Q4 2019 Earnings Call
Good morning, and welcome to Shake Shack, Sony 19, a year band results Conference call. Your lines have been placed into listen only mode.
Presentation, we will conduct a question answer session at that time to ask your question. Please press star one in your phone keypad, what time sake, we asked whats your limit your questions do you want.
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Host for today's call is from Watson with opening remarks from Mr., David You list. Mr. Beulah. Please begin.
Good morning, and welcome to our call to discuss Fairfax is 2019 year end result. 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 prospectus.
Which has been filed with Canadian Securities regulators and is available on SEDAR I'll now turn the call or to our chairman and CEO from Watson.
Good morning, ladies and gentlemen, welcome to Fairfax is 2019 yearend conference call I plan to give you some of the highlights and then pass it on classical onto Genala, not chief information Chief Financial Officer for additional financial and accounting details, but to begin today's conference call I'd like to comment on line.
Last nights press release announcing fall robots retirement.
All told me recently that for family reasons. He wanted to retire as president of Fairfax and it was with great great sadness at I accepted as decision.
Lets 17, yes, Paul has given us all.
And has been instrumental in our success over that time.
I've had the pleasure working very closely but Paul all those guys and I, but I missed some greatly.
He retires without gratitude and with all our best wishes to him his wife, Janice and as children and as retirement.
Paul will continue to work on projects for Us and will remain the chairman of the boards of some up or not.
Noninsurance investments. So we thank you very much fall a bolus yeah, but that's all thank you from from as you said I started a fairfax in late 2003 and became the president seven years ago and began doing these conference calls two years ago at the end of 2018.
Working with you and the entire Fairfax family has been a joy and an honor and privilege.
There is no better place to work, it's always been fun it Fairfax, whether defending the organization or helping grow the company over the years working with such talented people and assisting other businesses and individuals along the way.
Over the last two decades with this fantastic team an atmosphere I've given everything I had to help better this business and it has been great fun.
It is for personal reasons that I've decided to step back from working to spend more time with my family and that said as Prime mentioned I will continue to sit on the board of several Fairfax Investee companies.
To prime the entire Fairfax family and all our great shareholders I'm. So grateful for my time at Fairfax, and I look forward to watching the exciting future of the organization continue wonderful. Thank you from for everything it. Thank you Paul and Paul let's cost will be at I.E.G.M., and you'll have a chance to.
Say high default, so ladies and gentlemen, we'll just go right into our.
Fourth quarter call yearend call Fairfax has net earnings were 2 billion in 2019, what's the 376 million in 2018, which equates to a net earnings per share up approximately $70 per share was 11 65 in 2018.
Fairfax is book value per share them in 2019 increased by 14.8% adjusted for the $10 per share common dividend paid in the quarter.
Ill first quarter 2019.
Book value and the at 486 per share we had a record earnings as I've said in 2019 at just over 2 billion, but peak, but became just shy of our 15% target for growth and book value if not for some foreign exchange movements and pension expense and went through.
Other comprehensive earnings read a past 15%.
Our companies continue to have good results with a strong combined ratio of 96.9% consolidated strong reserves and producing an underwriting profit of 395 million for the.
All of our major insurance companies generated a combined ratios of less than 100%.
Zenith, leading the charge at 85.2% North bridge at 96.2, right at 96.9% Odyssey at 97.2 Allied World at 97.5, and carbon offset 97.6.
For the year.
Operating income was strong at 1.1 billion and our net gains on investments for the 1.7 billion.
This consists consisted of realized gains in our investment portfolios of 612 million that includes ice you guys had Lombard BTT Brookfield, then seaspan and unrealized gains of 1.1 billion, principally eurobank CDAI be back.
Thanks, BTT go digit and Seaspan.
As we've mentioned at our annual meetings and in our annual reports quarterly calls with IRS accounting, where stocks and bonds are recorded at market.
