Viking Posted March 13 Posted March 13 An update to an important story… India to Cancel IDBI Bank Stake Sale Due to Low Bids India plans to cancel the bids received for a majority stake in IDBI Bank as they fell short of the minimum price required, according to sources. Bloomberg posted on X, highlighting that the decision comes after evaluating the financial offers submitted by potential buyers. The government had aimed to divest its stake in the bank to raise funds and reduce its involvement in the banking sector. However, the bids did not meet the financial expectations set by the authorities, leading to the decision to scrap the sale process. The move reflects the challenges faced in attracting investors willing to meet the valuation criteria for state-owned assets. The government will now reassess its strategy for the bank's divestment, considering alternative approaches to achieve its financial objectives. https://www.binance.com/en/square/post/03-13-2026-india-to-cancel-idbi-bank-stake-sale-due-to-low-bids-301151962570865
Hoodlum Posted March 13 Posted March 13 (edited) 17 minutes ago, Viking said: An update to an important story… India to Cancel IDBI Bank Stake Sale Due to Low Bids India plans to cancel the bids received for a majority stake in IDBI Bank as they fell short of the minimum price required, according to sources. Bloomberg posted on X, highlighting that the decision comes after evaluating the financial offers submitted by potential buyers. The government had aimed to divest its stake in the bank to raise funds and reduce its involvement in the banking sector. However, the bids did not meet the financial expectations set by the authorities, leading to the decision to scrap the sale process. The move reflects the challenges faced in attracting investors willing to meet the valuation criteria for state-owned assets. The government will now reassess its strategy for the bank's divestment, considering alternative approaches to achieve its financial objectives. https://www.binance.com/en/square/post/03-13-2026-india-to-cancel-idbi-bank-stake-sale-due-to-low-bids-301151962570865 I wonder what the reserve and bids were. IDBI stock dropped today to lowest level in 5 months. I suspect it will drop further to May 2025 levels. It will be tough for India to attract future bids when selling state businesses, considering how long this took and the end up not selling. Edited March 13 by Hoodlum
Hoodlum Posted March 13 Posted March 13 (edited) I always though that the minimum bid needed was susceptible to speculation based on the below requirements. The below makes sense for someone initiating a acquisition of a public company, but not for a state acquisition where the bids don't arrive until late in the process and then need to account for the stock being driven up over a long period prior to the bid being placed. https://www.moneycontrol.com/news/business/dipam-sets-february-5-deadline-for-final-idbi-bank-bids-13800733.html Given that IDBI Bank is a listed entity, the final bid price is expected to reflect the acquisition price applicable for takeovers as per Sebi norms. This means that the H1 or highest bid will be the highest among the negotiated price, volume-weighted average price (VWAP) in the past 52 weeks, highest price at which the stock traded in in the past 26 weeks or the 60-day VWAP. Edited March 13 by Hoodlum
Hsmpanl Posted March 13 Posted March 13 6 minutes ago, Hoodlum said: I always though that the minimum bid needed was susceptible to speculation based on the below requirements. The below makes sense for someone initiating a acquisition of a public company, but not for a state acquisition where the bids don't arrive until late in the process and then need to account for the stock being driven up over a long period prior to the bid being placed. https://www.moneycontrol.com/news/business/dipam-sets-february-5-deadline-for-final-idbi-bank-bids-13800733.html Given that IDBI Bank is a listed entity, the final bid price is expected to reflect the acquisition price applicable for takeovers as per Sebi norms. This means that the H1 or highest bid will be the highest among the negotiated price, volume-weighted average price (VWAP) in the past 52 weeks, highest price at which the stock traded in in the past 26 weeks or the 60-day VWAP. What a shit show. Hope all the effort being put into the anchorage IPO is worth it. Glad they didn’t overpay just to get the asset.
djokovic1 Posted March 13 Posted March 13 I actually prefer the capital to go to buybacks at 8x multiple rather than a riskier IDBI investment with potential for higher returns.
MMM20 Posted March 13 Posted March 13 (edited) 52 minutes ago, djokovic1 said: I actually prefer the capital to go to buybacks at 8x multiple rather than a riskier IDBI investment with potential for higher returns. +1 and now maybe they’ll stay on that ~15% pace? I’m maxed out but couldn’t help but buy 1 more share. Edited March 13 by MMM20
Viking Posted March 13 Posted March 13 Shares Outstanding – Effective and Diluted As I have said many times before, I am not an accountant. Please let me know if I have messed up with my post below Fairfax’s share count tells an important part of the company’s capital allocation story. Over the past 15 years, two major trends stand out: 2013 to 2017: share count increased as Fairfax funded a significant international expansion in property and casualty insurance. 2018 to 2025: share count declined sharply as Fairfax repurchased shares aggressively at prices well below intrinsic value. As a result, Fairfax’s share count is now approaching 2013 levels — even though the company itself is much larger, more diversified, and more profitable than it was back then. That decline in share count has materially boosted per-share results, especially: earnings per share (EPS) book value per share (BVPS) But there is an important wrinkle. Diluted shares outstanding have not fallen nearly as quickly as basic shares outstanding. Why? Because Fairfax has been buying back shares aggressively while also using stock-based compensation programs to encourage long-term employee ownership. That distinction matters for investors. Why investors should care For Fairfax shareholders, share count is not just an accounting detail. It directly affects per-share value. If the share count falls, each remaining share owns a larger piece of the business. That lifts per-share measures like EPS and BVPS. But not all share counts tell you the same thing. Basic shares tell you how many shares economically participate in the business today. Diluted shares tell you how many shares could participate in the future after stock awards vest. Both matter. But they answer different questions. Basic, effective, and diluted shares Basic shares outstanding Basic shares outstanding are the shares currently issued and outstanding, excluding treasury shares. Basic shares outstanding = issued shares − treasury shares These are the shares currently entitled to the company’s earnings and book value. For most practical purposes, this is the current economic share count. Effective shares outstanding Investors sometimes use the term effective shares outstanding to mean the share count that reflects the actual economic ownership of the business today. At Fairfax, effective shares are essentially the same as basic shares outstanding. That is because treasury shares have already been removed from the outstanding share count. They do not currently participate in earnings or book value. So when analyzing Fairfax: Effective shares ≈ basic shares outstanding This is the share count that should be used when thinking