Q3 2019 Earnings Call
Good morning, and welcome to see this 2019 third quarter results conference call.
I have been please listen only know after the presentation, we'll we'll conduct a question and answer session.
Hi.
Question.
Our one you're filling keypad.
We ask that you limit your questions to one today's conference is being recorded if you have any objections you may disconnect. At this time your host for today's call is called <unk> that would opening remarks from Mr. Derek Hewett Mr.
Yes.
Good morning, and welcome to our call to discuss Fairfax is 2019 third quarter results. This call may include forward looking statements actual results may differ perhaps materially from those contained in such forward looking statements. As a result of a variety of uncertainties and risks factors. The most foreseeable which are set out under risk factors in our base shelf.
Perspective, which has been filed with Canadian Securities regulators and is available on SEDAR I'll now turn the call over to our president Paul or that.
Thank you Doug.
Good morning Fairfax shareholders.
Fairfax is net earnings for the third quarter were 69 million versus 106 million in the third quarter of 2018, which translates to net earnings per share of $2.04 versus $3.34 in 2018.
For the nine months of 2019, our net earnings were 1.33 billion versus 854 million for the first nine months 2018.
Fairfax is book value per share increased to $462.98 at September 32019, compared to $432.46 Decemberthirty one 2008.
An increase of 9.5% adjusted for the 10 dollar dividend in the first quarter.
Our operating companies generated another good quarter with an aggregate combined ratio below 100% with a combined ratio of 97.5% and strong reserves across the group, while producing an underwriting profit of 81 million in the third quarter.
All of our major insurance companies with the exception or Britt generated combined ratio was less than 100% with xena at 87.1% Odyssey group at 97.6% North bridge at 97.5% from an Forrester at 97.9% and Allied world at 96.2%.
Yeah.
Rick generally recognized higher losses relative to net premiums earned in the third quarter and we expect that to reverse in the fourth quarter with risk being closer to its plan of 97% for the year, excluding any major catastrophes.
Allied world's deserves a call out for the 96.2% combined ratio in the quarter Lou and team are hitting stride.
I should also mentioned that Scott Carmilani in his new role as president of distribution and strategic operations at Fairfax is continuing to make good progress growing new business with our companies and building out our data in Fairfax worldwide platforms.
For the third quarter Fairfax is operating income was strong at $280 million versus 250 million in the third quarter of 2018, reflecting primarily higher interest and dividends.
Net losses on investments for the third quarter were 97 million consisting of realized gains of 48 million unrealized losses of 145 million principally from Blackberry.
The realized gains included a gain of 150 million on the sale of 5% of the company's 9.9% equity interest in IC I see a lumbar.
In the fourth quarter, we sold our remaining interest in Iseatz CLM Bard.
Total cash proceeds from the third and fourth quarter sales of ICI lumbar were 729 million in.
In total we invested 347 million to establish ICI lumbar and re we raised 1.64 billion from the sale of Iseatz here lumbar or return of $1.3 billion.
We continue to be very good friends with the teams that IC, CLM, Bard and high CIA bank, and we wish them well in the future.
We've shifted our focus to digit our new digital insurance company in India under the leadership of Kmetko oil, which was just awarded the prestigious general unsure of the year Award in Asia. After only two years of operation.
Now for some key highlights for the third quarter to bring to your attention.
First our companies are continuing to see firming pricing across most lines of business in North America with the exception of workers compensation.
This was demonstrated again in the third quarter as our insurance and reinsurance businesses net written premium increased year over year by 13.7%.
Principal areas of growth Red North Bridge Odyssey group common Forrester and Allied World.
Hi company the change in net premiums written for the third quarter were as follows Odyssey group up 21% Allied World up 18% North bridge up 18% common Forrester up 16%.
Zenith down, 9% and Britt down 3%.
As we have said on prior calls Korea and the team Zenith continue taking the long term view and our prudently letting go of workers compensation business that is inadequately priced.
With Brett they are seeing price increases, but have reduced net premiums written in some low margin business and have purchased increased reinsurance protection.
In total gross premiums written across the group is up 12% in the quarter versus last year and the first nine months are up 13% versus last year.
Growth in total investments are float has followed suit and is now at 41.5 billion versus approximately $39 billion at the beginning of the year.
We have approximately $10 billion invested in short term us treasuries and short term investment grade corporate bonds.
Given the continued strength of the U.S. economy, we feel that is prudent to remain positioned on the shorter end of the treasury curve for the time be.
