|Shares Out. (in M):||28||P/E||0||0|
|Market Cap (in $M):||17,249||P/FCF||0||0|
|Net Debt (in $M):||8,840||EBIT||2,225||1,832|
Despite trading at a premium to Book Value, Fairfax Financial Holdings Limited (TSX:FFH) trades at up to a 25% discount to intrinsic value (shares are worth up to $630 per share) through a sum of its parts (SOTP) analysis (all values in USD).
FFH is composed of a range of businesses across insurance, reinsurance, restaurants, retail, financial services, industrial and media with no industry limitation. Over the past 32 years through 2017, management has compounded Book Value Per Share at 19.5% per year and Share Price at 18.4% per year.
There are 5 primary components to the SOTP analysis, each of which are discussed below: (1) Insurance and Reinsurance, (2) Affiliates, (3) Associates, (4) Fairfax India, Fairfax Africa, and Thomas Cook India and (5) Cash and Investments, Debt and Preferred Stock.
(1) Insurance and Reinsurance businesses have a fair value range of $11-14B based on a P/B multiple range of 0.9x - 1.1x based on comparables (including Markel Corporation, Berkshire Hathaway, Inc., Alleghany Corporation), where the primary businesses include Northbridge, OdysseyRe, Crum & Forster, Zenith, Brit, Allied World, Fairfax Asia, Subsidiaries and Run-off.
Northbridge is one of the largest commercial property and casualty insurers in Canada based on gross premiums written. OdysseyRe underwrites treaty and facultative insurance as well as specialty insurance globally. Crum & Forster is a national commercial property and casualty insurance company in the US writing a broad range of commercial, primarily specialty, coverages. Zenith is primarily engaged in the workers’ compensation insurance business in the US. Brit is a market-leading global Lloyd’s of London specialty insurer and reinsurer. Allied World is a global provider of property, casualty and specialty insurance and reinsurance solutions. Fairfax Asia is composed of insurance businesses across Asia in all classes of general insurance. The subsidiaries include global insurance and reinsurance companies across emerging and developed markets.
With Fairfax's underwriting history, float has grown by an annualized 10% from 2013 to 2017 through organic growth and M&A activity. The insurance and reinsurance businesses maintain strong performance despite 2017 catastrophe losses. FFH possesses an attractive ROE given its disciplined underwriting, investment discipline and 1.9x Float/Book.