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Southeastern Asset Annual meeting transcript

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Here are some things I found interesting:

Southeastern looks to be pretty bullish on outlook for P&C insurers & re-insurers:


Partners Fund: added Berkshire


"We bought a new position in Berkshire Hathaway. For the first time in our careers the

stock fell and remained far enough below intrinsic value for us to buy. The company’s

misunderstood derivative contracts created optically messy short-term results. In

addition, some of Berkshire’s recent investments have been hotly debated, though it is

far too soon to judge their ultimate outcome. The company’s book value (as well as our

appraisal) incorporates the market price of Berkshire’s public equity stakes, which we

believe are also selling for significant discounts to their intrinsic worth.We therefore

are getting a double discount for a company that is financially and competitively

advantaged, has a proven record of terrific insurance underwriting, owns a number of

great brands in non-insurance businesses, and has two of the world’s best capital

allocators at the helm."


Small Cap: hold 9% in Fairfax (3 P&C companies =21% of total portfolio)

- FFH, Everest Re & Markel

"Fairfax, the Fund’s largest holding and best performer in 2008, pulled back 15% in the

first quarter, making it the biggest detractor from results. Fairfax declined after

reporting somewhat weaker than expected fourth quarter insurance and investment

results. The company has never been as strongly capitalized and is well-positioned to

benefit from current investment and underwriting opportunities. Volatility in quarterly

results is a price worth paying for the superior long-term investment returns that

Prem Watsa and his team have delivered to Fairfax shareholders."


"The Small-Cap Fund sold for less than 40% of appraised value at quarter-end.We own

companies that have staying power through the recession due to their financial and/or

business strength. Many will gain advantage over weaker competitors. For example,

the capital positions of Fairfax and Everest Re should enable each to attract more

policies while other underwriters struggle with weaker balance sheets."


International: hold another 9% in Fairfax (3 P&C companies = 24% of total portfolio)

- FFH, Nippon Koa & Sompo


"Owner-operators KS Li, Florentino Perez, Prem Watsa, Lorenzo

Zambrano, and KT Lim have spent their lifetimes creating value by acting intelligently

for the long-term while many around them fret over current events.We do not

know when the market will turn, but we do know that most of the gains will accrue to

those investors with the courage to invest when all others are fleeing."




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