about book value per share. Diluted shares outstanding Diluted shares outstanding include not only current shares outstanding, but also shares that may be issued in the future under stock-based compensation plans and other equity-linked arrangements. These can include: restricted share awards RSUs other share-based compensation Diluted shares are therefore higher than basic shares because they reflect the potential future share count. This is why diluted shares are used in calculating EPS. Why Fairfax’s diluted shares have not fallen as quickly The answer lies in Fairfax’s compensation programs. Fairfax has been repurchasing shares aggressively, which reduces basic shares outstanding. At the same time, Fairfax grants stock-based awards to employees that vest over time. These awards are included in diluted shares outstanding before they fully vest. So the math works like this: buybacks reduce basic shares unvested stock awards keep diluted shares elevated That is why diluted shares have not been falling like the basic share count. It is also worth noting that the increase in treasury shares over the past decade largely reflects the growth of the organization itself. As Fairfax expanded globally and added employees, the company accumulated additional treasury shares to support its stock-based compensation programs. Over the past seven years, Fairfax has spent about $155 million per year on average purchasing shares for treasury to support these programs. Fairfax’s stock-based compensation is different from most companies This is where Fairfax stands apart. At many companies, stock-based compensation is a source of ongoing dilution because new shares are issued to employees year after year. Existing shareholders end up paying the price through a steadily rising share count. Fairfax’s approach is different. Instead of issuing new shares, Fairfax generally buys shares in the open market and holds them in treasury. When employee awards vest, those shares are reissued from treasury. That distinction matters. Economically, Fairfax is not printing new shares out of thin air. It is using cash to buy stock in the market and then using those shares as compensation. That makes Fairfax’s stock-based compensation look much more like cash compensation delivered in stock form than the typical Silicon Valley model of endless dilution. What Prem says Prem Watsa explained the philosophy clearly in Fairfax’s 2025 Annual Report: “We continue to encourage all our employees to be shareholders of Fairfax. We think it will be a great investment for them over the long term and great for the company to have our employees as shareholders in the company.” He also described how the executive bonus program works: “As part of that initiative, close to 10 years ago we decided to have a general principle that our annual bonuses to senior executives across the company would be awarded 50% in cash and 50% in Fairfax shares that vest in five years.” And importantly: “As these bonus shares are awarded, the company buys the shares in the market … and they are recorded as treasury shares… As the shares are vested and or exercised, the shares are then reissued and come out of treasury shares and back into shares outstanding.” That is an important point for investors: Fairfax is buying the shares in the market first. That reduces the risk of the kind of structural dilution often seen elsewhere. The two key programs 1. Executive annual bonus program Senior executives receive annual bonuses: 50% in cash 50% in Fairfax shares with a 5-year vesting period This structure encourages long-term thinking and ties compensation to the long-run performance of Fairfax stock. 2. Employee Stock Ownership Plan Fairfax also has a broad employee stock ownership plan available to most employees. Employees may allocate up to: 10% of salary into Fairfax shares The company then matches: 30% automatically up to an additional 20% if performance targets are met, primarily underwriting profitability This is not just an executive perk. It is a broad ownership program designed to make employees think like owners. That matters culturally. Why this can benefit long-term shareholders Stock-based compensation often deserves skepticism. In many companies, it is overused, poorly structured, and highly dilutive. But Fairfax’s system has several features that make it more shareholder-friendly. 1. It aligns employees with shareholders Employees become owners. Their upside is tied to Fairfax’s long-term per-share performance. That is especially important in a decentralized organization where culture and capital allocation discipline matter. 2. It improves retention Long vesting periods create an incentive for talented employees and managers to stay. That matters at Fairfax, where long-term underwriting discipline, investment judgment, and operating autonomy are core advantages. 3. It is a real expense Fairfax’s stock-based compensation is not free. It runs through compensation expense. So the cost is already reflected in earnings. This is a crucial point. Investors should not pretend the compensation has no cost. But neither should they treat it as if Fairfax is simply handing away stock at no economic sacrifice. Fairfax is paying employees, and part of that pay is delivered in stock purchased with cash in the open market. 4. It may reflect smart capital allocation An underappreciated feature of Fairfax’s approach is timing. Over the years, Fairfax appears to have built a meaningful treasury stock position when its shares were available at attractive prices. If that is what happened, then management was not only funding compensation programs — it was also allocating capital intelligently. In that case, treasury shares may represent a stockpile built at favorable prices for future employee compensation. That is very different from careless dilution. So which share count should investors use? For book value per share: Use basic/effective shares outstanding Why? Because unvested awards are not yet outstanding shares. They do not currently participate in book value. For earnings per share: Use diluted shares outstanding Why? Because EPS is meant to capture the earnings attributable to the share count that could exist after awards vest. Bottom line Fairfax’s share count story is driven by two opposing forces: buybacks, which reduce the current share count and increase per-share ownership stock-based compensation, which creates a pipeline of future shares included in diluted share count The result is that: basic/effective shares show the ownership structure today diluted shares show the potential ownership structure after stock awards vest For Fairfax, this distinction is especially important because the company’s stock-based compensation program is not typical. Fairfax is not relying on endless issuance of cheap stock. It is generally buying shares in the market, expensing the compensation properly, and using long vesting periods to build an ownership culture across the organization. That does not mean the program is costless. It is not. It is a real compensation expense. Over the past seven years, the company has spent about $155 million per year on average purchasing shares for treasury to support these programs. But for long-term shareholders, Fairfax’s approach appears far more aligned, disciplined, and shareholder-friendly than the stock-compensation models used by many other companies. In short, Fairfax’s program does create some dilution in diluted EPS. But it also strengthens culture, retention, and alignment — and it does so in a way that is far more thoughtful than the typical corporate SBC playbook.