We continue to be focused on growing interest and dividend income, which was $215 million in this third quarter versus $194 million in the third quarter of 2018.
Hamlin Watts is vigilantly, observing and monitoring global events and economic indicators.
We remain skeptical that the US economy is heading for a recession just yet.
On the contrary, we believe the US economy is growing us job market continues to be from financial conditions remain relatively loose the us consumer is indebted less today than a decade ago in the U.S savings rate is higher did that it higher today than at any time in the last 10 years.
Despite all this the fed is cut rates again this week.
Recent global developments have led to some positive upward momentum and rates.
Phase one trade deal between the us in China, followed by a potential Brexit deal between the UK and you have removed some fear for now and volatility is from the markets.
All this said if we're wrong and a use recession has drawn near we would expect to have plenty of opportunities to take advantage of given our large cash and short duration sovereign holdings at approximately 45% of the portfolio.
Ill now pass the call over to Jennifer Allen, our new Chief Financial Officer for additional financial and accounting details, but before I do let me give you some background on gen.
We have the good fortune Fairfax of having a number of talented young executives in our organization that allow us to recruit internally.
Jennifer Alan pit demise is that group.
While it Fairfax over the last 13 years Jen has worked at various roles on numerous projects with three of our former CFO those.
Dennis previously excelled as our assistant Vice President Finance and global controller, the CFO of Fairfax, India, and the CFO of Fairfax Africa.
During her tenure as the Chief Financial Officer, Fairfax, India Africa. Gen played key roles in many initiatives for these publicly listed companies, including including capital raising mergers and acquisitions negotiating credit facilities liaising with regulators and of course overseeing the accounting team.
Me Shirk has now moved into the CFO role at Fairfax, India, and Fairfax Africa.
We are very thankful to have such a talented experienced and humble executive as Jennifer Allen to take over Fairfax is chief financial officer role and we have every expectation that she will do a tremendous job for our company and our shareholders.
Okay over to you Gen for the first conference call. Thank you Paul before I discuss Fairfax is third quarter results I would like to take the opportunity to first. Thank you. Paul we are kind words to support over these past few months intimate knowledge in say, thank you to the management team at Fairfax all of our operating subsidiaries globally.
A special thanks to the dedicated and talented people and they work with daily at Fairfax their hard work and dedication is unparalleled. So fortunate to have been provided the support through this transition. So thank you to everyone.
Now turning to Fairfax is results for the quarter in the third quarter of 2019, Fairfax reported net earnings of 69 million or $2.04 per share on a fully diluted basis.
Compared to the third quarter of 2018, when we reported net earnings of 106 million or $3.34 per share on a fully diluted basis.
For the first nine months in 2019 Fairfax reported net earnings of 1.3 billion or $46 in 23 cents per share on a fully diluted basis.
Prior to the first nine months of 2018, when we reported net earnings of 854 million or $28.83 per share on a fully diluted basis.
Underwriting profits at our insurance and reinsurance operations in the third quarter of 2019 increased 81 million with a combined ratio of 97.5 compared to underwriting profit of 74 million in a combined ratio of 96.7 in the third quarter of 2018.
Underwriting profit in the first nine months of 2019 decreased to 271 million with a combined ratio at 97.1 compared to underwriting profit up 299 million with a combined ratio of 96.6 in the first nine months of 2018.
Our combined ratio benefited from favorable prior year reserve development in the third quarter and first nine months of 2019.
94 million and 185 million that translated into 2.9, and 2.0 combined ratio points in each of those periods compared to net favorable prior year reserve development of 174 million and 372 million that represented 5.74 0.2 combined ratio points in both.
Its respective periods in 2018.
Look into our operating operating company results, starting with North bridge.
North Bridge is underwriting profit was $8 million in the third quarter and 12 million in the first nine months of 2019 and had combined ratios of 97.5 98.7 in each of those respective periods.
That compared to underwriting profit at 31 million and 16 million in combined ratio was at 89.5.
98.1 in each of those same period in 2018.
North Bridge is underwriting results in the first nine months of 2019 included net favorable prior year reserve development of 32 million.
Representing 3.5 combined ratio point.
Reflecting better than expected loss emergence across all major business lines.
This compared to net favorable prior year reserve development at 37 million and 72 million representing 12.7.
8.6, combined ratio points in the third quarter and first nine months of 2018, reflecting better than expected loss emergence on automobile and casualty business lines.
