Fairfax 2026

[SafetyinNumbers]

1 hour ago, Txvestor said:

It's why for me personally while the stock stays at these levels. If they used every dollar of cash flows to keep buying back shares I would be a happy camper. I clearly don't know or can't see the upside in what they are doing with these equity acquisitions and although it wouldn't be a mortal blow to the company if they didn't work out, just like Equity hedges  and shorts did not, it sure would be at a tremendous opportunity cost. Let's say $3B was allocated here, unless it's worth well over $6B in 5yrs or so time. Buying back almost 10% of the company would have proven to be the best alternative. 

How do you define cash flow? Last year they spent a bit less than the dividends from the insurance subsidiaries on buybacks. I think that’s a good estimate for FCF. The insurance companies still need capital to grow and their portfolio turnover shouldn’t have much to do with buybacks except to the extent it creates excess capital. This year they are allowed to dividend up $4b. So far this year they are on pace for over $2b of buybacks. 

 

[Txvestor]

4 hours ago, SafetyinNumbers said:

How do you define cash flow? Last year they spent a bit less than the dividends from the insurance subsidiaries on buybacks. I think that’s a good estimate for FCF. The insurance companies still need capital to grow and their portfolio turnover shouldn’t have much to do with buybacks except to the extent it creates excess capital. This year they are allowed to dividend up $4b. So far this year they are on pace for over $2b of buybacks. 

 

Well it's quite unlikely they'd be growing much next few years with the soft market. If they grew 3%PA I'd be happy. There's a good chance it stays flat. Hence that won't take up much capital. It boils down to additional acquisitions versus paying a dividend back up to the parent for the share buybacks. 
 

Another possibility is they are holding that cash there in the subs, to facilitate the minority buyouts when appropriate and available. 

Edited yesterday at 03:35 AM by Txvestor

[SafetyinNumbers]

8 hours ago, Txvestor said:

Well it's quite unlikely they'd be growing much next few years with the soft market. If they grew 3%PA I'd be happy. There's a good chance it stays flat. Hence that won't take up much capital. It boils down to additional acquisitions versus paying a dividend back up to the parent for the share buybacks. 
 

Another possibility is they are holding that cash there in the subs, to facilitate the minority buyouts when appropriate and available. 

International is growing faster and parts of casualty are still strong. They also plan to use less reinsurance so they might grow net premiums by 5% not 3%. That needs a billion plus in capital. They do need capital to buy Allied World but, Eurolife is supposed to close next quarter and they raised the $750m in 30 year debt so have plenty of liquidity to scoop those up. Again, I don’t think the decision is acquisitions vs dividends at the subsidiary level. The constraints at the holdco seem to be maintaining the investment:equity leverage and debt:equity leverage. 

Edited yesterday at 12:12 PM by SafetyinNumbers

[SafetyinNumbers]

This could be the buyback. Scotia has the NCIB, no uptick, suggests it might be. The size might indicate it’s taking off TRS but I hope not. 
 

[Hoodlum]

1 minute ago, SafetyinNumbers said:

This could be the buyback. Scotia has the NCIB, no uptick, suggests it might be. The size might indicate it’s taking off TRS but I hope not. 
 

@SafetyinNumbers thanks for sharing this.  I was about to ask if anyone saw the buyer for this trade.  This certainly looks like a Fairfax buyback.  We will get confirmation in about 2 weeks. 

[Hoodlum]

Would Fairfax issue any press release for this buyback of 2% of outstanding shares?  They have not done this previously, although I believe we have not see a buyback this large since the Substantial Issuer Bid in 2021.  I believe Fairfax has now likely bought back 5% of outstanding share since Jan 1st.  

[Junior R]

3 minutes ago, Hoodlum said:

Would Fairfax issue any press release for this buyback of 2% of outstanding shares?  They have not done this previously, although I believe we have not see a buyback this large since the Substantial Issuer Bid in 2021.  I believe Fairfax has now likely bought back 5% of outstanding share since Jan 1st.  

no need all they need to do is renew the NCIB

[patterson]

1 minute ago, SafetyinNumbers said:

This could be the buyback. Scotia has the NCIB, no uptick, suggests it might be. The size might indicate it’s taking off TRS but I hope not. 
 

My first thought is that it's hard to imagine they'd take off the TRS at today's prices, which seems bearish and looks like an admission that the price is likely to keep declining in the short term. On the other hand, this makes a lot of sense and allows them to cancel those 416,600 shares, which I think is about 2% of the company, as well as stop the bleeding in the form of payments to counterparties. If those shares are canceled, won't there be a SEDI insider report or some sort of filing within a week?

 

 

[djokovic1]

I would be very surprised / unhappy if it’s the TRS. Would be amazing if it’s a 2% buyback in 1 swoop.

[Hoodlum]

27 minutes ago, djokovic1 said:

I would be very surprised / unhappy if it’s the TRS. Would be amazing if it’s a 2% buyback in 1 swoop.

