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Fairfax Annual Letter?


Parsad
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Anyone know when Prem's letter and annual report are supposed to come out?  Is it this week?  Cheers!

 

I was going to ask you--is it normally an early March deal?  Seems like a week after Buffett's is normal?

 

Hopefully someone reads this from head office and gives us an update.  I hope it's this week...I'm really looking forward to it.  Cheers!

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March 8 in the evening.

 

From the Q4 conference call:

 

"Then before I pass it back to Prem, I'd like to remind everyone that our Annual General Meeting will be held on Thursday, April the 11th, at 9:30 a.m. at Roy Thomson Hall. Details will be in the annual report on the last page, which will be published on March 8 in the evening.

 

So back to you, Prem."

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March 8 in the evening.

 

From the Q4 conference call:

 

"Then before I pass it back to Prem, I'd like to remind everyone that our Annual General Meeting will be held on Thursday, April the 11th, at 9:30 a.m. at Roy Thomson Hall. Details will be in the annual report on the last page, which will be published on March 8 in the evening.

 

So back to you, Prem."

 

Thanks alot Grenville!  Faster than head office and right off the transcript...how great is this board.  Cheers!

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March 8 in the evening.

 

From the Q4 conference call:

 

"Then before I pass it back to Prem, I'd like to remind everyone that our Annual General Meeting will be held on Thursday, April the 11th, at 9:30 a.m. at Roy Thomson Hall. Details will be in the annual report on the last page, which will be published on March 8 in the evening.

 

So back to you, Prem."

 

Thanks alot Grenville!  Faster than head office and right off the transcript...how great is this board.  Cheers!

 

Parsad,

 

What do you see as the future returns on Fairfax from here?  From your posts, is this a long-term buy and hold position for you?

 

Thanks in advance.

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March 8 in the evening.

 

From the Q4 conference call:

 

"Then before I pass it back to Prem, I'd like to remind everyone that our Annual General Meeting will be held on Thursday, April the 11th, at 9:30 a.m. at Roy Thomson Hall. Details will be in the annual report on the last page, which will be published on March 8 in the evening.

 

So back to you, Prem."

 

Thanks alot Grenville!  Faster than head office and right off the transcript...how great is this board.  Cheers!

 

Parsad,

 

What do you see as the future returns on Fairfax from here?  From your posts, is this a long-term buy and hold position for you?

 

Thanks in advance.

 

With the leverage they use, and their investment expertise, they can get 15% ROE going forward for at least another 10-15 years under the current team.  Cheers! 

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Very good letter!  Remains very bearish and made hints that a correction may not be as far as some people think.  Some good commentary on things they are doing regarding succession at various levels of the company.  Two in particular stuck out...Wade Burton has been added to the Investment Committee and Thomas Cook India will be their vehicle to acquire other Indian businesses.  Cheers!

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March 8 in the evening.

 

From the Q4 conference call:

 

"Then before I pass it back to Prem, I'd like to remind everyone that our Annual General Meeting will be held on Thursday, April the 11th, at 9:30 a.m. at Roy Thomson Hall. Details will be in the annual report on the last page, which will be published on March 8 in the evening.

 

So back to you, Prem."

 

Thanks alot Grenville!  Faster than head office and right off the transcript...how great is this board.  Cheers!

 

Parsad,

 

What do you see as the future returns on Fairfax from here?  From your posts, is this a long-term buy and hold position for you?

 

Thanks in advance.

 

With the leverage they use, and their investment expertise, they can get 15% ROE going forward for at least another 10-15 years under the current team.  Cheers!

 

Great businesses have the tendency to surprise on the upside!  :)

 

giofranchi

 

“As time goes on I get more and more convinced that the right method in investment is to put fairly large sums into enterprises which one thinks one knows something about and in the management of which one thoroughly believes. It is a mistake to think that one limits one’s risk by spreading too much between enterprises about which one knows little and has no reason for special confidence.” - John Maynard Keynes

 

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just out of interest, if you eliminate the 180% and 292% increases in bv and share price in 1986, how would that impact the long term averages of 22.7% and 19%?