Subject, a mark to market gains or losses quarterly and annual income will fluctuate and investment results will only make sense over the long term.
Of course these results were after taking mark to market losses, and Blackberry Exco style colon Fairfax Africa.
Our underwriting income continues to increase with a lower consolidated combined ratio and strong organic growth continuing that our companies.
Insurance and reinsurance business net written premium increased the audio year over year by approximately 10%. In addition to an increase of 9% in 2018.
Primarily due to growth that north bridge.
Let's see Kremen flaunts done Allied world.
Zenith are only company not seeing premium increases as workers compensation rates in the United States continue to decrease.
At the subsidiary level the change in net premiums written for the year around the fourth quarter was follows Odyssey group for 2019 up 17% and the fourth quarter up 25% common five so for the whole year, 18% for the fourth quarter.
27% North bridge, 15%.
For the fourth quarter, 20% Zenith was down 9% for the year around minus and down 7% for the quarter, Brett was flat for the as Lloyds.
A restructuring took place and for the fourth quarter they were down 7%.
Allied World was up 6% for the 2019 and 7% for the quarter. So you can see on a quarterly basis.
Rob the premiums will have been increasing based significantly if you look at a four on a quarterly basis and for them.
For the whole year 2019.
First quarter was up 4%.
This is a net written premium second quarter, plus 6% third quarter, plus 12, and fourth quarter less that team and these are mainly because of rate increases rate increases have been accelerating during the year and we expect this trend to continue at 2020.
We continue to look to put more of our cash to work without reaching for yield on taking duration risk over the last 24 months, we have invested our cash and short term us treasuries and short term investment grade bonds.
We have also deployed some of our cash into real estate and mortgages, we now have been.
Annual run rate of approximately 850 million, an interest and dividend income and continue to focus on redeploying cash.
In December as you saw in the press release, the company entered into an agreement to sell up 40% of equity interest and its wholly owned European run off group for cash of approximately 600 million two olmos.
Pursuant to the sale almost on the company will jointly manage.
The European runoff after completion of the sale, which we expect to happen in the first quarter.
Without partners, we hope to work together to help European runoff expand given the many opportunities that they're seeing there in London, particularly.
At the closing date, the company will Deconsolidate European run out from its run off reporting segment and apply the equity method of accounting for its remaining equity interest.
The transaction of costs are subject to regulatory approval.
And as I said is expected to close in the first quarter 2020, the assets and liabilities of European runoff of presented as held for sale and the company's consolidated balance sheet at year end.
We remain conservatively positioned with common shareholders' equity of 13 billion at December 31st 2019, compared to 11.8 billion and the previous CEO and holding company cash and marketable securities at 1.1 billion.
Always looking to be selling refinance first we have begun to repurchase our partner's interest and I insurance companies as well as repurchasing Fairfax shares during nine 2019, we repurchased 479000 shares and since the fourth quarter of 2017.
Approximately two years, we have but just over 1.2 million Fairfax shares.
Fairfax, India had an excellent year end 2019, as its book value per share increased by almost 22% to 16.89, almost $17 a share Bangalore International have airport had an increase in its valuation because of its second runway and second terminal and a valid.
Leading investment by third party invest over 10%.
Our proposition.
For more details please refer to the Fairfax NDF press release.
Fairfax Africa had a difficult deo, mainly because of mark to market losses and.
At Atlas Mara and C.G., so its net asset value dropped by 9%, we expected net asset value to come back to $10, but shares soon.
For more details again, please refer to the Fairfax Africa press release.
You'll remember we continued to hold CPR linked deflation for floor contracts for the notional amount of 100 billion and an average remaining term to maturity of 2.8 years. We carry these contracts at 87 million and they continue to provide us with downside protection India.
Ventas.
Catastrophic ton of world events.
As of December.
