Author Topic: Fairfax 2020  (Read 96641 times)

StubbleJumper

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Re: Fairfax 2020
« Reply #580 on: September 14, 2020, 08:43:27 AM »
Fires in California cost FFH $233m in 2018.  Anybody got a wild-ass-guess for 2020?



SJ


Viking

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Re: Fairfax 2020
« Reply #581 on: September 14, 2020, 10:08:16 AM »
Tomorrow I think the courts in the UK are supposed to come down with a ruling on contract language and Covid which will impact Brit.

Lots of near term headwinds for the insurance industry:
- Covid
- recession
- active hurricane season
- West Coast forest fires
- very low bond yields
- reserve releases shrinking
- reinsurance pricing starting to harden

I like Fairfax at current prices. But the news flow into Q3 results will likely be pretty bad. The good news is the industry is in hard market which started last year could last for some time. The insurance side of Fairfax has been holding up reasonably well which is encouraging.

Viking

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Re: Fairfax 2020
« Reply #582 on: September 14, 2020, 10:17:50 AM »
Now that the Blackberry deal has closed is it not a solid win for FFH shareholders? The key, of course, is how Blackberry performs moving forward. The timing is interesting (why not wait until November)?

Fairfax has reduced its exposure to Blackberry significantly ($330,000 Debenture versus $500,000) but is positioned to own 16.5 versus 15.7% of shares outstanding.

I am surprised Blackberry has not been taken out by a larger player given all the hype we are seeing in their business segments. Fairfax is now positioned very well should this happen. On the Q2 call Prem talked about continuing to monetize assets... this one looks like a strong candidate to me. Checks off lots of boxes. Sell asset at premium valuation. Lock in nice profit (where it is currently carried on the books). Raise significant amount of cash insurance subs can use to write more business. Significantly de-risk equity and total investment portfolio. Close the book on the whole RIM/Blackberry drama.

New deal: “Fairfax now beneficially owns, and exercises control or direction over, the Purchased Debentures, representing 55,000,000 Common Shares assuming full conversion. Together with Common Shares already owned by Fairfax and its subsidiaries and assuming full conversion of the Purchased Debentures, Fairfax would beneficially own 101,724,700 Common Shares representing, assuming all other Debentures are converted, approximately 16.5% of the total Common Shares outstanding“

Old deal: “Together with Common Shares already owned by Fairfax and its subsidiaries and assuming full conversion of the Fairfax Redeemed Debentures, Fairfax would have beneficially owned 96,724,700 Common Shares representing, assuming all other Redeemed Debentures were converted, approximately 15.7% of the total Common Shares outstanding.”

—————————-
Fairfax Announces Acquisition of 1.75% Convertible Debentures of BlackBerry Limited After Redemption of Existing Convertible Debentures

TORONTO, Sept. 02, 2020 (GLOBE NEWSWIRE) -- Fairfax Financial Holdings Limited (“Fairfax”) (TSX:FFH and FFH.U) announces that it has acquired, through its subsidiaries, ownership and control of $330,000,000 aggregate principal amount of 1.75% unsecured subordinated convertible debentures maturing on November  13,  2023 (the “Debentures”) of BlackBerry Limited (“BlackBerry”) representing  approximately  90%  of  BlackBerry’s  private  placement (the “Private Placement”) of an aggregate principal amount of $365,000,000 of Debentures that closed today.  The Debentures are convertible at the option of the holder into common shares of BlackBerry (“Common Shares”) at a price of $6.00 per Common Share and, therefore, the Debentures purchased by Fairfax’s subsidiaries (the “Purchased Debentures”) are convertible into 55,000,000 Common Shares.

Prior to the redemption thereof by BlackBerry (the “Redemption”), which redemption was completed prior to the Private Placement, Fairfax held, through its subsidiaries, ownership of $500,000,000 aggregate principal amount of 3.75% unsecured subordinated convertible debentures (the “Redeemed Debentures”) of BlackBerry maturing November 13, 2020.  The Redeemed Debentures were convertible at the option of the holder into Common Shares at a price of $10.00 per Common Share and, therefore, the Redeemed Debentures held by Fairfax’s subsidiaries (the “Fairfax Redeemed Debentures”) were convertible into 50,000,000 Common Shares.

https://www.fairfax.ca/news/press-releases/press-release-details/2020/Fairfax-Announces-Acquisition-of-1.75-Convertible-Debentures-of-BlackBerry-Limited-After-Redemption-of-Existing-Convertible-Debentures/default.aspx
« Last Edit: September 14, 2020, 10:49:10 AM by Viking »

Xerxes

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Re: Fairfax 2020
« Reply #583 on: September 14, 2020, 10:52:45 AM »
Welcome back to FFH Viking,

On Blackberry, I think a deeper FFH investment would be akin like watering your weeds. If someone told me this 3 years ago, I would say yes let’s give Chen time. But now BB already had enough time to build a viable business post-h/w and it has not shown much progress.

