Fairfax 2020

[StubbleJumper]

...I hadn't seen the article from Insurance Journal, so that is interesting in particular.  A couple of the more elaborate industry level loss estimates gives a bound for Zenith.  It looks like perhaps 16 loss points, before reinsurance and government funding, might be the reasonable estimate, with a bound of perhaps 50 loss points.  So, for an outfit like Zenith that writes $750m of premium, that would be maybe ~$120m before reinsurance and government funding, but possibly as much as $375m .  As you said, it's probably not an existential question, but it's curious that no provision was taken in the first quarter.
SJ

Relevant follow-up about potential costs (workers comp in California) which is important for Zenith. The ongoing development (not in the sense of recognized reserve development but in the sense of the social inflation threat) is definitely positive. Absent future adverse legislation, costs appear more and more manageable. Even if there is unusual flexibility to submit claims, Zenith will have to opportunity to rebut the claims and influence case law. It appears that Zenith will be able to report reasonable estimates in the coming quarters.
https://www.wcirb.com/sites/default/files/documents/rb-covid19-cost_impact_of_governor_executive_order_0.pdf

Thank-you for sharing that document.  The document was a nice walk through on how the costs can rapidly accumulate.  So in California, they are estimating a mid-point of 7 loss points and a bound of 10 or 11 points, and that's before any government programming or reinsurance.  If that applied across the US, that would be no problem at all for Zenith.

Beyond that, on a personal level, I am surprised at how small the indemnity is for a health care worker fatality.  Only $400k each and that includes medical costs as well as 5 or 10 years of economic support to surviving spouses and children?  The bulk of the workers dying must be personal support workers who don't earn so much?  I think I trotted out an assumption of about 5X as large, but admittedly, I just pulled that out of my ass because I know so little about WC.


SJ

[bearprowler6]

https://www.torstar.com/images/Torstar_press_release_-_May_26_2020.pdf

Paul Rivett comes out of “retirement”!

Paul Rivett joins Jordan Bitove in taking Torstar private at $0.63 per share or approx $52 million in total.

Fairfax Financial fully supports the take private transaction and will vote its 28.9 million class B Torstar shares in favour of the transaction. Fairfax will realize proceeds of $18.2 million on the sale of its shares.

So let me get this straight....Rivett retires from Fairfax 3 months ago in order to spend time with his family and now comes out of retirement 3 months later in order to take Torstar private which results in a massive realized loss for Fairfax on its Torstar investment?

How massive a loss? Well Fairfax acquired its 28.9 million Torstar Class B shares over several years including in the following transactions:

-   Nov 6/17 ---- 9.4 million shares @ $1.25 per share
-   Aug 25/16 --- 2.6 million shares @ $1.40 per share
-   June 3/16 --- 939,400 shares @ $1.77 per share
-   Mar 14/14 --- 2.4 million shares @ $5.35 per share
-       Earlier purchases were done at much higher per share values

BTW at March 31, 2020 Torstar had more than $78 million in cash on its books and no debt!

Thoughts or comments?

[Cigarbutt]

...
https://www.wcirb.com/sites/default/files/documents/rb-covid19-cost_impact_of_governor_executive_order_0.pdf
...

...
Beyond that, on a personal level, I am surprised at how small the indemnity is for a health care worker fatality.  Only $400k each and that includes medical costs as well as 5 or 10 years of economic support to surviving spouses and children?  The bulk of the workers dying must be personal support workers who don't earn so much?  I think I trotted out an assumption of about 5X as large, but admittedly, I just pulled that out of my ass because I know so little about WC.
SJ

This is a result partly from the compromise reached whereas the employers will not likely encounter tort litigation for the large majority of deaths (at least that was the case before CV) and the employees' survivors will receive funds relatively automatically corresponding, in substance, to the economic losses (varies across jurisdictions). For CV, there is a risk that the employer is considered or found 'negligent' versus Covid mortality (with the potential for 'nuclear' verdicts) and this would likely bypass the insurance intermediate such as Zenith. The indemnity to dependents is fixed as a percentage of salary (often two-thirds) and there is often a cap (absolute amount or duration) that may be related to the 'ability' to work for the surviving spouse and children no longer qualify for benefits when they reach adulthood (remember the age group of the typical CV death). Also, the indemnity owed by the insurance carrier may be lowered by corresponding amounts that may result from Medicare rules (surviving spouse). So there are a lot of mitigating factors.

