is structurally superior to almost any alternative source of capital: Large and growing No fixed maturity (as long as underwriting remains disciplined) No contractual interest cost; often negative cost Extremely stable due to the scale and diversification of the insurance business Non-callable This is low-risk leverage that cannot be replicated by most conglomerates, asset managers, or private equity firms. Fairfax’s Major Insurance Platforms Odyssey Group Allied World Brit Crum & Forster Northbridge Gulf Insurance Group These operations are diversified by geography and line of business, reducing volatility and enhancing the durability of float. Recent Performance Snapshot (Past Five Years) Total float has increased 59% Float per share has increased 98% (driven by aggressive share buybacks) Estimated underwriting profit in 2025: ~$1.7 billion Put simply: The insurance business provides a $38.5B pile of capital (2025E) The pile is growing rapidly per share Fairfax is being paid handsomely to hold it And Fairfax keeps everything it earns on it Yes—underwriting profit matters. But the much more important outcome is the large, durable, and growing float that Fairfax can invest for its own benefit. Which brings us to Engine 2. Engine 2: Investments – Compounding Float The Investment Portfolio (~$77 billion) Fairfax’s investment portfolio represents the combined deployment of: Shareholders’ equity (~$26.2B) Insurance float (~$38.5B) Holding-company debt (~$7.7B, excluding non-insurance companies) This capital is invested with a long-term, largely unconstrained mandate – a critical structural advantage. Fixed income (~$50 billion) Strengths: Predictable income, lower volatility, senior claim on capital, balance sheet stability Weaknesses: Limited upside, inflation erosion, poor long-term real returns Bonds preserve capital and smooth results. Today, interest income has become one of Fairfax’s most important and reliable income streams. Equities (~$27 billion) Fairfax has historically allocated significant capital to public and private equities Strengths: Ownership in growth, inflation protection over time, unlimited upside, superior long-term compounding Weaknesses: High volatility, uncertain short-term outcomes, last claim in distress Stocks create wealth over the long term. Fairfax’s largest public equity holdings were up $4.3B (47%) in 2025 alone. Performance over the past 5 years has been outstanding. The Structural Return Advantage Unlike traditional P/C insurers—who invest almost exclusively in bonds—Fairfax invests meaningfully in equities. The result: Fairfax investment portfolio return: ~8.5% Typical P/C peers: ~5.5% That return gap compounds massively over time. It is one of the most underappreciated advantages in Fairfax’s business model. Engine 3: Non-Insurance Operating Companies – Small Today, But Growing Fast Fairfax owns a growing collection of non-insurance operating businesses: Recipe Unlimited & The Keg Sleep Country Peak Achievements Meadow Foods AGT Foods and Ingredients This engine is small today, and management has no stated ambition to become a full Berkshire-style operating conglomerate. So why treat it as a distinct engine? Because it is growing rapidly. Non-insurance consolidated companies are Fairfax’s fastest-growing income stream, and they are becoming increasingly important to overall earnings power. Strategic Benefits Greater diversification Another stable source of recurring cash flow Optional source of liquidity (assets can be sold) Increased resilience at the group level These businesses complement the more volatile investment portfolio. How Fairfax develops this engine over the next decade will be worth watching closely. The Control System: Capital Allocation Is the Multiplier Capital allocation is the most important responsibility of any management team. It determines long‑term performance, growth in book value, return on equity, and ultimately the multiple assigned by the market. When done well, capital allocation: Delivers strong returns Improves the quality of the business over time At Fairfax, capital allocation does not generate returns on its own. It amplifies the returns produced by the three engines and determines per-share outcomes over long periods. Unconstrained Capital Allocation Fairfax operates with an unusually unconstrained approach to capital allocation. Over 40 years, management has built deep internal capabilities and a broad network of external relationships. Importantly, Fairfax is still a small company (size is not a constraint). As a result, Fairfax can deploy capital across an unusually broad opportunity set, giving it a continuous flow of above average rate of return options. The Opportunity Set Fairfax can operate as: Fixed income investor Public equity investor Private equity investor Venture capital investor Venture debt / structured credit investor Incubator and platform builder Distressed and bankruptcy investor Turnaround investor