2019, we have 10 billion in subsidiary cash and short term investments in our portfolio, which is approximately 26% of our portfolio investments to take advantage of opportunities opportunities that come our way. We have another 5.4 billion of approximately one year Treasury Boes classify the bonds.
And approximately 3.6 billion of high high quality corporate bonds with an average maturity of what navios.
In total we have approximately 19 billion in cash and short dated securities, which has almost 50% of our portfolio investments.
Investment portfolios will be largely unimpacted by rising interest rates as we have not reach for yield.
In fact, we would benefit from rising investment income.
With a run rate of approximately approximately 17 billion and gross premium.
A huge focus on underwriting discipline, a portfolio of approximately 38 billion, which does not include the riverstone UK portfolio, which we will continue to manage.
And HW I see our investment subsidiary operating in a stock because markets all grounded in our fair and friendly cultural Boto, what 34 years, we expect to generate 15% written for our shareholders over time.
We think the best is yet to come about now pass the call over to Gen. Allen, Our Chief Financial Officer, Jeff. Thank you Graham before I discuss Fairfax is 2019 result.
Like to acknowledge Paul.
That concludes unparalleled support that is provided to me and the finance team over the years.
I wish Paul all the best in the future.
We wanted to also.
Provides good readers with.
Sorry, we wanted to also let you know that in addition to the press release that with issued yesterday at all of the details on our 2019 financial results will be made available on our annual report, which will be posted on the company's website on March six 2020.
Turning to Fairfax is consolidated results for the full year 2019, I will highlight the result of or operating companies and then finished with our consolidated financial position.
For the full year 2019, Fairfax. It reported net earnings of just over 2 billion or $69.79 per share on a fully diluted basis.
Which is prime noted with a record year or the company.
That compared to net earnings of 376 million or $11.65 per share on a fully diluted basis in the full year 2018.
The full year 2019, net earnings primarily reflected strong net investment gains and higher interest dividend income and strong underwriting result at the operating company.
Operating profit at our insurance and reinsurance operations in 2019 increased to 395 million with a combined ratio of 96.9 compared to an underwriting profit is 318 million and a combined ratio of 97.3 in 2018.
The increase in underwriting profit 76 million, principally reflected lower accident year loss ratio.
Partially offset by lower debt favorable prior year reserve development.
Current period catastrophe losses in 2019 totaled 498 million represented 4.0 combined ratio points, principally related to Tyson hagibis at 146 million or 1.2 combined ratio points.
Going back SCIEX 76 million or 0.6, combined ratio point and Hurricane Dorian 66 million or 0.5 combined ratio point.
That was lower than the current period catastrophe losses in 2018 at 752 million at represented 6.5 combined ratio point.
In 2018, it principally related to the California, wildfires Hurricane Michael Enticing JV.
Our combined ratios benefited from net favorable prior year reserve development in 2019, a 480 million representing 3.8 combined ratio points.
That compared to net favorable prior year reserve development in 2018 at 789 million, representing 6.8 combined ratio point.
Net premiums written by our insurance and reinsurance operations increased by 10% in 2019.
Simply reflecting increases that Odyssey group prevalent Forrester and North bridge.
Looking to our operating company results, starting with North Bridge North Bridge is underwriting profit of 47 million and a combined ratio of 96.2 in 2019 was fairly consistent with its 2018 underwriting results.
2019 reflected lower non catastrophe loss experience related to the current accident year, principally improvements in their transportation business.
Partially offset by lower net favorable prior year reserve development.
North Bridge is underwriting profit in 2019 included net favorable prior year reserve development at 67 million, representing 5.4 combined ratio points, reflecting better than expected loss emergence across all major lines of business.
This compared to net favorable prior year reserve development of 107 million, representing 9.5 combined ratio points in 2018, reflecting better than expected Americans on automobile and casualty lines of business.
The underwriting result results in 2019 included 12 million that represented one combined ratio point of current period catastrophe losses at principally related to storms in Ontario, and Quebec.