The underwriting results in the first nine months of 2019 included 10 million of current period cat losses compared to $17 million current period catastrophe losses in the first nine months of 2018, both periods related primarily to storms in Ontario and Quebec.
Canadian dollar term net premiums written by North bridge in the third quarter and first nine months of 19 increased by 19.1% and 16.9% in each of those respective periods, reflecting stock strong retention of renewal business.
Growth in new business and price increases across the group.
Moving to Odyssey Group Odyssey Group reported underwriting profit at 20 million in 88 million with combined ratios at 97.6.
96.3 in the third quarter and first nine months of 2019.
Compared to underwriting profit of $19 million and 134 million on line ratios of 97.5 93.5 in the third quarter and first nine months of 2018.
Period catastrophe losses at 67 million and 135 million, representing 7.9, and 5.7 combined ratio point in the third quarter and first nine months at 2019, both principally related to Hurricane Dorian Entitling sat Fi smaller losses on various catastrophes.
Were lower than the current period catastrophe losses of $77 million and 142 million that represented 10.4 and 6.9 combined ratio points in the third quarter and first nine months at 2018 that principally related to typing gebbie Hurricane Florence type you may and smaller losses.
On various catastrophe.
I see groups combined ratios in the third quarter and first nine months at 2019 also benefited from net favorable prior year reserve development at 46 million and 86 million.
Which represented 5.6 in 3.6 combined ratio points respectively.
That compared to net favorable prior year reserve development of $66 million, and a 152 million, which equated to 8.9 and 7.57 0.4 combined ratio points, respectively. In the third quarter at first nine months of 2018.
At favorable prior year reserve development of both years, principally related to casualty and property catastrophe loss reserves.
Odyssey Group wrote 855 million and 2.5 billion of net premiums in the third quarter and first nine months of 2019 that represented increases of 21.2% the third quarter of 19 and 14.9% in the first nine months of 2019 increase principally reflected higher net.
Premiums written within their us insurance, North America, and the London market Division.
Moving onto chrome and Forster from enforcers underwriting profit improved to 12 million and 36 million in third quarter and first nine months of 2019 with combined ratios of 97.9 97.7 in both those respective periods.
That compared to underwriting profit at $10 million, an 18 million with combined ratios of 98.1 98.8 in the third quarter and first nine months of 2018.
Attritional current period catastrophe losses were $5 million 30 million in third quarter and first nine months of 19, but 1.1 combined ratio point in each of those respective periods.
That was in line with the 2018 third quarter current period catastrophe losses of 5 million.
Lately lower than the 17 million of current period catastrophe losses in the first nine months of 2018.
From Forresters net premiums written increased by 16.4% in the third quarter and 15.1% in the first nine months of 2019.
Primarily reflecting business volume growth in surplus and specialty accident, and health and surety and program lines of business.
Looking to zenith National Zenith National reported underwriting profit in the third quarter and first nine months of 2019.
24 million 92 million with combined ratios of 87.1, and 83.3, which compared to underwriting profits of 41 million 91 million with combined ratios of 80.3.
84.9, each of those respective periods in 2018.
The underwriting profit in the third quarter and first nine months 2019 included 17 million and 75 million or 8.9 of 13.7 combined ratio points.
Net favorable prior year reserve development, which compared to 23 million and 59 million or 11, and 9.9 can be show combined ratio points in the third quarter and first nine months of 2018.
The net favorable prior year reserve development of both years, principally reflected net favorable emergence related to accident years 2013 through 2018.
Zenith Road 152 million and $580 million net premiums in the third quarter and first nine months of 2019, which was lower than the 167 million and the $638 million net premiums and those respective periods in 2018.
The decrease in net premiums written in 19, primarily reflected price decreases.
Looking to breadth Britain third quarter, and first nine months of 2019.
Reported underwriting loss of $16 million and an underwriting profit of 13 million and combined ratios of 104.1 98.9 compared to underwriting losses of $33 million and 15 million with combined ratios of 1.3 and want to 1.3 in each of those same periods in 2018.
Current period catastrophe losses of $40 million and 43 million.
The 10.3, and 3.6 combined ratio points in the third quarter and first nine months of 2019, principally related to hurricane Dorian antitumor, backsides, which were lower than current period catastrophe losses at $66 million and $70 million that represented 16.8 and 6.0.
Combined ratio points in the third quarter first nine months in 2018 that related to types in the JV Hurricane Florence and type mix.