dartmonkey Posted March 13 Posted March 13 1 hour ago, djokovic1 said: I actually prefer the capital to go to buybacks at 8x multiple rather than a riskier IDBI investment with potential for higher returns. I guess that's why the share price is up today in a down market - the market believes (probably correctly) that the capital they had reserved for buying IDBI will now go to repurchasing shares. Thinking about what this would do to the book value, given that FIH is currently trading at 0.75x BV, buying a significant number of shares beneath book value would actually decrease the book value per share and postpone incentive fees paid to Fairfax. They hav bought back share for $29m, $127m, $36m, $37m, $8m and $10m in the last six years. They only had $8m cash on the balance sheet at year end, despite the sale of Saraushtra for $75m which closed in November, so it's not clear where they would get the cash for significant levels of buybacks. The BIAL IPO would solve that problem, but then again, if that happens, the share price is likely to rise a lot, so it's not clear to me how they could take advantage of this price without asset sales. 1
Hoodlum Posted March 13 Posted March 13 55 minutes ago, Viking said: Shares Outstanding – Effective and Diluted As I have said many times before, I am not an accountant. Please let me know if I have messed up with my post below Fairfax’s share count tells an important part of the company’s capital allocation story. Over the past 15 years, two major trends stand out: 2013 to 2017: share count increased as Fairfax funded a significant international expansion in property and casualty insurance. 2018 to 2025: share count declined sharply as Fairfax repurchased shares aggressively at prices well below intrinsic value. As a result, Fairfax’s share count is now approaching 2013 levels — even though the company itself is much larger, more diversified, and more profitable than it was back then. That decline in share count has materially boosted per-share results, especially: earnings per share (EPS) book value per share (BVPS) But there is an important wrinkle. Diluted shares outstanding have not fallen nearly as quickly as basic shares outstanding. Why? Because Fairfax has been buying back shares aggressively while also using stock-based compensation programs to encourage long-term employee ownership. That distinction matters for investors. Why investors should care For Fairfax shareholders, share count is not just an accounting detail. It directly affects per-share value. If the share count falls, each remaining share owns a larger piece of the business. That lifts per-share measures like EPS and BVPS. But not all share counts tell you the same thing. Basic shares tell you how many shares economically participate in the business today. Diluted shares tell you how many shares could participate in the future after stock awards vest. Both matter. But they answer different questions. Basic, effective, and diluted shares Basic shares outstanding Basic shares outstanding are the shares currently issued and outstanding, excluding treasury shares. Basic shares outstanding = issued shares − treasury shares These are the shares currently entitled to the company’s earnings and book value. For most practical purposes, this is the current economic share count. Effective shares outstanding Investors sometimes use the term effective shares outstanding to mean the share count that reflects the actual economic ownership of the business today. At Fairfax, effective shares are essentially the same as basic shares outstanding. That is because treasury shares have already been removed from the outstanding share count. They do not currently participate in earnings or book value. So when analyzing Fairfax: Effective shares ≈ basic shares outstanding This is the share count that should be used when thinking about book value per share. Diluted shares outstanding Diluted shares outstanding include not only current shares outstanding, but also shares that may be issued in the future under stock-based compensation plans and other equity-linked arrangements. These can include: restricted share awards RSUs other share-based compensation Diluted shares are therefore higher than basic shares because they reflect the potential future share count. This is why diluted shares are used in calculating EPS. Why Fairfax’s diluted shares have not fallen as quickly The answer lies in Fairfax’s compensation programs. Fairfax has been repurchasing shares aggressively, which reduces basic shares outstanding. At the same time, Fairfax grants stock-based awards to employees that vest over time. These awards are included in diluted shares outstanding before they fully vest. So the math works like this: buybacks reduce basic shares unvested stock awards keep diluted shares elevated That is why diluted shares have not been falling like the basic share count. It is also worth noting that the increase in treasury shares over the past decade largely reflects the growth of the organization itself. As Fairfax expanded globally and added employees, the company accumulated additional treasury shares to support its stock-based compensation programs. Over the past seven years, Fairfax has spent about $155 million per year on average purchasing shares for treasury to support these programs. Fairfax’s stock-based compensation is different from most companies This is where Fairfax stands apart. At many companies, stock-based compensation is a source of ongoing dilution because new shares are issued to employees year after year. Existing shareholders end up paying the price through a steadily rising share count. Fairfax’s approach is different. Instead of issuing new shares, Fairfax generally buys shares in the open market and holds them in treasury. When employee awards vest, those shares are reissued from treasury. That distinction matters. Economically, Fairfax is not printing new shares out of thin air. It is using cash to buy stock in the market and then using those shares as compensation. That makes Fairfax’s stock-based compensation look much more like cash compensation delivered in stock form than the typical Silicon Valley model of endless dilution. What Prem says Prem Watsa explained the philosophy clearly in Fairfax’s 2025 Annual Report: “We continue to encourage all our employees to be shareholders of Fairfax. We think it will be a great investment for them over the long term and great for the company to have our employees as shareholders in the company.” He also described how the executive bonus program works: “As part of that initiative, close to 10 years ago we decided to have a general principle that our annual bonuses to senior executives across the company would be awarded 50% in cash and 50% in Fairfax shares that vest in five years.” And importantly: “As these bonus shares are awarded, the company buys the shares in the market … and they are recorded as treasury shares… As the shares are vested and or exercised, the shares are then reissued and come out of treasury shares and back into shares outstanding.” That is an important point for investors: Fairfax is buying the shares in the market first. That reduces the risk of the kind of structural dilution often seen elsewhere. The two key programs 1. Executive annual bonus program Senior executives receive annual bonuses: 50% in cash 50% in Fairfax shares with a 5-year vesting period This structure encourages long-term thinking and ties compensation to the long-run performance of Fairfax stock. 2. Employee Stock Ownership Plan Fairfax also has a broad employee stock ownership plan available to most employees. Employees may allocate up to: 10% of salary into Fairfax shares The company then matches: 30% automatically up to an additional 20% if performance targets are met, primarily underwriting profitability This is not just an executive perk. It is a broad ownership program designed to make employees think like owners. That matters culturally. Why this can benefit long-term shareholders Stock-based compensation often deserves skepticism. In many companies, it is overused, poorly structured, and highly dilutive. But Fairfax’s system has several features that make it more shareholder-friendly. 1. It aligns employees with shareholders Employees become owners. Their upside is tied to Fairfax’s long-term per-share performance. That is especially important in a decentralized organization where culture and capital allocation discipline matter. 2. It improves retention Long vesting periods create an incentive for talented employees and managers to stay. That matters at Fairfax, where long-term underwriting discipline, investment judgment, and operating autonomy are core advantages. 3. It is a real expense Fairfax’s stock-based compensation is not free. It runs through compensation expense. So the cost is already reflected in earnings. This is a crucial point. Investors should not pretend the compensation has no cost. But neither should they treat it as if Fairfax is simply handing away stock at no economic sacrifice. Fairfax is paying employees, and part of that pay is delivered in stock purchased with cash in the open market. 4. It may reflect smart capital allocation An underappreciated feature of Fairfax’s approach is timing. Over the years, Fairfax appears to have built a meaningful treasury stock position when its shares were available at attractive prices. If that is what happened, then management was not only funding compensation programs — it was also allocating capital intelligently. In that case, treasury shares may represent a stockpile built at favorable prices for future employee compensation. That is very different from careless dilution. So which share count should investors use? For book value per share: Use basic/effective shares outstanding Why? Because unvested awards are not yet outstanding shares. They do not currently participate in book value. For earnings per share: Use diluted shares outstanding Why? Because EPS is meant to capture the earnings attributable to the share count that could exist after awards vest. Bottom line Fairfax’s share count story is driven by two opposing forces: buybacks, which reduce the current share count and increase per-share ownership stock-based compensation, which creates a pipeline of future shares included in diluted share count The result is that: basic/effective shares show the ownership structure today diluted shares show the potential ownership structure after stock awards vest For Fairfax, this distinction is especially important because the company’s stock-based compensation program is not typical. Fairfax is not relying on endless issuance of cheap stock. It is generally buying shares in the market, expensing the compensation properly, and using long vesting periods to build an ownership culture across the organization. That does not mean the program is costless. It is not. It is a real compensation expense. Over the past seven years, the company has spent about $155 million per year on average purchasing shares for treasury to support these programs. But for long-term shareholders, Fairfax’s approach appears far more aligned, disciplined, and shareholder-friendly than the stock-compensation models used by many other companies. In short, Fairfax’s program does create some dilution in diluted EPS. But it also strengthens culture, retention, and alignment — and it does so in a way that is far more thoughtful than the typical corporate SBC playbook. Thanks @Viking I was using effective share count for both BV and earnings and understand this better now.