Compared to current period catastrophe losses in 2018 at 19 million that represented 1.7 combined ratio point.
Canadian dollar terms North bridge is net premiums written increased by 18% in 2019, reflecting price increases across the group strong retention of renewal business and growth in the new business.
Moving on to Odyssey Group in 2019 Odyssey Group reported an underwriting profit of $90 million at a 97.2 combined ratio compared to an underwriting profit of 181 million at a 93.4 combined ratio in 2018.
Lower underwriting profit in 2019 reflected lower net favorable prior year reserve development and higher current period catastrophe losses.
Odyssey groups combined ratio in 2019 benefited from net favorable prior year reserve development at 230 million.
Which represented 7.2 combined ratio point, principally related to better than expected emergents on non catastrophe losses of 148 million primarily related to better than expected emergence from both non catastrophe loss experience principally in the casualty auto marine and aviation lines and property catastrophe loss experience.
That compared to net favorable prior year reserve development of 346 million or 12.5 combined ratio point in 2018.
Current period catastrophe losses at 280 million represented 8.8 combined ratio points in 2019, principally related to Tyson hagibis at $88 million or 2.8 combined ratio point.
Types and in fact site at 42 million or 1.3, combined ratio point and Hurricane Dorian at 25.8 combined ratio point.
And that compared to current period catastrophe losses of 252 million that represented 9.1 combined ratio points in 2018 that principally related to the 2018, California wildfires Hurricane Michael Enticing JV.
Odyssey Group 3.4 billion, if net premiums in 2019, which represented an increase of 17% from the prior year, it's reflected growth in all divisions with the majority of the increase related to you when we use insurance with growth in the U.S. crop motor and financial product line.
The London market in New line Odyssey's, New line business minutes casualty reinsurance.
Moving onto Crum Forrester.
From an forresters underwriting profit in 2019 improved to 52 million with a combined ratio of 97.6 from an underwriting profit is 33 million and a combined ratio of 98.3 in 2018.
The increase in underwriting profit was principally due to higher business volumes and profitable lines of business.
And lower current period catastrophe losses, partially offset by increased commissions as a result of growth and higher commission lines of business.
Kremen Forresters net premium written increased by 18% in 2019, primarily reflecting growth in accident and health surety and programs and surplus specialty lines of business.
Looking to Xena Zenith National reported underwriting profit in 2019 of 109 million with an 85.2 combined ratio compared to an underwriting profit of 140 million with an 82.6 combined ratio in 2018.
The decrease in underwriting profit in 2019, principally reflected the impact of price decreases due to continued favorable loss trends.
The underwriting profit in 2019 included $82 million or 11.2 combined ratio point of net favorable prior year reserve development, which reflected net favorable loss development trends for accident years 2013 through 2018.
Net premiums written by Zenith of 721 million in 2019 decreased by 9% from 789 million 2018, with the decrease primarily reflecting price decreases due to continuing favorable loss trends.
Great insurance in 2019 reported an underwriting profit a 51 million and a combined ratio of 96.9 compared to an underwriting loss of 77 million and a combined ratio of 105.2.
The year over year improvement and breadth underwriting result, principally reflected a decrease in current period catastrophe losses, and a decrease in the attritional loss ratio.
Partially offset by a decrease in net favorable prior year reserve development.
Current period catastrophe losses of 70 million represented 4.3 combined ratio points in 2019.
Principally related to typhoon Hagibis at 25 million or 1.5 combined ratio points.
In fact site $12 million 4.8, combined ratio points and Hurricane Dorian 24 million or 1.5 combined ratio point.
That would significantly lower bank current period catastrophe losses of 210 million that represented 12.7 combined ratio points in 2018 that related to the California, wildfires tightening gebbie Hurricane Florence and Michael.
Net favorable prior year Reserve development was lower in 2019 at 47 million and represented 2.8 combined ratio point.