 

regards

rijk

 

Well, if you fold a sheet of paper 50 times, you cover the distance from earth to sun. The first time you do that, you go from 0.1 mm to 0.2 mm. When you do that for the 51st time, you go back from sun to earth!!  ;D ;D

Ok, just joking…

 

giofranchi

 

“As time goes on I get more and more convinced that the right method in investment is to put fairly large sums into enterprises which one thinks one knows something about and in the management of which one thoroughly believes. It is a mistake to think that one limits one’s risk by spreading too much between enterprises about which one knows little and has no reason for special confidence.” - John Maynard Keynes

 

 

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just out of interest, if you eliminate the 180% and 292% increases in bv and share price in 1986, how would that impact the long term averages of 22.7% and 19%?

 

regards

rijk

 

Well, if you fold a sheet of paper 50 times, you cover the distance from earth to sun. The first time you do that, you go from 0.1 mm to 0.2 mm. When you do that for the 51st time, you go back from sun to earth!!  ;D ;D

Ok, just joking…

 

giofranchi

 

“As time goes on I get more and more convinced that the right method in investment is to put fairly large sums into enterprises which one thinks one knows something about and in the management of which one thoroughly believes. It is a mistake to think that one limits one’s risk by spreading too much between enterprises about which one knows little and has no reason for special confidence.” - John Maynard Keynes

 

BV per share at the end of 1985 was $2.08. So, an increase of +180% by 1986 year end means that BV per share grew to $5.89. In the 26 years that followed BV per share has grown to $378: that is a 17.35% CAGR.

Don’t forget that we are ending a three years period when BV per share has increased by only approximately 10% (including dividends) cumulatively.

 

PS

I was kidding before, but it is all true! Amazing, but true!  :)

 

giofranchi

 

“As time goes on I get more and more convinced that the right method in investment is to put fairly large sums into enterprises which one thinks one knows something about and in the management of which one thoroughly believes. It is a mistake to think that one limits one’s risk by spreading too much between enterprises about which one knows little and has no reason for special confidence.” - John Maynard Keynes

 

 

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just out of interest, if you eliminate the 180% and 292% increases in bv and share price in 1986, how would that impact the long term averages of 22.7% and 19%?

 

regards

rijk

 

Well, if you fold a sheet of paper 50 times, you cover the distance from earth to sun. The first time you do that, you go from 0.1 mm to 0.2 mm. When you do that for the 51st time, you go back from sun to earth!!  ;D ;D

Ok, just joking…

 

giofranchi

 

“As time goes on I get more and more convinced that the right method in investment is to put fairly large sums into enterprises which one thinks one knows something about and in the management of which one thoroughly believes. It is a mistake to think that one limits one’s risk by spreading too much between enterprises about which one knows little and has no reason for special confidence.” - John Maynard Keynes

 

BV per share at the end of 1985 was $2.08. So, an increase of +180% by 1986 year end means that BV per share grew to $5.89. In the 26 years that followed BV per share has grown to $378: that is a 17.35% CAGR.

Don’t forget that we are ending a three years period when BV per share has increased by only approximately 10% (including dividends) cumulatively.

 

PS

I was kidding before, but it is all true! Amazing, but true!  :)

 

giofranchi

 

“As time goes on I get more and more convinced that the right method in investment is to put fairly large sums into enterprises which one thinks one knows something about and in the management of which one thoroughly believes. It is a mistake to think that one limits one’s risk by spreading too much between enterprises about which one knows little and has no reason for special confidence.” - John Maynard Keynes

 

Maybe the numbers I have just told you aren’t correct. If you look at “Consolidated Financial Summary”, you find that BV per share at the end of 1985 was $1.52, while at the end of 1986 it was $4.25. If so, CAGR in BV per share from 1986 to 2012 has been 18.85%.  :)

 

giofranchi

 

“As time goes on I get more and more convinced that the right method in investment is to put fairly large sums into enterprises which one thinks one knows something about and in the management of which one thoroughly believes. It is a mistake to think that one limits one’s risk by spreading too much between enterprises about which one knows little and has no reason for special confidence.” - John Maynard Keynes

 

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CAGR book growth from 2000 - 2012 inclusive is 7.18%.