Net favorable prior year reserve development was lower in third quarter and first nine months of 2019 at 8 million and $10 million or 2.1, 0.8, combined ratio point, principally reflecting better than expected claims experienced in various lines of business.
That compared to 19 million in 28 million or 4.8, and 2.4 combined ratio points in the third quarter and first nine months of 2018, principally reflecting better than expected to merchants in the 2017 catastrophe losses in the third quarter and on energy and US property business line in the first nine months.
Bricks net premiums written increased by 2.5% and increased by 1.6% in third quarter and first nine months at 2019, respectively. The decrease in the third quarter, primarily reflected increased use of proportional treaty reinsurance.
And the purchase of increase catastrophe protection.
The increase in the first nine months, primarily reflected growth in their core book of business.
Generated by increased contribution from initiatives launched in recent years and price increases.
That was partially offset by reductions in non core lines of business and increased use of proportional treaty reinsurance and the purchase of increase catastrophe protection.
Moving on to Allied World.
Slide World reported underwriting profit of 23 million in both third quarter and first nine months of 2019.
With combined ratios of 96.2 98.7 in each of the respective periods.
This compared to an underwriting profit of 20 million and $75 million with combined ratios of 96.7 and 95.5 in the same period in 2018.
Clint pig catastrophe losses of 23 million in both the third quarter nine months in 19 represented 3.9 and 1.3 combined ratio points also principally related to hurricane Doreen and types in fact site.
Compared to higher current catastrophe losses of $62 million that represented 10.3, and 3.7 combined ratio points net third quarter and first nine months at 2018. It also related to Tyson and JV hurricane foreign types in maintenance.
Allied world's underwriting profit in the first nine months at 2019 was impacted by 79 million or 4.4 combined ratio point.
Net adverse prior year reserve development, reflecting deterioration in the insurance segment at $47 million Princeton, principally related to North American casualty and the reinsurance segment for $33 million that related to Tyson and JV.
In the third quarter and first nine nine months of 2018 Allied world benefited from $13 million or 2.2 combined ratio points in $28 million or 1.7 combined ratio points, reflecting favorable emergence on the 2017 catastrophe losses.
Allied World contributed $613 million or 2 billion in net premiums written in the third quarter and first nine months of 2019, representing year over year increases of 18.2 and 6.1, respectively.
Relating to high renewal rates and new business growth across the entire organization.
Moving to Fairfax Asia, Fairfax Asia recorded underwriting profit at 2 million and 3 million with combined ratios of 96.9.
97.8 in the third quarter and first nine months of 2019. This was better than the underwriting profit of 1 million and an underwriting loss of 1 million with a combined ratios of 98.5 and 109 100.9 in those same periods in 2018.
Combined ratios in the third quarter and first nine months to 2019 included 8 million and 21 million or 14.6, and 14.4 combined ratio points.
Net favorable prior year reserve development.
Which compared to 6 million and $16 million or 12 points and 11.4 combined ratio points in each of the respective periods.
Of net favorable prior year reserve development in the third quarter and first nine months at 28 team.
The net favorable prior year reserve development of both years, principally related to automobile property in workers' compensation.
Moving on to insurance and reinsurance other segment they produce underwriting profits of 8 million and 4 million with combined ratios of 97.199 0.5 in the third quarter and first nine months of 2019 that compared to underwriting losses of 13 million and 19 million with combined ratios of 104 point.
Seven and 102.2 in those same periods in 2018.
And finally looking to run off.
We reported operating losses of $14 million and 45 million in the third quarter and first nine months at 2019 compared to operating losses of $49 million and $102 million in those same period in 2018.
The improvement in the underwriting loss year over year, principally reflected improvement in the underwriting results and higher investment income.
And now looking at the consolidated results of Fairfax.
The consolidated interest and dividend income increased year over year from 194 million and 583 million in the third quarter and first nine months of 2018 215 million and 672 million in third quarter and first nine months of 2019.
Primarily reflecting higher interest income earned on our increased holdings of high quality corporate bonds.
Short dated us treasury bonds and Canadian government bonds.
That was partially offset by the lower interest income earned on a decrease holdings of our us municipal bonds.
Fairfax recorded a recovery of income taxes of $5 million in the quarter that represented a 6.4 effective income tax rate and a provision for income income taxes of 325 million at an 18.1% effective into income tax rate in the first nine months at 2019.
Since really reflecting the impact of non taxable investment income and the tax differential in income and losses outside of Canada.
Our total debt to total CAC ratio, excluding the non insurance operations.