Reflecting better than expected claim experience across most lines of business compared to $99 million that represented 6.0 combined ratio point in 2018.
Rick net premium written decreased by 1% in 2019 after excluding the onetime intercompany reinsurance transaction with runoff in 2018, that's eliminated on consolidation.
The decrease reflected an increase use a proportional treaty reinsurance in the marine and property lines of business, partially offset by growth in premiums written primarily growth in their reinsurance segment that was partially offset by lower business volumes due to reductions in noncore lines of business.
Allied World reported an underwriting profit of 58 million and a combined ratio of 97.5 in 2019 compared to an underwriting profit of 43 million and a combined ratio of 98.1 in 2018.
Proven in underwriting profitability, principally reflected lower current period catastrophe losses.
Partially offset by net adverse prior year reserve development in 2019 compared to net favorable prior year reserve development in 2018.
Current period losses in 2019 were 85 million or 3.7 combined ratio point.
Principally related to Tyson Hagibis at 31 million or 5.7 combined ratio point.
And in fact site at 20 million 0.8, combined ratio point Hurricane Dorian $14 million 0.6 combined ratio point.
That compared to.
Kurt period prior catastrophe losses in 2018 at 223 million or 9.8 combined ratio points that principally related to the California wildfires taken in JV Hurricane Florence and Michael.
Net adverse prior year reserve development at 32 million or 1.4 combined ratio points in 2019 reflected deterioration in both the insurance segment.
In the reinsurance segment compared to net favorable prior year reserve development of 97 million or 4.2 combined ratio point in 2018.
Allied world's net premium written increased by 3% reflecting growth in gross premiums written partially offset by decreased premium retention, primarily driven by increased reinsurance purchase in their insurance segment.
Moving to Fairfax Asia, Fairfax Asia underwriting profit increased to 6 million at a combined ratio of 97.0 in 2019 net compared to an underwriting profit of point 4 million at a combined ratio of 99.8 in 2018.
With the increase in underwriting profit, principally reflecting higher net favorable prior year reserve development.
Our insurance and reinsurance other segment reported an underwriting loss of 18 million and a combined ratio of one to 1.7 in 2019 compared to an underwriting loss of $49 million in a combined ratio of one of 4.6 in 2018.
The decrease in the underwriting loss in 2019, Prince really reflected higher net favorable prior year Reserve development, primarily at group free Fairfax Central and Eastern Europe, and bright insurance that was partially offset by higher current period catastrophe losses, primarily related to the Chilean riot.
And finally looking to run off excluding the first quarter 2019, and the fourth quarter 2018 reinsurance transactions.
Runoff reported an operating loss of 219 million in in 2019 compared to an underwriting loss of 288 million in 2018.
The decrease in operating loss in 2019, principally reflected the runoff of advent unearned premiums and lower loss on claims.
Partially offset by higher operating expenses.
Losses on claims in 2019 reflected not at net adverse development at US run off of Q1 hundred 16 million principally related to the strengthening of assesses pollution other leighton claim reserves.
That was partially offset by European run off net favorable reserve development $66 million.
As Prem noted on December 22019, the company entered into agreement to contribute its wholly owned European runoff group to a newly formed Riverstone Barbados company that will be jointly managed with Omars.
Pursuant to the agreement owners will subscribe for 40% equity interest in Riverstone, Barbados for cash consideration of approximately 600 million.
At the closing date, the company will Deconsolidate European runoff and will remove runoff removed from the runoff reporting segment and commence the equity method of accounting to its joint venture interest in the Riverstone Barbados entity.
At December 30, Onest 2019 on our consolidated balance sheet, the assets and liabilities of that European runoff operation were presented at held for sale in the company's balance sheet.
And as Prime noted the transaction is subject to regulatory approval with anticipated closing in the first quarter of 2020.
Looking to our consolidated results Fairfax, our consolidated interest and dividend income increased year over year from 784 million in 2018 to 880 million in 2019.
