History
Fairfax Financial Holdings Ltd. (“Fairfax”) was incorporated under the Canada Corporations Act on March 13, 1951 and continued under the Canada Business Corporations Act in 1976. Fairfax's original name was Markel Service of Canada Ltd., The name was subsequently changed to Markel Financial Holdings Ltd. and, in May 1987, to their current name of Fairfax Financial Holdings Ltd.
Fairfax is led by Chairman and CEO Prem Watsa. Watsa controls nearly half of Fairfax; his value-oriented investing strategies have been compared to those of Warren Buffett. Fairfax is similar to Leucadia National Corporation (NYSE:LUK) and Markel Corp (NYSE:MKL). Leucadia and Markel are also value-oriented firms that follow, to varying degrees, the principles outlined by Benjamin Graham and David Dodd in their texts Security Analysis and The Intelligent Investor.
Fairfax Financial's investment team at "Hamblin Watsa Investment Council" (HWIC), an affiliate of Fairfax has achieved similar outstanding long term results. From 1985 to the end of 2010, Fairfax Financial had a compound growth rate of approximately 25% in book value per share (per year), it's about 243 times what Fairfax began with in 1985.
V. Prem Watsa was born in 1950 in Hyderabad, India. Watsa eventually trained to be a chemical engineer. He graduated from the Indian Institute of Technology Madras in 1971/1972 with a bachelor's degree in Chemical Engineering. Watsa changed his path in 1972, however, moving to London, Ontario, where his older brother resided. Watsa's dad figured prospects were limited in India, so he told him that he, too, should go to Canada. Thereafter Watsa enrolled in the MBA program at the University of Western Ontario and obtained his Master Degree in Business Administration.
Prem Watsa's professional career began in 1974 when he joined Confederation Life Insurance Co. in Toronto, where he quickly moved from his position as an investment and research analyst to one of a stock portfolio manager for pension clients. His first boss at Confed, John Watson, handed him Benjamin Graham's The Intelligent Investor, the classic book of value investing. Watsa was a Vice President of Confederation Life Investment Counsel from 1974 to 1983.
In 1983, with almost ten years of experience under his belt, Watsa signed on with GW Asset Management (Gardiner Watson), a start-up asset management firm in Toronto. He served as Vice President of GW Asset Management from 1983 to 1984. At Gardiner Watson, Watsa met the talented Francis Chou in 1984.
Chou was also born in India and immigrated to Canada in 1976 with only $200 in his pocket. Success and a tidy personal fortune have come to Francis Chou through a remarkable Forrest Gump (character) type of odyssey. Initially, Francis worked as a telephone repair man and technician for seven years at Bell Canada. In the late 1970s, Chou became interested, as a hobby, in investing and discovered Ben Graham and his book Security Analysis, as well as the methodology of Warren Buffett. In July 1981, Francis Chou, who had only his a high school diploma under his belt, set up an investment club with seven co-workers and $51,000 in capital. By 1986, it had grown to about $1.7 million when the original investment club was converted to a mutual fund, Chou Associates. Chou left Bell Canada in 1984 and became a retail analyst at GW Asset Management (after 18 months at GW, Chou joined Prem Watsa at Fairfax Financial as one of its original investors).
In 1984, Prem Watsa left GW Asset Management to found his own asset management firm, Hamblin Watsa Investment Counsel Ltd. (now fully owned by Fairfax) together with his former boss from Confed, Tony Hamblin. Tony was the Chief Investment Officer at Confed. The five founding partners were: Tony Hamblin, Prem Watsa, Roger Lace, Brian Bradstreet and Frances Burke. All former colleagues from Confed are still with him today at HWIC. Francis Chou is an associate at Hamblin Watsa. In terms of results of long-term investments of funds of clients, his company ranked in the top 10% across Canada.
In 1985, Prem Watsa took control of Markel Financial, a Canadian-based specialist in trucking insurance. The company was controlled by the Virginia-based Markel family. The company was almost bankrupt, but Watsa figured it just needed a capital injection. Watsa hit it off with Steven Markel, who is still a friend. In May 1987, he re-organized Markel Financial Holdings Limited and renamed it Fairfax Financial Holdings Limited (FAIRFAX: short for "fair, friendly acquisitions"). Prem Watsa has served as Chairman and Chief Executive Officer of Fairfax Financial Holdings Limited (formerly Markel Financial Holdings) since 1985 and as Vice President of Hamblin Watsa Investment Counsel Ltd. (HWIC) since 1985. He is also the Chairman of Odyssey Re Holdings Corp's (ORH) board of directors. Mr. Watsa, directly, and indirectly through 1109519 Ontario Limited, The Sixty Two Investment Company Limited and 810679 Ontario Ltd., owns the controlling equity voting interest of Fairfax Financial Holdings Limited("Fairfax"). He owns roughly 10% of Fairfax, which accounts for 99% of his personal wealth. His 10-for-1 multiple voting shares give him just over 50% ownership. The guiding principles of Fairfax are still intact. Honesty and integrity are essential in all relationships and will never be compromised. They never lost a President or Fairfax officer: Sir John Templeton had the biggest influence in Watsa's life, as both a friend and business adviser. Watsa visited him at least once a year at his home in the Bahamas. Sir John was a Fairfax Financial shareholder for a long time.
Mr. Prem Watsa is a Chartered Financial Analyst, a graduate of the Indian Institute of Technology with a degree in Chemical Engineering and a holder of an MBA from the Richard Ivey School of Business of the University of Western Ontario. He is a member of the Board of Trustees of the Hospital for Children, a member of the Advisory Board for the Richard Ivey School of Business, a member of the Board of Directors of the Royal Ontario Museum Foundation and as well as Chairman of the Investment Committee of St. Paul’s Anglican Church.
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