 

The real question is why someone would be selling at this price.  I understand the need sometimes for fund rebalancing, but it would seem it is very poor timing to sell now.  I thought the same when Fairfax was able to scoop up $2M share at $500US/share in 2021.  

[yesman182]

1 hour ago, SafetyinNumbers said:

This could be the buyback. Scotia has the NCIB, no uptick, suggests it might be. The size might indicate it’s taking off TRS but I hope not. 
 

Aren’t there only 4-5 people/firms with that many shares to sell? So either a top ten holder in Fairfax liquidated or they took of TRS. Is that what you are thinking? 

[Hoodlum]

1 hour ago, Junior R said:

no need all they need to do is renew the NCIB

 

Since the NCIB was announced on September 30, I believe Fairfax has bought back 1.5M shares (incl ~500k share in Q4).  They still have about 700k share available to buy back from that NCIB (2.2M shares).  Fairfax may not need to issue a new NCIB before the existing one expires, unless there is the opportunity for another very large buyback.  

[Hoodlum]

20 minutes ago, yesman182 said:

Aren’t there only 4-5 people/firms with that many shares to sell? So either a top ten holder in Fairfax liquidated or they took of TRS. Is that what you are thinking? 

 

I would be very surprised if this is related to the TRS.  Fairfax has always said that this is an investment and they treat it like any other investment.  It would not make any sense to close out some of the TRS at this price. from an investment perspective.

[djokovic1]

28 minutes ago, Hoodlum said:

The real question is why someone would be selling at this price.  I understand the need sometimes for fund rebalancing, but it would seem it is very poor timing to sell now.

Well Mr. Market can surprise you  The share price was 10% lower 3 weeks ago i.e there was a lot of selling at much lower prices too.

 

[yesman182]

1 minute ago, Hoodlum said:

 

I would be very surprised if this is related to the TRS.  Fairfax has always said that this is an investment and they treat it like any other investment.  It would not make any sense to close out some of the TRS at this price. from an investment perspective.

I hear ya, but who could have sold than many shares? It would be like blackrock liquidating their position. 

[Txvestor]

48 minutes ago, Hoodlum said:

 

The real question is why someone would be selling at this price.  I understand the need sometimes for fund rebalancing, but it would seem it is very poor timing to sell now.  I thought the same when Fairfax was able to scoop up $2M share at $500US/share in 2021.  

Unless the buyer and seller is the same ie TRS unwind at a lower settlement price with a simultaneous contract to block buy the shares held at the said price. That could simply means a lower capital gains tax bill. its more or less at 12mth lows. And they've been buying even at prices 20% higher than this. 
I too can't imagine who would otherwise sell such a large block of shares. That's almost $700M US. 

Edited 3 hours ago by Txvestor

[gfp]

I can't imagine that trade is anything other than Fairfax initiating a closing of part of the TRS position and purchasing the counterparty hedge shares.  As others have commented - there is not really a plausible alternative scenario for a trade like that.  It makes sense from Fairfax's perspective only because they are interested in buying the block of hedge shares.  The counterparty loves it - easy peasy.

[yesman182]

Didn't they raise an equivalent amount of debt on June 8th? Perhaps the closing of the TRS has more to do with their ability to access debt markets vs the TRS share price? I really have no idea about their ability or inability to raise debt at this scale or interest rate. 

[SafetyinNumbers]

1 hour ago, gfp said:

I can't imagine that trade is anything other than Fairfax initiating a closing of part of the TRS position and purchasing the counterparty hedge shares.  As others have commented - there is not really a plausible alternative scenario for a trade like that.  It makes sense from Fairfax's perspective only because they are interested in buying the block of hedge shares.  The counterparty loves it - easy peasy.

Fidelity has been trimming lately. Maybe it was them.

[gfp]

Just now, SafetyinNumbers said:

Fidelity has been trimming lately. Maybe it was them.

 

That's just not how people trade.  2% of the entire company in one block trade cross.  Does Fidelity even own that much?  Does Fidelity get credited with owning the shares that I own through Fidelity?

[djokovic1]

2 minutes ago, gfp said:

That's just not how people trade

Depends. if you are an aggressive seller sometimes regardless of price, happens all the time with institutions you will be willing to act opportunistically on block liquidity when it’s available. Even if your participation on previous days was much lower (because there was no matching block from Fairfax). Plausible scenario: Fairfax raised debt capital and potential sellers were made aware big block is available. 
 

also plausible: it was the trs

 

also plausible but less likely: Fairfax not involved at all

 

[SafetyinNumbers]

9 minutes ago, gfp said:

 

That's just not how people trade.  2% of the entire company in one block trade cross.  Does Fidelity even own that much?  Does Fidelity get credited with owning the shares that I own through Fidelity?

It is how some institutions trade although less now then when I was on the trading desk at UBS. If there was a PM or mandate change I can see it happening. 

Edited 1 hour ago by SafetyinNumbers