I am no expert in cyber security but just seeing crowdstrike getting so much traction and BB none, tells me something. I am ok to their position sizing as is.

I hope I am wrong.
 
« Last Edit: September 14, 2020, 10:54:16 AM by Xerxes »

Viking

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Re: Fairfax 2020
« Reply #584 on: September 14, 2020, 12:32:34 PM »
Welcome back to FFH Viking,

On Blackberry, I think a deeper FFH investment would be akin like watering your weeds. If someone told me this 3 years ago, I would say yes let’s give Chen time. But now BB already had enough time to build a viable business post-h/w and it has not shown much progress.

I am no expert in cyber security but just seeing crowdstrike getting so much traction and BB none, tells me something. I am ok to their position sizing as is.

I hope I am wrong.

Xerxes, I am with you... I do not want to see Fairfax growing its exposure to Blackberry (over what they had in the past). So the fact they have shrunk this exposure by US $170 million is a win of sorts. There is the potential for a solid win for Fairfax IF Blackberry is sold. 

nwoodman

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Re: Fairfax 2020
« Reply #585 on: September 14, 2020, 08:20:49 PM »
Tomorrow I think the courts in the UK are supposed to come down with a ruling on contract language and Covid which will impact Brit.

Lots of near term headwinds for the insurance industry:
- Covid
- recession
- active hurricane season
- West Coast forest fires
- very low bond yields
- reserve releases shrinking
- reinsurance pricing starting to harden

I like Fairfax at current prices. But the news flow into Q3 results will likely be pretty bad. The good news is the industry is in hard market which started last year could last for some time. The insurance side of Fairfax has been holding up reasonably well which is encouraging.

UK website for the ruling,  due to be handed down at 10:30am on Tuesday 15 September 2020

https://www.fca.org.uk/firms/business-interruption-insurance#latest-updates

cheers
nwoodman

petec

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Re: Fairfax 2020
« Reply #586 on: September 15, 2020, 12:51:03 AM »
Welcome back to FFH Viking,

On Blackberry, I think a deeper FFH investment would be akin like watering your weeds. If someone told me this 3 years ago, I would say yes let’s give Chen time. But now BB already had enough time to build a viable business post-h/w and it has not shown much progress.

I am no expert in cyber security but just seeing crowdstrike getting so much traction and BB none, tells me something. I am ok to their position sizing as is.

I hope I am wrong.

Do you know why BB have failed to gain traction in security?
FFH MSFT BRK BAM ATCO LNG IHG TFG CGT DC/A

nwoodman

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Re: Fairfax 2020
« Reply #587 on: September 15, 2020, 03:22:29 AM »
Tomorrow I think the courts in the UK are supposed to come down with a ruling on contract language and Covid which will impact Brit.

Lots of near term headwinds for the insurance industry:
- Covid
- recession
- active hurricane season
- West Coast forest fires
- very low bond yields
- reserve releases shrinking
- reinsurance pricing starting to harden

I like Fairfax at current prices. But the news flow into Q3 results will likely be pretty bad. The good news is the industry is in hard market which started last year could last for some time. The insurance side of Fairfax has been holding up reasonably well which is encouraging.

UK website for the ruling,  due to be handed down at 10:30am on Tuesday 15 September 2020

https://www.fca.org.uk/firms/business-interruption-insurance#latest-updates

cheers
nwoodman

The Court found in favour of the arguments advanced for policyholders by the FCA on the majority of the key issues.

Christopher Woolard, Interim Chief Executive of the FCA, commented:

‘We brought the test case in order to resolve the lack of clarity and certainty that existed for many policyholders making business interruption claims and the wider market.  We are pleased that the Court has substantially found in favour of the arguments we presented on the majority of the key issues. Today’s judgment is a significant step in resolving the uncertainty being faced by policyholders. We are grateful to the court for delivering the judgment quickly and the speed with which it was reached reflects well on all parties.

‘Coronavirus is causing substantial loss and distress to businesses and many are under immense financial strain to stay afloat. Our aim throughout this court action has been to get clarity for as wide a range of parties as possible, as quickly as possible and today’s judgment removes a large number of those roadblocks to successful claims, as well as clarifying those that may not be successful.

‘Insurers should reflect on the clarity provided here and, irrespective of any possible appeals, consider the steps they can take now to progress claims of the type that the judgment says should be paid.  They should also communicate directly and quickly with policyholders who have made claims affected by the judgment to explain next steps.

‘If any parties do appeal the judgment, we would expect that to be done in as rapid a manner as possible in line with the agreement that we made with insurers at the start of this process. As we have recognised from the start of this case, thousands of small firms and potentially hundreds of thousands of jobs are relying on this.’

Xerxes

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Re: Fairfax 2020
« Reply #588 on: September 15, 2020, 04:41:25 PM »
Welcome back to FFH Viking,

On Blackberry, I think a deeper FFH investment would be akin like watering your weeds. If someone told me this 3 years ago, I would say yes let’s give Chen time. But now BB already had enough time to build a viable business post-h/w and it has not shown much progress.