treasurehunt Posted March 13 Posted March 13 1 hour ago, dartmonkey said: Thinking about what this would do to the book value, given that FIH is currently trading at 0.75x BV, buying a significant number of shares beneath book value would actually decrease the book value per share and postpone incentive fees paid to Fairfax. Buying a lot of shares under book would actually increase book value per share.
dartmonkey Posted March 13 Posted March 13 1 hour ago, treasurehunt said: 2 hours ago, dartmonkey said: Thinking about what this would do to the book value, given that FIH is currently trading at 0.75x BV, buying a significant number of shares beneath book value would actually decrease the book value per share and postpone incentive fees paid to Fairfax. Buying a lot of shares under book would actually increase book value per share. You are right, thank you for the correction. The demoninator would increase more than the numerator, since buying back $1 worth of book value only costs $0.78. It wouldn't have a huge impact - buying back $100m worth of shares would take the book value per share from $22.94 to $23.17, so I got the direction wrong. I was probably subconsciously thinking of P/B, which would go down, from 22.94/17.90= 0.78 to 23.17/17.90 = 0.77.
backtothebeach Posted March 13 Posted March 13 3 hours ago, Viking said: For earnings per share: Use diluted shares outstanding Why? Because EPS is meant to capture the earnings attributable to the share count that could exist after awards vest. Not sure I completely understand this logic (but I am not an accountant either). If a company retains 100% of its earnings, the created value remains in the company and will eventually also belong to those shares that vest in the future. But let's say a company distributes all its earning via dividend, wouldn't the dividends only be paid to the basic shareholders (I don't think they accrue to unvested shares, do they? *** ), and then calculating EPS using basic shares would be more accurate? ***Ok, apparently they do, so I answered my own question, and using diluted shares for EPS makes sense. I'll post this anyway. *From chatGPT: 1. Restricted Stock Units Unvested RSUs usually do NOT receive dividends directly. However, many companies provide dividend equivalents: When the company pays a dividend, an equivalent amount is tracked or credited. The credited dividends are paid only if the RSUs vest.
dartmonkey Posted March 14 Posted March 14 (edited) 13 hours ago, backtothebeach said: 17 hours ago, Viking said: Use diluted shares outstanding Why? Because EPS is meant to capture the earnings attributable to the share count that could exist after awards vest. Not sure I completely understand this logic (but I am not an accountant either). I also am not an accountant, and also do not understand why you wouldn't just use diluted share count for everything, whether it is earnings per share or book value per share. But I can confirm that Yahoo Finance uses diluted shares in calculating earnings per share and effective shares when calculating book value per share, supporting Viking's idea of doing it that way. Edited March 14 by dartmonkey
SafetyinNumbers Posted March 14 Posted March 14 (edited) 4 hours ago, dartmonkey said: I also am not an accountant, and also do not understand why you wouldn't just use diluted share count for everything, whether it is earnings per share or book value per share. But I can confirm that Yahoo Finance uses dilutes shares in calculating earnings per share and effective shares when calculating book value per share, supporting Viking's idea of doing it that way. It’s just an attempt to net accurate and useful but if it makes a difference in a buy decision the margin of safety probably isn’t big enough RJ uses fully diluted shares for book value, FWIW. To me it just makes sense to use what the company uses. Edited March 14 by SafetyinNumbers
jeyfox Posted March 14 Posted March 14 Here is recap of combined ratios since 2004 and the change of ownership levels at the different insurance entity levels between 2024 and 2025. The playbook of reinforcing what they know very well. Falcon Thailand: from 97% to 100% AMAG (Indonesia): from 80 to 81% Fairfirst (Sri Lanka) from 78 to 100% Fairfax Ukraine from 70 to 100%. Digit: from 60 to 58% upon conversionof securities once regulatory approval is received. Cheers! Jeremy
Hoodlum Posted March 14 Posted March 14 (edited) 2 hours ago, jeyfox said: Here is recap of combined ratios since 2004 and the change of ownership levels at the different insurance entity levels between 2024 and 2025. The playbook of reinforcing what they know very well. Falcon Thailand: from 97% to 100% AMAG (Indonesia): from 80 to 81% Fairfirst (Sri Lanka) from 78 to 100% Fairfax Ukraine from 70 to 100%. Digit: from 60 to 58% upon conversionof securities once regulatory approval is received. Cheers! Jeremy Thanks @jeyfox for posting these changes in ownership as it is interesting to see how this is evolving for some of the smaller insurance subs that we don’t normally hear about. We know that Allied and Odyssey minority interests will eventually be bought out. It would be nice if Fairfax could buy out the remaining 3% interest of GIG, but I don’t know what that would take as they were offered 2x book and turned that down. I did a little digging on Pacific Insurance (Malaysia) and noticed that Fairfax reported owning 100% in the 2015 annual report but then dropped to 85% in the 2016 report. I could not find anything to know what caused this drop in ownership. I am curious what happened to that 15%. Edited March 14 by Hoodlum
Viking Posted March 15 Posted March 15 (edited) Sigma Companies International – March 2025 – Base Hits Matter As we work our way through Fairfax's 2025 annual report, we have been highlighting a few of the things that caught our attention. The Sigma sale (and sizeable realized gain) is both important and instructive for a number of different reasons. That is what we explore in our short post today. Value Investing in Practice “All intelligent investing is value investing — acquiring more that you are paying for. You must value the business in order to value the stock.” Charlie Munger The Sigma investment is a clear example of value investing in practice. In 2017, Fairfax invested $41.4 million to acquire an 81% interest in Sigma Companies International Corp. For Fairfax, this was a relatively small investment. Seven years later, Fairfax realized $327 million of total value: $284 million cash received $43 million retained ownership interest $178.7 million realized gain The investment delivered a 31% compound annual return. The formula is simple: 1. Buy a good business at a price well below its value. 2. Support strong management. 