Real estate investor Infrastructure investor Commodity and resource investor International and emerging markets investor Asset manager / permanent capital sponsor Cannibal / consolidation investor (buybacks, increased ownership) Few companies enjoy this level of flexibility. Best-In-Class Execution Over the past five years, Fairfax has put on a clinic. Below are some examples of the breadth/range of their capabilities: Insurance: net premiums written doubled to ~$26.6B (over six years) Acquisition of Gulf Insurance Group in 2023 Bonds: avoided the historic 2022 bond bear market (protected balance sheet) Equities: upgraded portfolio; delivering outstanding results, led by Eurobank FFH-TRS (2020/2021) provides exposure to 1.76 million shares at $373/share Digit IPO (2024) – insurance start-up in India (initial investment made in 2016) $2.1B PacWest real-estate construction loan purchase (2023), with Kennedy Wilson C$100M investment in Foran Mining (2021), exploration and development (copper) $150M convertible bond investment in gold producer Orla Mining (2024) Well timed asset sales – Pet Insurance, Resolute (2022), Stelco (2024), Orla (2025) Shares outstanding reduced 24.3% over eight years (at ~$734/share) The list only scratches the surface. The Results The outcomes speak for themselves: BVPS CAGR: 17.1% Share price CAGR: 27.2% This is best‑in‑class performance—and it is not close. Importantly, these results are not driven by the insurance cycle. Insurance cycles exist. Financial markets exist. Fairfax’s results are driven by capital allocation. That is the beauty of the model. Bottom Line Fairfax has spent four decades refining its business model. Roughly five years ago, the pieces finally aligned. Management learned how to fully exploit a framework inspired by Berkshire Hathaway—adapted to Fairfax’s own strengths. The model is simple in concept: Acquire capital cheaply Deploy it rationally Avoid permanent loss Let compounding do the heavy lifting With each passing year, the picture becomes clearer: Insurance: performing at a high level; never better positioned Investments: performing at a high level; never better positioned Capital allocation: best-in-class All parts of the company are working together. Earnings are larger, higher quality, and more resilient across cycles. Shareholder returns have been exceptional. The best part? This version of Fairfax is just getting started. The runway is long. It is an exciting time to be a Fairfax shareholder.
Viking Posted January 30 Posted January 30 On 1/24/2026 at 12:14 PM, Viking said: Fairfax’s Business Model My next couple of posts are going to focus on Fairfax’s business model. Why? My thesis is most investors (and analysts) do not understand Fairfax’s business model. (I still have lots to learn.) Part of the reason is complexity – it is not a traditional P/C insurance company (despite some analysts’ best attempts to pretend otherwise). The other is it has changed in important ways over the past 40 years. To get us started, let’s explore how it has changed and where Fairfax is in their journey today. Where is my analysis off base? I look forward to hearing the feedback from other board members. Has Fairfax’s Business Model Changed Over the Years? Yes—dramatically. While Fairfax’s core philosophy has remained consistent for four decades, the expression of that philosophy has evolved meaningfully. The company has repeatedly adapted its insurance operations, investment framework, and capital allocation approach in response to hard-earned lessons, changing market conditions, and a steadily growing capital base. What follows is a clear, phase-by-phase overview of that evolution. Phase 1 (1985–2000): Scale Insurance + Value Investing Insurance: Scale and Learn Aggressive growth through acquisitions Primary objective: grow float and achieve scale Investments: Make Money with Investments Traditional Ben Graham-style value investing Investments were expected to be the primary profit driver Summary: This was Fairfax’s foundation-building phase. The focus was on rapid growth, learning the insurance business, and leveraging float through value investing. Scale came first; refinement would come later. Phase 2 (2001–2010): Digest Insurance + Value Investing Insurance: Digest and Learn Painful Lessons Worked through significant reserving problems Shifted from expansion to stabilization and repair Investments: (Still) Make Money—Spectacularly So Continued value-oriented investment approach Extraordinary success with CDS and equity hedges during the 2008 financial crisis Summary: This period was defined by humility on the insurance side and brilliance on the investment side. Fairfax learned—painfully—that insurance quality mattered far more than previously appreciated. At the same time, the success of CDS and hedges planted the seeds for a later big mistake. Phase 3 (2011–2020): Improve Insurance + Play Extreme Defense Insurance: Steady Quality Improvement + Acquisition-Driven Growth in a Soft Market Andy Barnard appointed to lead insurance operations in 2011 Underwriting profit becomes the central focus Quality improvement began with existing operations In a soft market, growth pursued primarily via acquisitions – with quality as a priority: Allied World, Brit, International, Zenith Global footprint expanded Strategic pivot in India (sale of ICICI Lombard; seeding of startup Digit) Investments: A Lost Decade Heavy use of equity hedges and shorts proved costly Equity investment framework deteriorated: Result was too many “chronically leaking boats” across the portfolio Summary: This period was defined by brilliance on the insurance side and humility on the investment side – the opposite of the prior period. While insurance quality steadily improved, defensive investment positioning overwhelmed results and masked the progress being made inside the insurance operations. Key inflection points: Equity hedge exited 2016 Final short position closed in 2020 Equity investment framework refined around 2018 Phase 4 (2021–Present): The Insurance-Float Compounding Machine This is where the transformation becomes unmistakable. Insurance: A High-Quality Business, Rapid Growth in a Hard Market Continued underwriting discipline under Andy Barnard and Brian Young Shift from acquisition-driven growth to organic growth, exploiting a hard market Insurance earnings are now larger, more consistent, and higher quality than ever Investments: A High Quality Business Delivering Exceptional Results Clear shift to high-quality equities: strong management teams, solid balance sheets, and sustained profitability Chronic underperformers addressed decisively: sold, merged, taken private, or wound down Equity holdings performing exceptionally well Eurobank stands out as a flagship success Capital Allocation: Best-in-Class Execution Fixed income: avoided the historic 2022 bond bear market (by being very short duration) Asset sales: pet insurance, Resolute Forest Products, Stelco, Orla Fairfax total return swap: opportunistic and unconventional Share buybacks: ~24% reduction in shares outstanding over eight years, executed at very low prices Summary: This period has been defined by brilliance on both the insurance and investing sides of the business. Capital allocation has been exceptional. All parts of the business model are working together (complementary/synergistically). As a result, earnings have been transformed – much larger, higher quality and more resilient across cycles. So—Is Fairfax’s Business Model Different Today? At its core: no. In practice: very much so. The foundational model remains: Insurance float Decentralized operating companies Centralized capital allocation But its modern expression reflects decades of learning. The Bigger Lesson – Resilience and Strength Fairfax made meaningful missteps over the years: Early on, with insurance quality and reserving Later, with equity hedges and short positions Yet despite those mistakes, Fairfax compounded its share price at approximately 19% annually over 40 years (US$, dividends reinvested). That is an exceptional record—and a powerful testament to the underlying strength of the business model. Today, for the first time in the company’s history: Insurance and investments are both high-quality businesses Capital allocation is operating at a best-in-class level This is a version of Fairfax we have never seen before—and it is the best version we have ever seen. Fairfax has become a true compounding machine. I am bringing this post forward as it is the sister post to the one above.
Malmqky Posted January 30 Posted January 30 Thanks for sharing as always @Viking Sometimes I think 25-30% of my portfolio in Fairfax, even after making multiples of my original investment, is too little. You inspire me to write.
Viking Posted January 30 Posted January 30 (edited) 11 minutes ago, Buffett_Groupie said: no mention of Seaspan? @Buffett_Groupie, good point. Earlier in January I did updates for all the public equity holdings (using Dec 31, 2025 stock prices). When Fairfax releases their annual report I plan on doing the same for the private holdings (like Poseidon/Atlas/Seaspan). When I post i tend to over-emphasize the other things I have been working on at the time (and other important things tend to get under-emphasized). Needless to say, this is the first ‘version’ of this post - so it is a little clunky and missing things. This is where comments/input/critique from other board members becomes quite valuable/helpful - so please keep it coming. Edited January 30 by Viking
Viking Posted January 30 Posted January 30 23 minutes ago, Malmqky said: You inspire me to write. Do it! I find writing helps organize my thoughts. And improves my understanding. (If I can’t write it so it is understandable I probably don’t understand it…) And the discussion on the board then takes it even further.
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