An interesting spill-over effect though are the additional costs that employers will accrue (to eventually be passed on the customer) when prevention measures will be applied (equipment and protocols) in order to prevent workers from getting sick when businesses reopen (think restaurants, hospitality, healthcare etc). If i were part of Zenith, i would make sure that future coverage will be conditional on firms following state regulations being presently drafted for going back to work protocols. A lot of potential grey areas and this will not help productivity of the services sector..

[StubbleJumper]

https://www.torstar.com/images/Torstar_press_release_-_May_26_2020.pdf

Paul Rivett comes out of “retirement”!

Paul Rivett joins Jordan Bitove in taking Torstar private at $0.63 per share or approx $52 million in total.

Fairfax Financial fully supports the take private transaction and will vote its 28.9 million class B Torstar shares in favour of the transaction. Fairfax will realize proceeds of $18.2 million on the sale of its shares.

So let me get this straight....Rivett retires from Fairfax 3 months ago in order to spend time with his family and now comes out of retirement 3 months later in order to take Torstar private which results in a massive realized loss for Fairfax on its Torstar investment?

How massive a loss? Well Fairfax acquired its 28.9 million Torstar Class B shares over several years including in the following transactions:

-   Nov 6/17 ---- 9.4 million shares @ $1.25 per share
-   Aug 25/16 --- 2.6 million shares @ $1.40 per share
-   June 3/16 --- 939,400 shares @ $1.77 per share
-   Mar 14/14 --- 2.4 million shares @ $5.35 per share
-       Earlier purchases were done at much higher per share values

BTW at March 31, 2020 Torstar had more than $78 million in cash on its books and no debt!

Thoughts or comments?

You hadn't already mentally written this off?  If FFH were to hold this for another 5 or 10 years, what do you figure would be their cashflows from the investment?  Approximately zero?  At least with this arrangement, FFH gets $18m and a tax carry-forward and they can focus on something else.  Maybe they'll also be able to recuperate a bit of capital from Resolute and Toys too?

Past decisions have been regrettable, but moving on isn't necessarily a bad thing.


SJ

[Parsad]

https://www.torstar.com/images/Torstar_press_release_-_May_26_2020.pdf

Paul Rivett comes out of “retirement”!

Paul Rivett joins Jordan Bitove in taking Torstar private at $0.63 per share or approx $52 million in total.

Fairfax Financial fully supports the take private transaction and will vote its 28.9 million class B Torstar shares in favour of the transaction. Fairfax will realize proceeds of $18.2 million on the sale of its shares.

So let me get this straight....Rivett retires from Fairfax 3 months ago in order to spend time with his family and now comes out of retirement 3 months later in order to take Torstar private which results in a massive realized loss for Fairfax on its Torstar investment?

How massive a loss? Well Fairfax acquired its 28.9 million Torstar Class B shares over several years including in the following transactions:

-   Nov 6/17 ---- 9.4 million shares @ $1.25 per share
-   Aug 25/16 --- 2.6 million shares @ $1.40 per share
-   June 3/16 --- 939,400 shares @ $1.77 per share
-   Mar 14/14 --- 2.4 million shares @ $5.35 per share
-       Earlier purchases were done at much higher per share values

BTW at March 31, 2020 Torstar had more than $78 million in cash on its books and no debt!

Thoughts or comments?

Interesting...very interesting!  Congratulations to Paul.  Cheers!

[Cevian]

https://www.torstar.com/images/Torstar_press_release_-_May_26_2020.pdf

Paul Rivett comes out of “retirement”!

Paul Rivett joins Jordan Bitove in taking Torstar private at $0.63 per share or approx $52 million in total.

Fairfax Financial fully supports the take private transaction and will vote its 28.9 million class B Torstar shares in favour of the transaction. Fairfax will realize proceeds of $18.2 million on the sale of its shares.

So let me get this straight....Rivett retires from Fairfax 3 months ago in order to spend time with his family and now comes out of retirement 3 months later in order to take Torstar private which results in a massive realized loss for Fairfax on its Torstar investment?

How massive a loss? Well Fairfax acquired its 28.9 million Torstar Class B shares over several years including in the following transactions:

-   Nov 6/17 ---- 9.4 million shares @ $1.25 per share
-   Aug 25/16 --- 2.6 million shares @ $1.40 per share
-   June 3/16 --- 939,400 shares @ $1.77 per share
-   Mar 14/14 --- 2.4 million shares @ $5.35 per share
-       Earlier purchases were done at much higher per share values

BTW at March 31, 2020 Torstar had more than $78 million in cash on its books and no debt!