 

It ended 2000 at $148 BV per share. From 2002 to 2012 it distributed a cumulative $51.56 in dividends. It ended 2012 at $378 BV per share. If you add the dividends received, you get to a 9.3% CAGR in BV per share.  :)

Reinvesting the dividends, your return would have been even higher.

 

giofranchi

 

“As time goes on I get more and more convinced that the right method in investment is to put fairly large sums into enterprises which one thinks one knows something about and in the management of which one thoroughly believes. It is a mistake to think that one limits one’s risk by spreading too much between enterprises about which one knows little and has no reason for special confidence.” - John Maynard Keynes

 

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The table shows you how our reserves have developed for the ten accident years prior to 2012. Northbridge has

had an average redundancy of 8.2% – i.e., if reserves had been set at $100 for any year between 2002 and 2011,

they would have come down on average to $91.80, showing redundant reserves of $8.20. On a comparable basis,

Crum & Forster had an average reserve redundancy of 5.8%, OdysseyRe 9.8% and Fairfax Asia 8.8% (First Capital

alone was 12.0%). We are very pleased with this reserving record, but given the inherent uncertainty in setting

reserves in the property casualty business, we continue to be focused on being conservative in our reserving process. More on our reserves in the MD&A.

 

If a insurance has higher redundancy, does it reduce taxes by deferring them?

 

BeerBaron

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Please help me understand how FFH's S&P hedge works:

 

For the S&P 500 hedge, they did it at 1050 with $428M and it's $115M mark-to-market on the book after the index has gone up more than 50% from their hedge.  Does that mean, if the index goes to 2000, then the entire $428M will be wiped out, right?  But it also shows their hedge is at a loss of more than $1 billion.  Does that mean they stand to lose $1 billion if they close the hedge now?

 

Thanks

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They also have Russell2000 short which probably lost more. But it's a little puzzling they lost 1B last year - seems more than I expected.

The index was only up sth like 15% last year, so they have a short position in total roughly 6B at the beginning of last year ?

Now they have only around 4B equity holding so do they need 6B short to hedge ? seems they over-hedged ?

 

Please help me understand how FFH's S&P hedge works:

 

For the S&P 500 hedge, they did it at 1050 with $428M and it's $115M mark-to-market on the book after the index has gone up more than 50% from their hedge.  Does that mean, if the index goes to 2000, then the entire $428M will be wiped out, right?  But it also shows their hedge is at a loss of more than $1 billion.  Does that mean they stand to lose $1 billion if they close the hedge now?

 

Thanks

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They also have Russell2000 short which probably lost more. But it's a little puzzling they lost 1B last year - seems more than I expected.

The index was only up sth like 15% last year, so they have a short position in total roughly 6B at the beginning of last year ?

Now they have only around 4B equity holding so do they need 6B short to hedge ? seems they over-hedged ?

 

Please help me understand how FFH's S&P hedge works:

 

For the S&P 500 hedge, they did it at 1050 with $428M and it's $115M mark-to-market on the book after the index has gone up more than 50% from their hedge.  Does that mean, if the index goes to 2000, then the entire $428M will be wiped out, right?  But it also shows their hedge is at a loss of more than $1 billion.  Does that mean they stand to lose $1 billion if they close the hedge now?

 

Thanks

 

They appear to be over hedged unless things have changed because their hedge was a total return swap.  That is the equivalent of shorting the market at the time they put on the hedge of 100% of their equity portfolio.  Without adjustment, their losses on the hedge go up exponentially as the market rises.  Their portfolio has lagged the market.  Therefore, they appear to be over hedged.  This would explain the magnitude of the recent loss on their hedge.

 

This is not necessarily a bad thing if the market tanks as Prem has hinted that he expects it to do probably before the middle of the year.

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Page 18 says: "We have invested a total of $454.1 million in these CPI-linked contracts which are carried on our books at $115.8

million, a 74.5% decline from our cost. The remaining average term on these contracts is 7.7 years."

 

Does that mean if FFH closes the hedge today, it will lose (454.1 - 115.8)M?  Or is it $1,006 million loss?

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