Primarily reflecting higher interest income earned on increased holdings of high quality us corporate bonds, partially offset by lower interest income earned on decreased holding of our us municipal bonds.
Fairfax recorded a provision for income taxes at $262 million at an effective tax rate of 12% in 2019.
With the lower effective tax rate in 2019, primarily due to income earned outside of Canada, that's taxed at lower rates and the recognition of previously unrecorded us foreign tax credits.
Our total debt to total cap ratio, excluding our non insurance companies decreased to 24.5 at December 31, 2019 from 25.0 at December 31, 2018, primarily as a result of the increase in total capital.
We ended 2019 within investment portfolio, which included the holding company cash and investments at 39 billion slightly higher than 38.8 billion held at December 31 2018.
Book value per share at December 31, 2019 was 486 point 10 compared to 432.46 at December 31, 2018, an increase of 14.8% adjusted for that 10 dollar dividend at the company paid in the first quarter of 2019.
And now I'll pass it back over to you.
Thank you very much and we look forward to answering your questions. Please give us your name your company name and try to limit your questions. Tony one so that it's fair to everyone on the call.
Okay, and we are ready for the questions.
Thank you we will now begin the question and answer session participants are which Alan if you would like to ask a question. Please press star one and.
Please record your name for any required any name and company.
Required to introduce your question to cancel your request.
And our first question is from the line is changing going from National Bank Financial Your line is now open. Please go ahead.
Yes, good morning, Advani Jamie.
We are really solid I was hoping you could break out what organic growth was.
In Q4.
Yes, so organic growth.
In Q4 was approximately 13%.
In terms of net written premium so were basically Jamie we are seeing rates increase accelerated rate increases through 2019 and.
We've been very careful and as you know not writing not increasing our premiums over the isn't a soft market and decreasing it and so and now we're expanding we grew in.
2019, and on an accelerated basis quarter by quarter Thats why showed it to you and.
And we think that trend continues in 2020.
Okay, and where do you where do you think leverage can.
And can reach and how quickly can infer fox achieve those levels.
You mean that terms of premiums to equity and that's that type 11 that you're talking about yes. So.
Past, we've gone to one of them a half times.
Net written premiums to shareholders equity.
But.
Arc AAT companies, we are very decentralized so each of our presidents, particularly the big ones Odyssey Allied world covered far so Brett that all ready to expand.
They know what to do it has its not just the price increases you have to get that right margins because there's all sorts of.
Potential risks at the insurance business and.
We have the ability to expand as much as we like.
In the next few years and in the past 2001. This is.
As a much bigger company today than we won 2001, but in 2001. After September 11th 2002, three and fall we'd be more than double about premium.
And.
In the end those three areas.
Right now we have 17 billion in gross premium approximately 13 billion net written premium.
But but thats, how you look at of in total, but what you should look at as each of the company's 4 billion and Odyssey approximately 4 billion then.
In Allied and.
And on and on a non and all of those companies have the ability to expanded the pricing as appropriate.
And at the moment that seems like it's appropriate.
Okay, great and.
Okay.
Can you balance that.
That's very commentary with.
Purchases given this loss for one below book value. It would seem like it uses of capital to repurchase shares as well can you balance those two competing.
Uses of capital, Yes of course.
Our first is to help our companies grow because these opportunities on last forever and secondly, as the buyback our stock yes.
We have to do it in a financial way, we have to do it and.
In a way that.
No doesn't put us at risk and so.
So we had thats the balance Jamie that we're going through it so.
Using only excess funds that we think we won't meet and so far our expansion potential and the insurance business and.
And buyback our stock so we bought some.
And.
And by the way I've said publicly that we want to buy our shares we don't want to show issue says, we don't want to expand that have a diversified platform of the insurance reinsurance business, although the world.
But I said that over 10 years, so it's over time not like every quarter.
We will buy it as and when we feel comfortable.