3. Be patient. Value investing may be out of favour in many parts of today’s market, but it continues to work exceptionally well for Fairfax. Sigma is simply one of the latest examples. In recent years Fairfax has also realized significant gains from investments such as Poseidon (2026), Orla Mining (2025), Stelco (2024), Ambridge Partners (2023), Resolute Forest Products (2022) and pet insurance (2022). Corporate Baseball Sigma highlights another important feature of Fairfax’s investment approach. The initial investment was small, but the outcome was meaningful. Fairfax has produced several “home runs” in recent years — investments that generated over $1 billion in gains. But the company has also produced many “singles” — investments that created $100 million or more in value, like Sigma. In baseball terms, Fairfax has been hitting for both power and average. The home runs attract the headlines. The singles quietly keep the scoreboard moving. Importantly, Fairfax is not simply swinging for the fences. The company’s investment process has evolved in recent years. It is making more consistent contact — generating a steady stream of profitable investments. Each successful investment moves the runners around the bases. Capital is redeployed into new opportunities, compounding over time. In corporate baseball, that combination — consistently getting on base and power — is what wins championships. Comments from Prem about Sigma from Fairfax's 2025AR. In 2017 we purchased an 81% interest in Sigma Companies International for $41 million. Led by Victor Pais, Sigma is a manufacturer and supplier of products used in water, stormwater and drainage infrastructure. Victor and team did an outstanding job navigating some turbulent times while at the same time building a great company. Early in 2025, Victor sold the company, with our interest being $284 million cash and a 16% ownership in the acquiring company worth $43 million for a 31% annual compound return. We wish Victor and the team all the best in the future. Comments about Fairfax’s initial investment in Sigma from Fairfax’s 2017AR “On August 2, 2017 the company acquired an 81.2% non-voting equity interest in Sigma Companies International Corp. (‘‘Sigma’’) for cash consideration of $41.4. Sigma, through its subsidiary, is engaged in global water and wastewater infrastructure projects.” Fairfax’s 2017AR Edited March 15 by Viking
mengan Posted March 16 Posted March 16 FYI, going through the last call (Q4 2025). This below jumped out as the weakest part of the call. The charitable interpretation is that runoff asbestos/environmental truly is messy and hard to forecast. The less charitable interpretation is that they still do not have a crisp way to explain why shareholders should feel confident the bleeding is near an end. ---- Daniel Baldini Thanks. Thanks for taking my call, and thanks for the wonderful results. So with that said, my question is: Is there any end in sight to these losses from the runoff business? You've disclosed them separately for, I believe, the last 10 years, and when I add them up, it comes to almost $1.6 billion. Now, I understand that there are reserves associated with this business, and they produce investment gains, but I can't imagine that when you sort of entered into these deals, you expected losses of this magnitude. So a little bit of color there would be great. Thank you. Peter S. Clarke Sure. Sure. Good question. A lot of these liabilities, we inherited through acquisitions, back in the late 1990s, early 2000s, and they're really latent liabilities. There are asbestos, environmental pollution claims. And, you know, we have a specialized team that we've segregated these claims, and they're focused on it. We would, I would say personally, they're best in class. They've been managing these liabilities for a long time, but they're very difficult claims. And, you know, in the United States, it's very litigious and, you know, there's continuing, especially on the asbestos front, you know, some of these claims are 30, 40 years old, and, we look at them every year. You typically, you can't use general actuarial techniques to come up with the reserves. It's a matter of reacting to what happens. Hi, hi, Denise? Denise, are you there?
Maverick47 Posted March 16 Posted March 16 2 hours ago, mengan said: The charitable interpretation is that runoff asbestos/environmental truly is messy and hard to forecast. The less charitable interpretation is that they still do not have a crisp way to explain why shareholders should feel confident the bleeding is near an end. Unfortunately, the charitable interpretation is more likely to be correct in my opinion. I worked for a large insurer based in the US…and a little over a decade ago, I recall three straight years where the asbestos and environmental loss reserves were re-estimated upwards by roughly $400 million each year, so a cumulative $1.2 billion in only 3 years. Each year, the actuarial review was presumed to have been conservative enough to “finally” estimate the reserves once and for all, and each year it was “wrong”. Management finally gave up in disgust and transferred the applicable reserves at the time of about $3.6 billion to a runoff reinsurer…but total losses to the primary insurer were still capped at about twice that amount, or $7.2 billion, after which losses would again come back to the primary insurer. it’s been over ten years now, and the paid losses on the reserves held by the reinsurer have still not totaled the original $3.6 billion they received and had available to invest. I guess what I’m saying is that all things considered, the primary insurer, if they had been confident in their ability to invest those reserves, probably would have been better off retaining them, even doing so would have produced another ten years of upward reserve re-estimations. I’m comfortable enough with Fairfax’s investment and capital allocation talents that I expect we, as shareholders, will be better off with them retaining these reserves, and investing them until they are finally paid out, than paying what is likely to be an expensive price to transfer them to a runoff reinsurer.
SafetyinNumbers Posted March 16 Posted March 16 59 minutes ago, Maverick47 said: Unfortunately, the charitable interpretation is more likely to be correct in my opinion. I worked for a large insurer based in the US…and a little over a decade ago, I recall three straight years where the asbestos and environmental loss reserves were re-estimated upwards by roughly $400 million each year, so a cumulative $1.2 billion in only 3 years. Each year, the actuarial review was presumed to have been conservative enough to “finally” estimate the reserves once and for all, and each year it was “wrong”. Management finally gave up in disgust and transferred the applicable reserves at the time of about $3.6 billion to a runoff reinsurer…but total losses to the primary insurer were still capped at about twice that amount, or $7.2 billion, after which losses would again come back to the primary insurer. it’s been over ten years now, and the paid losses on the reserves held by the reinsurer have still not totaled the original $3.6 billion they received and had available to invest. I guess what I’m saying is that all things considered, the primary insurer, if they had been confident in their ability to invest those reserves, probably would have been better off retaining them, even doing so would have produced another ten years of upward reserve re-estimations. I’m comfortable enough with Fairfax’s investment and capital allocation talents that I expect we, as shareholders, will be better off with them retaining these reserves, and investing them until they are finally paid out, than paying what is likely to be an expensive price to transfer them to a runoff reinsurer. I think it’s also an easy place to book more reserves when being forced to release them elsewhere. I think Fairfax does try to legally defer income as much as possible.
