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Letters & Theses

Prem Watsa · Markel Financial Holdings

To our Shareholders

Prem Watsa's first letter as chairman, to the shareholders of Markel Financial Holdings (1985)

Covers FY1985Published 1986Shareholder letter · Investment

What to notice

  1. 1

    Watsa says the main reason for investing was the Markel family itself, crediting Steven and Tony Markel with keeping a struggling company alive through the previous two years.

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Why read it

The founding statement of a company that grew into Fairfax: a value investing philosophy and a 20% return target, set out in a single page before any track record existed.

About this letter

Prem Watsa wrote this one-page letter to the shareholders of Markel Financial Holdings, a small Canadian insurer, as its new chairman, reviewing 1985. In September of that year he and Steven Markel completed a private placement that raised $9.1 million through convertible preferred stock and warrants, and The Sixty-Two Investment Company, a holding company of Canadian businessmen, Confederation Life and Watsa himself, took voting control. The company was renamed Fairfax Financial Holdings in 1987.

The letter explains why the new owners invested, introduces the executive who would run day-to-day operations, and sets out an investment philosophy taken from Benjamin Graham and Warren Buffett. It closes with how shareholders should judge the company: by after-tax return on common equity, with a long-term target of 20%. The file is a re-upload on Fairfax's own site; the letter itself is undated and was published with the 1985 annual report.

Companies

  • Markel Financial Holdings

Themes

  • investing philosophy
  • capital allocation
  • long term thinking
  • leadership

L3VLUP does not host this document. It belongs to Markel Financial Holdings; the notes above are L3VLUP’s reading of it.