I am no expert in cyber security but just seeing crowdstrike getting so much traction and BB none, tells me something. I am ok to their position sizing as is.

I hope I am wrong.

Do you know why BB have failed to gain traction in security?

Hi Petec,
I don't have background in cybersecurity but do listen to BB conference calls and the space.

Last year this time, BB shares plunged some 20% or so. That was on the back on the news that BB has to spend investing in its sales force for the next two quarters, b/c their then-current sales force were what they called "harvesters" and since they bought Cylance they needed "hunters". Ok fine, we need hunters.

Prior to that the narrative was that their purchase of Cylance was a coup, since similar names were trading at large multiples. So that there was a value-in-value sum of the parts Watsasim kind of thing, and we needed to be patient. Ok great, I am patient.

Then Covid-19 happened and their exposure to auto-sector took a beating. Ok fine shit happens but we still need hunters and i still need to remain patient.

But then I was expecting that work-from-home environment would create a tailwind for its cyber-security. Was hoping Cylance would become for BB, what the Cash-App turned out to be for Square. Square's business was hit badly due to their customer segment during the shutdown, but the growth of digital payment app far exceeded their other lagging businesses. Ok fine, perhaps payment space is more prolific than cybersecurity. What do i know, i am an aerospace guy.

But then let's compare to its peers during the Covid era. Cylance has (i think) a run rate of $200 million, growing really fast and contributes say a fifth of Blackberry total. For context, few year ago, Blackberry for the first time exceeded $500 million in revenue in software and services and is very close to get to $800-900 million in sales for the year I think. So, it is a big chunk of its future growth bought at $1.4 billion. But compared that to Crowdstrike that is a $30 billion business and it IPO in June 2019. Nearly doubled on the back of revenue growth north of 80%. (source: Google finance); most recent quarter nearly $200 million. So couple hundred millions shy of a $billion in sales.

https://marketrealist.com/2019/07/why-blackberrys-cylance-acquisition-is-key-for-revenue-growth/

I dont have a problem with a not moving stock price if the underling is improving as i know that the share are just getting cheaper in relative terms, but i question why its fundamental are not growing with a lifting tide that seems to be lifting Crowdstrike just fine.

I did sell half of my BB shares that I bought at $4.5-$6 range few months ago. And start building a position in InterActive Corp. Still have the other half to dispose of that has a cost around $9-$10 CAD. While I trimmed on BB, I did double my FFH position since March, let's say I like to have the exposure more through FFH and its convertibles.

Looks like earning call is on Sept 24:
« Last Edit: September 15, 2020, 04:51:08 PM by Xerxes »

Viking

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Re: Fairfax 2020
« Reply #589 on: September 15, 2020, 05:24:38 PM »
Tomorrow I think the courts in the UK are supposed to come down with a ruling on contract language and Covid which will impact Brit.

Lots of near term headwinds for the insurance industry:
- Covid
- recession
- active hurricane season
- West Coast forest fires
- very low bond yields
- reserve releases shrinking
- reinsurance pricing starting to harden

I like Fairfax at current prices. But the news flow into Q3 results will likely be pretty bad. The good news is the industry is in hard market which started last year could last for some time. The insurance side of Fairfax has been holding up reasonably well which is encouraging.

UK website for the ruling,  due to be handed down at 10:30am on Tuesday 15 September 2020

https://www.fca.org.uk/firms/business-interruption-insurance#latest-updates

cheers
nwoodman

The Court found in favour of the arguments advanced for policyholders by the FCA on the majority of the key issues.

Christopher Woolard, Interim Chief Executive of the FCA, commented:

‘We brought the test case in order to resolve the lack of clarity and certainty that existed for many policyholders making business interruption claims and the wider market.  We are pleased that the Court has substantially found in favour of the arguments we presented on the majority of the key issues. Today’s judgment is a significant step in resolving the uncertainty being faced by policyholders. We are grateful to the court for delivering the judgment quickly and the speed with which it was reached reflects well on all parties.

‘Coronavirus is causing substantial loss and distress to businesses and many are under immense financial strain to stay afloat. Our aim throughout this court action has been to get clarity for as wide a range of parties as possible, as quickly as possible and today’s judgment removes a large number of those roadblocks to successful claims, as well as clarifying those that may not be successful.

‘Insurers should reflect on the clarity provided here and, irrespective of any possible appeals, consider the steps they can take now to progress claims of the type that the judgment says should be paid.  They should also communicate directly and quickly with policyholders who have made claims affected by the judgment to explain next steps.

‘If any parties do appeal the judgment, we would expect that to be done in as rapid a manner as possible in line with the agreement that we made with insurers at the start of this process. As we have recognised from the start of this case, thousands of small firms and potentially hundreds of thousands of jobs are relying on this.’

Thanks for posting :-) Largely as expected i think. We will find out more when companies report Q3 results. But looks like UK payouts will be large.