Hamburg Investor Posted March 16 Posted March 16 (edited) The Most Remarkable Sentence in Fairfax's 2025 Shareholder Letter The single most remarkable line in Fairfax's 2025 shareholder letter - at least to me - is this one: "The total return on our investment portfolio of 9.3% in 2025 was well above our 40-year average of 7.7% and closer to the average returns of our first 25 years!" I've read this sentence several times now. And I don't think Watsa is just reporting a good year. He is quietly signalling something bigger: that he believes it is possible again to earn returns "like in the old days" on Fairfax's asset base. Not the 30–50% annual book value growth of the early years – but asset-level returns in the same ballpark as those of the first 25 years. It reads like a statement of confidence - and it’s an interesting data point. Prem marks 2010 to 2020 as outliers. Let me walk through why I think that matters – and why the story is more nuanced than it first appears. Is Prem making the case for 22%, 25%+ Compounding? Let’s do the math: The average arithmetic return on assets of the 1st 25 years was 9.7% (average from the five 5-year periods of 10.4%, 9.7%, 8.8%, 8.6%, 11.0%). So yes - 2025s 9.3% is just shy of mirroring that average. At todays float leverage of 2.8 such average asset returns would lead to a return of 27.2% pretax and - assuming a 20% tax rate - 21.7% after tax return. That’s huge. And that’s clearly not the same as 15%. Even if you substract corporate overhead. Incidentally, it’s quite interesting that Prem states more clearly than ever that FFH’s intrinsic value has grown significantly faster than its book value over the years and that this trend will continue; consequently, we can also interpret Prem’s target of 15% book value growth as a goal to increase FFH’s intrinsic value by 15%+ annually - maybe 16% or even more. Anyway, the 21.7% aftertax returns are (a) without counting in a profitable insurance business (with todays premiums standing at $1.596/share, assuming cr95, that adds another $80/share; which translates to 6.3% pretax earnings and would add another 5% aftertax roe - so 26.7%) and (b) without counting in any hidden assets, that should give extra leverage with equity like returns (if I‘d assume 10% roe on Prems equity investments I’d add another 1% roe per $3bn of hidden assets or - if 15% roe - 1% extra roe per $2bn. Of course, Prem doesn't promise such returns outright. And he even isn’t saying that this will happen every year or on average. Anyway, just a few sentences later he continues to cite 15% book value growth as his target and for good reason. You‘ll never know, if a zero interest rates regime or a softer than ever market or a big catastrophe or growth beating value in a major way or other things knock at your door and when. It‘s just, that all those drags combined are clearly outliers and far from normal and average. What the Five-Year Table Actually Says – And Doesn't Say The letter includes Fairfax's familiar 5-year period table: compound book value growth, average combined ratio, and average investment return, going back to 1986. At first glance, the three columns feel oddly disconnected. Book value growth swings from −0.9% to +57.7% without an obvious mechanical link to the other two numbers. That's because the table is missing its most important variable: the ratio of investment portfolio to equity. So I went through the old reports and if I got the numbers right, than In the early years, Fairfax's float was in the same ballpark as today; so like 1.5 to 2.0 book value was normal, at least at the end of the 5 year timeframes starting 1985 (there’s one peek/exception of 3.2 float to equity, but all others are below 2.0). But the Asset to equity ratio was way higher in the first 25 years; between above 4 and even above 10. So FFH used not only float, but normal credit as a second, even bigger layer of leverage (at least that’s my interpretation; please help me if I am wrong; happy to learn). So a 10% return on a portfolio that is 5 × equity means a 50% contribution to book value growth before underwriting is even considered, right? The float leverage is the hidden engine the table never shows. But in those early years, the float wasn't free. Average combined ratios over 5 years above 104%, 114% or 106% meant Fairfax was paying for its float through underwriting losses; AND I guess on the other assets (credit?). So those investment returns had to first cover that cost before creating any book value at all. The headline numbers were spectacular – but structurally fragile. The 2011–2020 Decade: What Happens When the Engine Stalls The 5 years table is brutally honest here. In 2011–2015 and 2016–2020, Fairfax finally got underwriting right – combined ratios below 100%, float becoming genuinely cheaper. And yet book value growth collapsed to 3.8% and 5.6%. The culprit was investment returns falling to 3.2% and 3.4%. Crushed by zero rates. For an insurer whose model depends on earning a spread between cost-of-float and return-on-float, near-zero rates were an existential drag - made worse by Watsa's prolonged macro hedges and deflation bets that destroyed enormous opportunity cost throughout the decade. Good underwriting. Wrong macro bets. Wrong rate environment. Growth beating value. The engine stalled. The only time when the 5 year investment returns went below 8.6%. Why 9.3% Is Achievable Today – Despite Fairfax Being Much Larger This is where it gets interesting - and where the size question comes in. The obvious objection to Watsa's implied optimism is: Fairfax is vastly larger now. You can't generate the same asset returns at scale. And there's truth in that. In the early decades, strong portfolio returns relied on: - a small, concentrated equity portfolio where a few multibaggers could materially move the overall result, and - a large bond book in a high-rate world as a already high baseline. A $500mn equity portfolio can compound at 20%+ if Watsa makes three brilliant calls. A $20 billion equity portfolio cannot - the universe of ideas shrinks dramatically as the equity portfolio gets bigger. That constraint is real and permanent. But here is what changes the equation: Fairfax no longer needs the same equity alpha to hit strong total portfolio returns. Why? Because the portfolio mix itself has shifted in a way that compensates: - The fixed-income book earns ~5% again instead of 1–2%, generating $2.6bn in annual interest and dividend income - locked in and maintainable for at least four years - A structurally higher share of assets than in the first 25 years now sits in equities and equity-like holdings, reducing the drag from bond allocations, which structurally give lower returns than stocks/equity - (a plus for book value growth: The float itself now generates profit rather than consuming it) In the early years, a 9–10% total return on assets required a handful of exceptional stock picks. But the higher float/credit leverage in the early days was a drag, pulling overall investment returns down. If Prem shot the lights out with equity in the early days, but he was levered 1-to-10 with equity to assets, 9 out of 10 asset parts were giving bond-like returns. So the overall investment return was still near to the bond base, right? At least the gravity of bond like returns is way less in a 1.8 part bonds to 1 part equity situation. And don’t forget: All that happend with the acceptance of underwriting losses. Today, a similar 9–10% is achievable through a healthier, more balanced mix: reasonable bond yields, more equity exposure, and decent - not brilliant - stock selection. That is the real implication of Watsa's sentence. He is not claiming the equity outperformance of 1992 is back. He is saying the return environment and portfolio structure have aligned in a way that makes those asset-level returns possible again – through a different, more durable route. The New Structural Advantage: Float That Pays You For the first time in Fairfax's 40-year history, both compounding components are working simultaneously: - Combined ratio of 93.6% - the best five-year underwriting