Increased to 27.1 at September Thirtyth 2019 from 25.0 at December 31, 2018, primarily as a result of the increase holding company debt that was partially offset by our increase in common shareholders' equity.
We ended the third quarter 2019, with an investment portfolio, which included the holding company cash and investments.
40, 41.5 billion that compared to 38.8 billion investment portfolio at December 31, 2018.
And now I'll pass it back over to you Paul.
Thank you very much Jen.
We now look forward to answering your questions. Please give us your name your company name and try to limit your questions to only ones with its fair to all on the call.
Okay units, we are ready for questions.
Thanks.
We'll now begin.
Yes.
The question.
Yes.
Your name and company.
Introduce your question.
Yes.
One moment.
Yes.
First question.
Paul.
Okay.
Your line is now.
Thank you good morning.
Well.
Two questions for you first ones on the.
Investment.
Portfolio, so because with the Q4 18 call you mentioned striving for better investment performance and 2019, and certainly to some extent you've achieved.
More specifically referred to Monetizations and process.
I was wondering if you can kind of got status update on that Monetizations in pro side.
Just a characterization of how far you secure long.
Processes, there's still a lot to potentially do there.
Good question, Paul So we are we're quite far along in the process.
There we've got the whole hamblen watts of team from from right through working with US a number of these things are close to fruition.
A few.
At our more at the earlier stages, but as you as you can imagine we can't give you specifics on it but we're very happy that were close to being able to get a few things across the line.
In in the fourth quarter.
I see ITCL Lombard was part of that so you saw that that we can act fairly quickly.
But also I'd say, it's a it's a.
We want to get best price and best execution right. So we're working to get working to do that for our shareholders and as you said, we have we have done fairly well. This year were on we're on target for that 50% our OE and that's that's a result of hitting that 6% return target in the portfolio and we're excited because we've got a bigger flow.
Now that keeps coming in thanks to our operating companies. So that gives us a little bit more leverage as we go into the end of the year, but we're we're quite close on a few a few of the things we've been working on and we look forward to two announcing them when they come across the line.
Right.
Second question is on the underwriting performance specifically premium growth.
Wondering if you can give us a sense of how much of that is coming from.
Volume versus price I guess, what I'm really trying to get to hear it is.
Dan ability.
Sort of let's call it a low teen type growth rate.
Yes, so it's always hard to tell because you don't want to get too excited but I have to tell you that.
In my career here 16 years.
We are starting to get quite excited I haven't seen anything quite like this.
It's firming no one's calling it a hard market yet no one's ringing the bell, but its firming and I would say.
I'd look to John but we're roughly of that 13%, we're roughly 50% premium 50% price. So that's a good mix and.
And we're quite excited and don't want to predict work and go from here, but we think that might have legs.
John I don't know if you want to add is no I think it's fair statement.
Great. Thank you for your answers all right. Thank you very much.
Thank you.
Thanks.
Hello.
Hi, Good morning, everyone Tomorrow. So Paul just wanted to follow up on the question around the positioning of the investment portfolio and I guess, one one point of pushed back I often get investors.
Fair packages in the branded tape.
Bigger swings at socks and have had some larger position like the Blackberry. Unlike the telco in there.
It can create some quarter by quarter volatility.
We talk about that monetization or reorientation portfolio is that something that you're thinking about like how do you.
How do you incorporate that that type of approach.
That that might help.
Some of the volatility or or or.
Through the performance where are you going through time.
Yes, no listen I think we have heard that we've heard that from our former shareholders and but for US we're always going to be value focused.
And then the there may be larger positions from time to time generally speaking, we don't want to go any bigger than the current position sizing that we have.
But.
But we continue to be we continue to be focused on the names we have and we will always be value investors and there may from time to time be larger positions as value investors, but keeping in mind that even now with a 41 and a half billion in float even though you know even a $1 billion position.
Is it is relatively small in the portfolio. So.
So its but we are we are mindful of that and going forward. We we don't want to have positions much bigger than 1 billion in anyone in anyone that.
Yes, there and then maybe we could talk a little bit of ads.
Capital and balance sheet.
You are seeing.
Units like Odyssey and Allied growing so much how are you feeling from a balance sheet leverage perspective, it and are you confident that your we're well positioned to go out and.
Capture that that opportunity.
Yes, no we're really excited and confident where we are on from a capital perspective.
You know this but.
We always have been keeping and will for the foreseeable future keep more than a $1 billion at the holding company level.
And we don't get rating agency credit for that but we keep it there.