To take advantage of it and.
But we're not going to do it at the expense of financial position all at the expense of our insurance company's ability to take advantage of a good pricing.
Great. Thank you.
Thank you very much Jamie can we have the next question.
I think.
Our next question from the line of Mark from RBC Capital markets. Your line is now open Sir.
Good morning.
Good morning.
Questions.
Can you help with.
The holding company cash was about 1 billion shop at the end of last quarter.
Andrew about 1 billion, even or so at the end of this quarter can you help with just a couple of the major items that accounted for then move from 1 billion southern to about a billion.
Yes.
Right sure slipped the end of the last quarter. The 1 billion seven represented we had 500 million drawn on our credit facility. That's been fully repaid in the fourth quarter. There was also some residual capitalization put into our underline insurance companies to help them with growth.
Okay. Okay.
It's helpful on that.
And then at the end Mark.
As we've said we get to another 600 million in the first quarter of as and when this riverstone UK closes.
And so we'd like to build out Roe.
Cash and marketable position.
A higher level that a valid one.
Okay. That's helpful.
The second question.
There was.
A sizable loss in the fourth quarter related to.
The.
Gross profit share on associates, and Noninsurance entities, just talk a little bit about what we what was there I'm sure. It's probably some type of a mark to market, but just to help understand it.
Yes for sure Mark Jan.
Would you answer that these sure so mark maybe just on that summarizes the income statement there will be more details and nerve ends DNA. When it comes out in the annual report to give you more clarity, but high level I think theres a couple of things to note in that non insurance company line. So in there we have Thomas Cook that you recall is a concern.
Elevated investment, but it owns the underlying questionnaires that were de merged in the fourth quarter.
Upon that the merger there was $191 million, that's an impairment on the quest shares relating to the non controlling interests of Thomas Cook that full 191 is attributed to the non controlling interest line on the Fairfax net PML, so zero impact to our book value per share it's a growth presentation.
The other thing to note on that non insurance operation line is also Fairfax, India is presented in that line before we do our consolidation.
Prime noted that they had an excellent quarter and an uptake.
Principally related to the Bangalore Airport as a result, they accrue for performance fee of about 48 million. That's also in that line as an expense, but the way the consolidation works, we have the benefit coming through on the Fairfax line I'm at 48 million. So the net benefit that you would actually see in our results of the 66% that we.
Retain so there is a little bit of noise on kind of a one off transaction in those lines just to clarify.
That's that's helpful.
And then just one last item if I can.
You mentioned within the runoff segment that there were assessed discharges.
Typically that's all in the fourth quarter could you just quantify how much impact on how to in the fourth quarter results.
You said.
216, right 216 million.
And.
And gross in the end use as fast as we add some redundancies in.
In the UK and the net impact was 150 million and of course, Mark we have interest and dividend income Len.
You have.
Gains and losses on the stock site fixed them altogether and approximately it's about $50 million loss in our runoff company.
And as a us runoff company or the total runoff company is about $50 million laws and so.
Especially as has been a problem for some time and the plaintiffs lawyers. This is what they called social inflation based deployers of being extending the reach into all sorts of no nokseven crannies to get.
Anything that's got a little as best as they come off to the companies and how we think it might be somewhere in the next few years white.
Peaking but.
But we happened to have the best steam and Riverstone very well was.
Team for.
Especially as and.
Environmental.
Settlements, we've we've made acquisitions on that front also and.
So.
We think we know what we're doing and.
And we'll grinded two.
To a halt as time goes by but it is a industry wide concern as.
As the plaintiffs lawyers extended reach they've gone through that they've been.
Coming after the insurance companies and other companies fall.
Decades now and.
Somewhat yet we think it'll pick out, but but it is still something that we watch very carefully and we look at it every year.
Okay.
Appreciate the color, thanks, very much and execution ticker terrific. Thank you Mark.
Next question.