period in company history, generating ~$1.5 billion annually in profit - Investment return recovering to 6.8% on average, 9.3% in 2025 Let’s run the rough math with an example and the shift becomes clear: > Early years: ~4× float leverage × 9% investment return − 7.5% cost of float ≈ 28.5% (that's pretax; so 22.8% contribution to book value, assuming 20% tax rate) > Today: ~2.5× float leverage × 9% return + 6% profit of float ≈ 28.5% - again. The leverage today is smaller. The quality of each unit of float is dramatically better. A bigger share of overall investment returns on assets is defined by FFHs equity portfolio and not by the bond portfolio as in the past. The net result is similar – through a structure that doesn't depend on very big equity outperformance/returns, like in the early years with a than much smaller equity. Bottom Line „The total return on our investment portfolio of 9.3% in 2025 was well above our 40-year average of 7.7% and closer to the average returns of our first 25 years!" The asset leverage of the early years is gone - and it is not coming back. But Fairfax no longer needs it. A higher equity weight in the investment portfolio, secured back-to-normal fixed-income yields, and structurally profitable underwriting create a different but comparably powerful compounding engine. Addendum: I have a few more questions and points of confusion: Does anyone know why, in the early years, assets relative to equity were so enormous (a factor of 4, 5, ...10) – even though the ratio of float to equity was significantly lower; like only a fraction of overall leverage? Where did this leverage come from? Am I even correct in assuming that the leverage was generally invested in a bond-like manner (as opposed to equity-like)? Or were bond-like returns at least more typical when you factor in the costs of the additional (non-float) leverage? More generally, we still rarely discuss deferred taxes here as a second significant lever, which is now becoming increasingly significant. Just a thought. ... happy to learn from your feedback - I may be a bit off here and there. But that's what makes a discussion, doesn't it? Edited March 17 by Hamburg Investor
dartmonkey Posted March 17 Posted March 17 On 3/16/2026 at 5:48 PM, Hamburg Investor said: The Most Remarkable Sentence in Fairfax's 2025 Shareholder Letter The single most remarkable line in Fairfax's 2025 shareholder letter - at least to me - is this one: "The total return on our investment portfolio of 9.3% in 2025 was well above our 40-year average of 7.7% and closer to the average returns of our first 25 years!" I've read this sentence several times now. And I don't think Watsa is just reporting a good year. He is quietly signalling something bigger: that he believes it is possible again to earn returns "like in the old days" on Fairfax's asset base. Not the 30–50% annual book value growth of the early years – but asset-level returns in the same ballpark as those of the first 25 years. It reads like a statement of confidence - and it’s an interesting data point. Prem marks 2010 to 2020 as outliers. Let me walk through why I think that matters – and why the story is more nuanced than it first appears. Is Prem making the case for 22%, 25%+ Compounding? Let’s do the math: The average arithmetic return on assets of the 1st 25 years was 9.7% (average from the five 5-year periods of 10.4%, 9.7%, 8.8%, 8.6%, 11.0%). So yes - 2025s 9.3% is just shy of mirroring that average. At todays float leverage of 2.8 such average asset returns would lead to a return of 27.2% pretax and - assuming a 20% tax rate - 21.7% after tax return. That’s huge. And that’s clearly not the same as 15%. Even if you substract corporate overhead. Incidentally, it’s quite interesting that Prem states more clearly than ever that FFH’s intrinsic value has grown significantly faster than its book value over the years and that this trend will continue; consequently, we can also interpret Prem’s target of 15% book value growth as a goal to increase FFH’s intrinsic value by 15%+ annually - maybe 16% or even more. Anyway, the 21.7% aftertax returns are (a) without counting in a profitable insurance business (with todays premiums standing at $1.596/share, assuming cr95, that adds another $80/share; which translates to 6.3% pretax earnings and would add another 5% aftertax roe - so 26.7%) and (b) without counting in any hidden assets, that should give extra leverage with equity like returns (if I‘d assume 10% roe on Prems equity investments I’d add another 1% roe per $3bn of hidden assets or - if 15% roe - 1% extra roe per $2bn. Of course, Prem doesn't promise such returns outright. And he even isn’t saying that this will happen every year or on average. Anyway, just a few sentences later he continues to cite 15% book value growth as his target and for good reason. You‘ll never know, if a zero interest rates regime or a softer than ever market or a big catastrophe or growth beating value in a major way or other things knock at your door and when. It‘s just, that all those drags combined are clearly outliers and far from normal and average. What the Five-Year Table Actually Says – And Doesn't Say The letter includes Fairfax's familiar 5-year period table: compound book value growth, average combined ratio, and average investment return, going back to 1986. At first glance, the three columns feel oddly disconnected. Book value growth swings from −0.9% to +57.7% without an obvious mechanical link to the other two numbers. That's because the table is missing its most important variable: the ratio of investment portfolio to equity. So I went through the old reports and if I got the numbers right, than In the early years, Fairfax's float was in the same ballpark as today; so like 1.5 to 2.0 book value was normal, at least at the end of the 5 year timeframes starting 1985 (there’s one peek/exception of 3.2 float to equity, but all others are below 2.0). But the Asset to equity ratio was way higher in the first 25 years; between above 4 and even above 10. So FFH used not only float, but normal credit as a second, even bigger layer of leverage (at least that’s my interpretation; please help me if I am wrong; happy to learn). So a 10% return on a portfolio that is 5 × equity means a 50% contribution to book value growth before underwriting is even considered, right? The float leverage is the hidden engine the table never shows. But in those early years, the float wasn't free. Average combined ratios over 5 years above 104%, 114% or 106% meant Fairfax was paying for its float through underwriting losses; AND I guess on the other assets (credit?). So those investment returns had to first cover that cost before creating any book value at all. The headline numbers were spectacular – but structurally fragile. The 2011–2020 Decade: What Happens When the Engine Stalls The 5 years table is brutally honest here. In 2011–2015 and 2016–2020, Fairfax finally got underwriting right – combined ratios below 100%, float becoming genuinely cheaper. And yet book value growth collapsed to 3.8% and 5.6%. The culprit was investment returns falling to 3.2% and 3.4%. Crushed by zero rates. For an insurer whose model depends on earning a spread between cost-of-float and return-on-float, near-zero rates were an existential drag - made worse by Watsa's prolonged macro hedges and deflation bets that destroyed enormous opportunity cost throughout the decade. Good underwriting. Wrong macro bets. Wrong rate environment. Growth beating value. The engine stalled. The only time when the 5 year investment returns went below 8.6%. Why 9.3% Is Achievable Today – Despite Fairfax Being Much Larger This is where it gets interesting - and where the size question comes in. The obvious objection to Watsa's implied optimism is: Fairfax is vastly larger now. You can't generate the same asset returns at scale. And there's truth in that. In the early decades, strong portfolio returns relied on: - a small, concentrated equity portfolio where a few multibaggers could materially move the overall result, and - a large bond book in a high-rate world as a