Just just to make sure that were there for subs in the future for policyholders and shareholders, but we are we're very well capitalized and as we said on prior calls.
As we started to see this trend progressing we are we are there for our operating companies to grow because there's an opportunity for a little bit maybe of a step change as far as getting that business and growing the float and and being able to stay at that higher level.
And Meanwhile, we're out there doing things like refinancing our debt.
You saw that we did a recently Canadian deal and you know weve pushed out maturities until 2022 of any consequence, and working to continuing to look at ways to to find.
Cheap financing all financing alternatives not much really we can do now between now and 2022.
But.
We are looking for alternative sources of financing and.
And so were.
To sum it up we are very very comfortable and and very excited about where we are from a capital position there for our operating.
And I guess, just a follow on what that is around prioritization clearly you want to support the growth of the operating units there, but what about buybacks in the stock continues to languish here.
Accounts at the group just seems to be.
Probably the highest I've seen it over the last 10 years or so so how does that factor into the next year for you.
No we do watch it and.
As Prime has said over the last 34 years, I mean that multiple goes up and goes down and certainly at a discount we see that but in the third quarter. Although we did both 30 million and buyback for treasury purposes third quarter, we want to make sure that we're we're we're watching that's the high cat.
Hi, cat quarters, we want to be extra careful there, but Tom but it is let's priority for us, but first as mentioned in the prior question, we want to be there for our companies to make sure they grow and grab grab that great business, while they can increase our float.
We have already said, we're going to be looking too.
Our partners out in Britain, and Euro life, and the coming months, but but we're we're mindful on the stock in at there at the right time, we'll we'll obviously take advantage.
To the extent we can.
Okay. Thanks for that color.
Right. Thank you.
Thanks.
From the line of.
National.
Your line is now open.
Yes. Thank you good morning.
Jamie.
First question just related to the ships of Allied world to Bermuda based companies or what are some of the U box of about change.
No no real impact.
Nothing like a tax point of view are financially that nonres no no not at all.
Okay and then.
The themes going on in Us insurance dig in the Buzz word from other calls is social inflation can you provide us with any comments on the impacts to fractions.
Students as it relates to to that team.
Yes, no. So I mean, the big impact is obviously the is it think it's part of this this increasing firming of pricing and including the fact that Theres also capacity seems to becoming a lower limits, but we believe weve been proactive on this trend in our underwriting actions.
We've seen higher losses in commercial auto for example, but but we believe we're ahead of that curve on this trend with our companies and their underwriting actions.
And the company as a whole benefits.
As we have a diversified mix of business, both by line of business and geography.
And generally have lower smaller business that we write with lower limits so for us social inflation.
It is as we see it is just part of what's giving us firming pricing and.
And should be should be all things considered a good thing for us going forward.
Great and last one real quick just with the growth in premiums.
Is there is there a targeted leverage either from an underwriting leverage our investment leverage that you are looking to achieve.
With the with the outsized growth in premiums at this stage.
No no no no real target.
Skype will limit I'd say that a little flippantly, but the reality is.
On our decentralized structure each of our Ceos is incentivized for 95 combined and they are as you see theyre growing profitably with great reserving. So the were but note, but no target.
Great. Thank you.
Alright. Thanks.
Thank you.
From the line.
Okay.
Yes, thanks very much.
Just a question on your comments you said.
If there was a U.S. recession you'd see opportunities.
Maybe elaborate as to what those opportunities are I assume that would be deployment of the cash but.
I don't assume its buying any more in terms of equities given your kind of.
Sure.
At your limit there being totally.
Being that these things including your.
Investments in associates, and whatnot or equivalent to your book value. So would these opportunities really just be deploying the cash into more fixed income.
Yes, no real good question, Tom So we as we've done in the past you saw in the financial crisis, we were able to be there.
To provide convertibles to folks who just couldn't get financing anywhere else. So that converted going to convertibles would be part of the change of mix being and very liquid short term sovereign.
Cash and sovereign.
That we can very quickly switch and and deploy in areas like convertibles also take advantage of the extensive spreads are widening take advantage generally so so thats. So thats one area, but the other is I mentioned with one of the prior questions. We are changing the mix on on equities as we're executing on.
On some of the disposition strategy. So so there is there will be ready to the extent that it changes will be ready either way. So that's that's where we're positioning ourselves where we have not despite.
Despite pressure and you see it from our competitors, we're not reaching for yield staying patient preserving capital and and we'll see which we had goes we are leaning a little bit as I said towards thinking that the USA is strong and.