Thoughts or comments?

Optics is not good on this one. I don't like it. In Feb 2020 Prem commented, “Paul told me recently that for family reasons, he wanted to retire as President of Fairfax. It was with great sadness that I accepted his decision".

I've been a big proponent of Prem and hold a lot of shares. Going forward, I'll have to approach any such comments with greater skepticism.

[bearprowler6]

https://www.torstar.com/images/Torstar_press_release_-_May_26_2020.pdf

Paul Rivett comes out of “retirement”!

Paul Rivett joins Jordan Bitove in taking Torstar private at $0.63 per share or approx $52 million in total.

Fairfax Financial fully supports the take private transaction and will vote its 28.9 million class B Torstar shares in favour of the transaction. Fairfax will realize proceeds of $18.2 million on the sale of its shares.

So let me get this straight....Rivett retires from Fairfax 3 months ago in order to spend time with his family and now comes out of retirement 3 months later in order to take Torstar private which results in a massive realized loss for Fairfax on its Torstar investment?

How massive a loss? Well Fairfax acquired its 28.9 million Torstar Class B shares over several years including in the following transactions:

-   Nov 6/17 ---- 9.4 million shares @ $1.25 per share
-   Aug 25/16 --- 2.6 million shares @ $1.40 per share
-   June 3/16 --- 939,400 shares @ $1.77 per share
-   Mar 14/14 --- 2.4 million shares @ $5.35 per share
-       Earlier purchases were done at much higher per share values

BTW at March 31, 2020 Torstar had more than $78 million in cash on its books and no debt!

Thoughts or comments?

Optics is not good on this one. I don't like it. In Feb 2020 Prem commented, “Paul told me recently that for family reasons, he wanted to retire as President of Fairfax. It was with great sadness that I accepted his decision".

I've been a big proponent of Prem and hold a lot of shares. Going forward, I'll have to approach any such comments with greater skepticism.

Yes optics are terrible.....moving on is not a bad thing...but getting robbed by a former executive of the company who was apparently in retirement is quite something else.

Why the hell would Fairfax agree to a buyout of Torstar at $0.63....the cash balance (and no debt) alone is worth more.

The rest of the what Torstar owns....newspapers, several media properties (Torstar paid $190 million for their investment in Vertical Scope only 4 years ago and own 15% of Blue Ant Media etc) are worth considerable more than zero.

Fairfax shareholders (and Torstar shareholders but who cares about them) should be outraged....but all we have here is largely silence from Fairfax shareholders....

I agree with Sanjeev on this one.....good for Paul Rivett....but this should not be allowed to happen....

As for the tax loss carryforwards this sale will create for Fairfax....these are only of value if you have investment gains to offset them which is not something that has been in abundance at Fairfax recently.

BP6

[cwericb]

“Paul Rivett joins Jordan Bitove in taking Torstar private at $0.63 per share or approx $52 million in total.”

“BTW at March 31, 2020 Torstar had more than $78 million in cash on its books and no debt!”

Given that we have been mourning the loss of Paul Rivett from Fairfax due to family reasons and now this, in what way does this pass the smell test?

Just wondering what I am missing and why this is worthy of congratulations?

[bearprowler6]

“Paul Rivett joins Jordan Bitove in taking Torstar private at $0.63 per share or approx $52 million in total.”

“BTW at March 31, 2020 Torstar had more than $78 million in cash on its books and no debt!”

Given that we have been mourning the loss of Paul Rivett from Fairfax due to family reasons and now this, in what way does this pass the smell test?

Just wondering what I am missing and why this is worthy of congratulations?

I never bought into the retirement story for Rivett and stated as such on here numerous times over the last several months. I hate to be proven right.....

The congratulations for Rivett is simply because he has picked Prems pocket on his way out the door. If this sale goes through at $0.63 per share than it will go down as one of the greatest corporate deals of all time....from Rivetts perspective alone.

I am outraged....and other Fairfax shareholders should be as well...Fairfax holds more than 40% of the class B shares of Torstar. They have huge input into any takeover of the company. A takeover of Torstar does not occur unless Fairfax agrees. This deal should not go through at $0.63 per share. Wake up Prem!

Something is very very wrong at Fairfax....this is just another example....

[cwericb]

Once again, a new application of the "Fair and Friendly" motto of Fairfax.