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FFH Q2 report posted


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Key points...

During the first six months of 2009, shareholders’ equity at June 30, 2009 increased by

$644.4 to $5,613.2 from $4,968.8 at December 31, 2008. Common shareholders’ equity at June 30, 2009 was $5,510.7 or $315.91 per basic share (excluding the unrecorded $340.1 excess of fair value over the carrying value of investments carried at equity) compared to $278.28 per basic share (excluding the unrecorded $356.0 excess of fair value over the carrying value of investments carried at equity) at the end of 2008, representing an increase per basic share in the first six months of 2009 of 13.5% (without adjustment for the $8.00 per common share dividend paid in the first quarter of 2009, or 16.4% adjusted to include that dividend). During the first six months of 2009, the number of basic shares decreased primarily as a result of the company’s repurchase of 28,700 subordinate voting shares. At June 30, 2009 there were 17,443,784 common shares effectively outstanding.

 

 

Major changes to portfolio investments in the first six months of 2009 included a net increase of $1.6 billion in bonds, a net decrease in cash and short term investments (principally U.S. Treasury securities) of $2.2 billion and a net increase of $0.8 billion in common stocks. The unrecorded excess of fair value over the carrying value of investments carried at equity was $340.1 at June 30, 2009 ($356.0 at December 31, 2008).

 

Holding company cash, short term investments and marketable securities at June 30, 2009 totalled $880.1

 

    During the first six months of 2009 OdysseyRe purchased on the open market approximately 1.2 million of its common shares pursuant to its

previously announced common share repurchase programme, increasing the company’s ownership of OdysseyRe to 71.9% as at June 30, 2009.

 

 

    As of June 30, 2009, the company owned $5.81 billion notional amount of credit default swaps with an average term to maturity of 2.9 years,an original cost of $114.8 and a fair value of $158.4.

 

      During the second quarter of 2009, the company sold $140.3 (2008 – $855.0) notional amount of credit default swaps for proceeds of $8.6

(2008 – $190.0) and recorded net losses on sale of $0.3 (2008 – net gains of $22.8) and net mark-to-market losses of $81.7 (2008 – $7.0). During the

first six months of 2009, the company sold $3.04 billion (2008 – $4.69 billion) notional amount of credit default swaps for proceeds of $231.6

(2008 – $1,075.0) and recorded net gains on sale of $46.2 (2009 – $317.0) and net mark-to-market losses of $71.8 (2008 – gains of $384.0). Sales of credit default swap contracts during the first six months of 2009 and 2008 caused the company to reverse any previously recorded unrealized market value changes since the inception of the contract and to record the actual amount of the final cash settlement through net gains (losses) on investments in the consolidated statements of net earnings.

 

                                                                                                                                                  June 30,  December 31,

                                                                                                                                                    2009        2008

Holding company cash, short term investments and marketable securities, net of short sale and

  derivative obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      . . . . . . .  862.7    1,555.0

Holding company debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        . . . . . . .  858.3      869.6

Subsidiary debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    . . . . . . .  899.9      910.2

Other long term obligations – holding company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                    . . . . . . .  176.1      187.7

Total debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,934.3    1,967.5

Net debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,071.6      412.5

Common shareholders’ equity . . . . . . . . .            . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,510.7    4,866.3

Preferred equity . . . . . . . . . . . . . . . . . . .  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  102.5      102.5

Non-controlling interests . . . . . . . . . . . . .      . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,026.1    1,382.8

Total equity and non-controlling interests.              . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,639.3    6,351.6

                                                                                                                                                      16.1%        6.5%

Net debt/total equity and non-controlling interests                  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Net debt/net total capital(1) . . . . . . . . . . . . . . . . .      . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    13.9%        6.1%

Total debt/total capital(2) . . . . . . . . . . . . . . . . . . .    . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    22.6%      23.7%

Interest coverage(3) . . . . . . . . . . . . . . . . . . . . . . .  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      5.9x      16.4 x

 

 

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"During the first six months of 2009 OdysseyRe purchased on the open market approximately 1.2 million of its common shares pursuant to its

previously announced common share repurchase programme, increasing the company’s ownership of OdysseyRe to 71.9% as at June 30, 2009."

 

Si se Puede!

 

 

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Given the BV @ 6/30, and given the FV adjustments for equity holdings such as ICICI, with the adjustments for market performance of stocks since 6/30 my estimate of BV today is $350.

 

 

What does this "fair value" of ICICI mean?  A or B?