And we'll get a trade deal done phase one shortly and and we'll continue to follow that trend job numbers were good this morning, and and we see little bit of potentially wage inflation from that GM deal. So we think it's it might trend that way, but if it goes the other way. It goes we're ready to go with the portfolio as it's currently structure.
Okay, and just a follow up with respect to your comments about the buyback and now that we're kind of almost through the the cat.
Season.
Would you and given where your stock trades would you be more.
What is your thinking in terms of buybacks now.
Yes, no. It's we're definitely we're definitely watching it don't want to don't want to give aware hand, but.
But priority is making sure were there as as.
Growth accelerating.
But we're also obviously monitoring some of the caps that have happened in this quarter to as you said, it's generally seems to be over but.
But we are things seeing things like California, wildfire, which so far hasn't been hasn't been as serious as campfire was last year, but.
But we are.
We are watching the stock rest assured and but want to be there for what has been.
Could be a generational shift.
Pricing and and so.
We'll we'll wait and balance the approach, but but definitely and always will be interested in our stock at the right Greg.
Thanks.
Thank you.
Thanks next question.
Yes.
Your line is.
Good morning, I apologize.
Question.
Tourism Russ can you guys give us an update on how that's performing if it's performing as expected when do you guys purchased it.
And then the other question is what do you think about value investing present the loss.
Yeah, I send years value investing hasn't really performed do you think doesn't change going forward or what's your perspective on that.
Ill Junior you know you never can tell what these things, but you know with prime and the team.
Decades of experience. These things have a way of turning we might have seen that with a with what we've seen with we work and a movement among the growth.
Group to focus a bit more on bottom line.
Free cash flow and and earnings so that maybe we may be seeing a shift back to value, but but listen that's that's one way or the other it doesnt matter, we are focused on capital preservation and the value.
Value.
Approach and we're going to stick with that and and we think over the long run that it has worked and we'll continue to work.
On toys R us.
Retail and you know retail environment has been tough in Canada.
You saw the news.
Last night this morning about Encana and.
Particularly out west Los jobs.
So retail is off toys R. US continues to be continues to be producing good EBITDA. It's a critical season right now, but but the downside protection as you think about it from a value perspective is that we bought it for the real estate value and the business is all upside, we're very supportive there and and.
We will continue to be very supportive the business continue to believe in it.
But it's it's upside and and it continues to perform not.
Got it expectations, but.
Over the long term, we expected it will be a great cash generator for us.
Hey, Thanks look all right. Thank you.
Thank you.
From the line.
RBC capital markets. Your line is now.
Mark good morning.
To my questions have already been covered but I'll kind of a numbers question the.
I see actually Lombard sale.
Sorry, you commented in the in the interim report in terms of some of that were sold in the third quarter and some of it. It was in the fourth quarter, where does the cash from that show up or may be cash hasn't been received.
Yes, so John maybe you want to take that one not sure. So on the Ipi say Lombard sales. So it's up in the holding company cash subsequent to the quarter 250 of that proceeds that came in where he was used to repay at the credit facility and we are working on the residual to be paid off in the next coming.
We.
But that is up in the holding company cash line.
Okay. Thank you.
Second question and I was going to ask about in any way, but you kind of mentioned in your opening remarks about digits am I correct. That's that's not a consolidated entity. That's just that's as whatever you call affiliate in holding or an affiliate investments. That's that's correct it investment associated with equity accounted.
Okay, and so any of the any of the proportional proceeds of that are going to come through.
Within that corresponding PNM line.
That's correct it will come through in the Sharon profit Associate line and the income statement.
Okay.
And then the other question that I had the losses related for two typhoon Fox I were fairly low I thought relative to my expectations any early comments in terms of where the hagibis losses may come in higher than that lower than that about the same.
No we have no indication at this time on those.
Okay. Those are my questions. Thank you.
Alright, Thanks, a lot.
Thank you.
From the line up.
Private investor.
Yes, Hello, and good morning, Thanks for taking the question.
My question is.
Basically on.
On India and.
Given the most.
First sites itself.
As you know as.
A few direct investments that are pretty big.
The company has a big stake in.
Obviously, there's also the.
Flexing your vehicle, so I just want to do.
Your comments on how are you guys see the market and how what are the opportunities looking at.
Well I mean as a general comment.
Given the previous.
What I just said.
No no no. Thank you for the question. So we are we continue to be very excited about India.