already high baseline. A $500mn equity portfolio can compound at 20%+ if Watsa makes three brilliant calls. A $20 billion equity portfolio cannot - the universe of ideas shrinks dramatically as the equity portfolio gets bigger. That constraint is real and permanent. But here is what changes the equation: Fairfax no longer needs the same equity alpha to hit strong total portfolio returns. Why? Because the portfolio mix itself has shifted in a way that compensates: - The fixed-income book earns ~5% again instead of 1–2%, generating $2.6bn in annual interest and dividend income - locked in and maintainable for at least four years - A structurally higher share of assets than in the first 25 years now sits in equities and equity-like holdings, reducing the drag from bond allocations, which structurally give lower returns than stocks/equity - (a plus for book value growth: The float itself now generates profit rather than consuming it) In the early years, a 9–10% total return on assets required a handful of exceptional stock picks. But the higher float/credit leverage in the early days was a drag, pulling overall investment returns down. If Prem shot the lights out with equity in the early days, but he was levered 1-to-10 with equity to assets, 9 out of 10 asset parts were giving bond-like returns. So the overall investment return was still near to the bond base, right? At least the gravity of bond like returns is way less in a 1.8 part bonds to 1 part equity situation. And don’t forget: All that happend with the acceptance of underwriting losses. Today, a similar 9–10% is achievable through a healthier, more balanced mix: reasonable bond yields, more equity exposure, and decent - not brilliant - stock selection. That is the real implication of Watsa's sentence. He is not claiming the equity outperformance of 1992 is back. He is saying the return environment and portfolio structure have aligned in a way that makes those asset-level returns possible again – through a different, more durable route. The New Structural Advantage: Float That Pays You For the first time in Fairfax's 40-year history, both compounding components are working simultaneously: - Combined ratio of 93.6% - the best five-year underwriting period in company history, generating ~$1.5 billion annually in profit - Investment return recovering to 6.8% on average, 9.3% in 2025 Let’s run the rough math with an example and the shift becomes clear: > Early years: ~4× float leverage × 9% investment return − 7.5% cost of float ≈ 28.5% (that's pretax; so 22.8% contribution to book value, assuming 20% tax rate) > Today: ~2.5× float leverage × 9% return + 6% profit of float ≈ 28.5% - again. The leverage today is smaller. The quality of each unit of float is dramatically better. A bigger share of overall investment returns on assets is defined by FFHs equity portfolio and not by the bond portfolio as in the past. The net result is similar – through a structure that doesn't depend on very big equity outperformance/returns, like in the early years with a than much smaller equity. Bottom Line „The total return on our investment portfolio of 9.3% in 2025 was well above our 40-year average of 7.7% and closer to the average returns of our first 25 years!" The asset leverage of the early years is gone - and it is not coming back. But Fairfax no longer needs it. A higher equity weight in the investment portfolio, secured back-to-normal fixed-income yields, and structurally profitable underwriting create a different but comparably powerful compounding engine. Addendum: I have a few more questions and points of confusion: Does anyone know why, in the early years, assets relative to equity were so enormous (a factor of 4, 5, ...10) – even though the ratio of float to equity was significantly lower; like only a fraction of overall leverage? Where did this leverage come from? Am I even correct in assuming that the leverage was generally invested in a bond-like manner (as opposed to equity-like)? Or were bond-like returns at least more typical when you factor in the costs of the additional (non-float) leverage? More generally, we still rarely discuss deferred taxes here as a second significant lever, which is now becoming increasingly significant. Just a thought. ... happy to learn from your feedback - I may be a bit off here and there. But that's what makes a discussion, doesn't it? I think 9.3% returns on total iinvestments is probably too optimistic - the average for the last 6 years is 6.1%. The last 6 years show how variable this is, from year to year, compared to bond returns: I calculate the last line by backing out the fixed income return from the overall return, and calculating the return on equity investments (which includes associates and consolidated non-insurance companies.) As you can see, the fixed income return was low in 2020-2022 and has recovered to about 5% now. But the equity investments are, as you would expect, all over the place. For instance, in 2021, returns were great, because they booked a huge gain in Digit Insurance. 2022 was terrible because it was a terrible year for stocks, with the S&P down 19%. And so on. So I think extrapolating last year's great 9.3% return, and particularly its 18.8% equity investment component, is too optimistic. But even so, with the leverage in place, low corporate costs and low interest costs, and great investments like Eurobank and Fairfax India trading at low valuations, I am pretty confident in their prospects. I think we already have My model is still embryonic, but if I assign 13.2% to equity returns (the 6-year average) instead of 18.8%, with fixed income returns unchanged at 5.0%, we should still have overall returns of 7.6%, a bit better than the 6-year average of 6.1%. And with already 2 major investment successes for 2026 (Eurolife - $350m, Poseidon - $866m, total of $1216m), after only 2 1/2 months we are well on our way to repeat something similar to last year's $3151m in total investment gains (9.3%) than the 6-year average.
Marco Van Basten Posted March 17 Posted March 17 27 minutes ago, dartmonkey said: I think 9.3% returns on total iinvestments is probably too optimistic - the average for the last 6 years is 6.1%. The last 6 years show how variable this is, from year to year, compared to bond returns: I calculate the last line by backing out the fixed income return from the overall return, and calculating the return on equity investments (which includes associates and consolidated non-insurance companies.) As you can see, the fixed income return was low in 2020-2022 and has recovered to about 5% now. But the equity investments are, as you would expect, all over the place. For instance, in 2021, returns were great, because they booked a huge gain in Digit Insurance. 2022 was terrible because it was a terrible year for stocks, with the S&P down 19%. And so on. So I think extrapolating last year's great 9.3% return, and particularly its 18.8% equity investment component, is too optimistic. But even so, with the leverage in place, low corporate costs and low interest costs, and great investments like Eurobank and Fairfax India trading at low valuations, I am pretty confident in their prospects. I think we already have My model is still embryonic, but if I assign 13.2% to equity returns (the 6-year average) instead of 18.8%, with fixed income returns unchanged at 5.0%, we should still have overall returns of 7.6%, a bit better than the 6-year average of 6.1%. And with already 2 major investment successes for 2026 (Eurolife - $350m, Poseidon - $866m, total of $1216m), after only 2 1/2 months we are well on our way to repeat something similar to last year's $3151m in total investment gains (9.3%) than the 6-year average. I think that if you were to mark to market their investments, the returns would be much higher...
SafetyinNumbers Posted March 18 Posted March 18 30 minutes ago, dartmonkey said: I calculate the last line by backing out the fixed income return from the overall return Do you include gains/losses in the bond portfolio in the fixed income return?
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