A:  Is it what they believe the stock would trade for in today's market given present market valuations?

B:  Is it like the "FAIR" value they paid of 1.3x for NB?

 

 

If B, then I fear that you might as well count all of their common stocks at "FAIR" value, which probably puts BVPS well over $400.  But that's kind of like putting the cart before the horse.

 

If A, then it's perfectly fine to count it towards BV.

 

 

 

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Given the BV @ 6/30, and given the FV adjustments for equity holdings such as ICICI, with the adjustments for market performance of stocks since 6/30 my estimate of BV today is $350.

 

 

What does this "fair value" of ICICI mean?  A or B?

A:  Is it what they believe the stock would trade for in today's market given present market valuations?

B:  Is it like the "FAIR" value they paid of 1.3x for NB?

 

 

If B, then I fear that you might as well count all of their common stocks at "FAIR" value, which probably puts BVPS well over $400.  But that's kind of like putting the cart before the horse.

 

If A, then it's perfectly fine to count it towards BV.

 

 

 

 

Fair value per fas 157 - the price at which it would sell for today, in todays market.  For most traded securities, fair value means current market price.  If you own more than 20%, it means cost or book value, adjusted for your proportionate ownership.

 

Its carried on their books as an equity investment for accounting purposes.  This means it is not marketed to market value.  Given the high growth in india, it is worth significantly more than this if they were to sell it today.

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Given the BV @ 6/30, and given the FV adjustments for equity holdings such as ICICI, with the adjustments for market performance of stocks since 6/30 my estimate of BV today is $350.

 

 

What does this "fair value" of ICICI mean?  A or B?

A:  Is it what they believe the stock would trade for in today's market given present market valuations?

B:  Is it like the "FAIR" value they paid of 1.3x for NB?

 

 

If B, then I fear that you might as well count all of their common stocks at "FAIR" value, which probably puts BVPS well over $400.  But that's kind of like putting the cart before the horse.

 

If A, then it's perfectly fine to count it towards BV.

 

 

 

 

Fair value per fas 157 - the price at which it would sell for today, in todays market.  For most traded securities, fair value means current market price.  If you own more than 20%, it means cost or book value, adjusted for your proportionate ownership.

 

Its carried on their books as an equity investment for accounting purposes.  This means it is not marketed to market value.  Given the high growth in india, it is worth significantly more than this if they were to sell it today.

 

 

That's what I was hoping for.  Thanks.

 

At today's close of $290 it's still valued at 82.8% of estimated present book per your estimate.

 

 

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Very happy with the book value number! They certainly did not disappoint this time around and did beat the majority of expectations that I have seen.

 

I hope that Prem will provide some kind of color in the conference call tomorrow as to what is book value currently. This was a great piece of information to have with the 1st quarter report. Investments value is the most volatile item within Fairfax and one that greatly matters.

 

I think that the table is set for the buyout of Odyssey Re. I mean what other justification could there be for Fairfax to not buy back at ton of shares when the stock went down to the $250 level? $250 divided by $316 equals 0.79, $40 divided by $52 equals 0.77. Very similar undervaluation relative to book and much more agressive repurchasing at ORH with 1.2 M in the quarter + 532,000 shares in July!

 

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I thought this thing was a "zero"?  How could the greatest shortseller in history...the man who discovered the Enron fraud...with an uncompromising "negative correlation" to the major indices...be so wrong!  Phhpppphtttt!  I'll leave the humility to Prem, because he's a far better man than me, but Chanos can kiss my brown a**!  I know Jo Ann would have loved this post.  ;D  Cheers!

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I thought this thing was a "zero"?  How could the greatest shortseller in history...the man who discovered the Enron fraud...with an uncompromising "negative correlation" to the major indices...be so wrong!  Phhpppphtttt!  I'll leave the humility to Prem, because he's a far better man than me, but Chanos can kiss my brown a**!  I know Jo Ann would have loved this post.   ;D  Cheers!

 

 

I invested in Fairfax and it has since added a zero to my portfolio.  An additional comma was needed to accomodate it.

 

Is that what people mean when they say it is a zero?  I am looking forward to it being a double zero.

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Given the BV @ 6/30, and given the FV adjustments for equity holdings such as ICICI, with the adjustments for market performance of stocks since 6/30 my estimate of BV today is $350.

as an aside, BV@Q2 was $368 under US GAAP - mainly because non-controlling interests are included in total equity $6,442.

actually, I was a little surprised to learn how misleading the US GAAP can be :o

 

cheers

 

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