Under a prime Minister Modi.
No itself, it's a little bit little bit down now the markets emerging markets generally are a little down, but but thats an opportunity for us we think long term future of that country and not economy is one of the best places to invest on the planet and.
And so we continue to be very excited about opportunities continue to be analyzing opportunities.
And.
No.
Our investments there we think are very good and we'll continue to grow.
Given its just such a dynamic country and with what Prime Minister Modi is doing being business friendly I would just.
We continue to be very excited about that markets. Okay.
Thank you okay. Thank you very much.
Yes.
Yep.
Yes.
Hi, there I thought it might just sneak in one on India as well.
I'm not sure can position to comment Paul Let me, maybe Jennifer can but one of the notable most notable aspects of their their quarter that they reported last night was the big.
Uptick in value at the Bangalore Airport AOL.
Looks like maybe plans for a third terminal being put in there can can you offer any comment about just extended the swing there was pretty meaningful.
Percentage terms and any color you can offer on on how some of the assumptions changed in the model there.
Trigger that increase.
Sure No problem, Jeff. So if we look at the Bangalore Airport, that's held through Fairfax, India. They recently had the master plan.
Proved by the underlying regularly regulation authorities in India that allow them to bring on that third terminal. So that most of the lift that you're seeing in the third quarter.
We didnt have it in the prior quarters because it is quite a robust process. They have to go through to make sure. They have that regulatory approval and before we can actually factored that into the cash flow. So that is most of the list that you see in the third quarter.
Maybe to note also on that asset is you know we've disclosed extensively in the past that the underlying real estate asset.
We're still waiting on the master plan on not one that value with not yet in the underlying value of Bangalore Airport. It's only at a lease value. So that is something hopefully in the coming quarters, we'll start to see hopefully a benefit lift on not as well, which we've disclosed previously.
That's helpful color. Thank you. Thank you.
Thanks, Jeff.
Final question.
Andrew.
Hi.
Good morning, Andrew Good morning.
Now, let's get back to one of the original question you had just regarding the redeployment of the equity.
I mean, you made the point pull that billion dollar position is about as big as you roll and then is noted.
41 billion.
It is quite a big percentage of the equal the business. So.
I think maybe the message that investors sort of wanting to here is that.
Going forward.
It will be more diversified than is today.
A bit more liquids and it is today, because I'm not going to say, which holdings and you should know thats all for US today, what else you trying to liquidate studies repositioning position in Europe .
So is that the moves as the company to try and end up with a sort of.
Finally, I want to take you pull study that still sticking with the sort of lessons mentality.
The organization, one that is a little bit more suited to the Tal just being yes.
At this whole organization.
No I think Andrew that's that's a fair comment and I think it's correct correct comment.
No.
We do want to we do want to be in overtime and more liquid positions, but always with the value and but it but continuing to be opportunistic.
So.
But I think you're right.
Our our preference would be to be liquid.
But.
But we're we see and take the opportunities as they come and but we said we will want to stay below the billion and but even that is only for.
Really good opportunities like we've seen with Seaspan.
Some remarkably well and we think Theres just.
Kind of upside still on that.
But.
We're mindful of that.
Limit and.
And so.
We'll kick will continue to be focused on it but be opportunistic and always with the value focus.
Thanks, So much does one follow up just in terms of the comments you made early on about the slightly stronger market in terms of premium pricing and all the rest of it I mean I'm really.
The one just.
Thanks for taking place well does feel like it's got less capital.
I'd also maybe with the history the groups looking back to previous situations, where you've seen us on the market.
Every reason why it takes place so would you just look back in.
Oh, yes, we can solve in hindsight, but thats slimy Devon David.
Yes, no I think listen Andrew it's the if it's the question right now in our industry and I think in hindsight, everybody can kind of piece it together, but but it's a number of factors. It's the low interest rate environment. It's the social inflation that we talked about it for capacity coming out from some of our competitors, including capacity coming out and Lloyd.
Market, it's it's catastrophes like what happened in 2017 worst catastrophe year on record that if that have really kind of shaken up the core and got.
A whole generation of underwriters focused on needing to get price again as opposed to the opposite so it makes a whole lifts the factors all kind of coming together and I don't think anybody necessarily side coming but it's certainly seems like it's it's on its way now.
Right.
Thanks for taking my question no problem entered thank you very much.
Well if there is no further questions. Thank you everyone for joining this call. Thank you units.
Yes.
That does conclude today's call.
Disconnect.
Thank you.