I'd.
Thank you our next question Linus Tom Mckenna from BMO capital. Your line is now open.
Good morning, Tom Good morning Prem.
A question with respect to your.
You mean, you're minority.
Insurance partners.
And they help you made acquisitions in the past and.
And I think the trend has been disorder help to buy them out, but the Riverstone acquisition seems to go a little bit the other way, where you're actually selling some of the stuff back to them. So it.
Do you see in vision.
In increasing.
Role with these partners going forward or do you envision a role where youre going to be.
Buying up should your ownership from these partners going forward. So so our robin yes, thats two waves that too as sites right.
Tom one to one is I insurance companies and we've been buying back our Rob.
Our partner's interest overtime, so like Thats would be Brad that the euro life and and that would be Allied Allied comes this year. So yes, so we'd be looking to eventually on.
Those companies are 100% there Ryan John's companies and over time, we'd be looking at OTI ought to present in terms of the Riverstone we've taken that.
Weve taken.
Almost as a partner and and we think what we've done is that as a partner we've allowed that allows us to deconsolidate and.
UK accompany now Riverstone can does a lot of Lloyds companies and there's a lot over run offs in the UK.
So it helps us to finance that separately.
With our partner and and eventually there's all sorts of possibilities, including taking at public at some point in time. So we're looking at Riverstone UK.
In a separate.
Basis.
But but it's very much thats been a great pro forma.
Okay, and we think the big advantage as it allows us to.
Finance.
It separately from the Fairfax.
Insurance companies.
And what would be the.
In order to take your wife in Britain, and Allied up to 100% ownership.
What's left for you.
What kind of cost do you see over the next.
So.
The.
Your life will be doing it sometime this year that we'll probably do it right from.
The company itself, we've done very well in your life, so that won't need.
It's funny and full breadth.
Me that 10%, we have to buyback and we're looking at buying back that as soon as we can and then outline is opens up in June I think somewhere June July and then.
We have the ability to do that I think the for allied.
Peter if I remember it was something like bill into the have something like that that.
We need we.
We need to buy at some point in time and the next.
Three four years.
Okay, and what about and in the breadth is that what's the dollar amount on that.
Brett.
We don't have to but it's approximately 100 million, okay, but plus minus 100 million yes.
Okay. Thanks for that thank you. Thank you Tom.
Can be go onto the next question any.
Absolutely. Our next question is in line of Christopher gable and individual investors. Your line is now open Sir.
Thank you very much hey, good morning, Kosovo good morning.
I'd like to follow up little bit on the British share repurchases, which personally at a higher expectation for the rate.
Since it was up there on 10 17 is about 4% been purchased back and you.
You mentioned you were trying to reduce it over time from 20 to 23.
Good news for summer timeframe is 10 years I thought it was shorter.
Yes, we'll.
I quoted in dollars annual reports that I quoted and I've talked about the now Rob HCM.
The king of buybacks as a guide by that they both Henry Singleton no the new.
The name but.
All that something like 85% of their shares outstanding but they bought it over what do you bought it over 10 15 years and I wanted to make sure that you don't we've got a platform Christopher that of 17 billion worldwide and Sean. So that doesn't include about 2 billion from Euro life fan from mom.
Gulf Insurance company and some from just an idea and so we've got a better product 20 billion. We don't have to buy anything more when we grow at 10%. We are growing at 1.7 billion plus minus another Brett is how we look at it right. So.
So we're going to have a tremendous ability going forward when we can balance as we were saying about financial position.
Ability to finance, our insurance companies growth and buyback stock. So over time will be buying back a significant amount of our stock.
But we don't want to do it at the expense of our financial position that we don't want to as I said do it at the expense of restricting the growth in our insurance companies.
Thank you very much okay, perfect Nexstar question any.
Absolutely our next question.
Mccallum solo from solo capital management. Your line is they will be.
Well. Thank you very much for taking my question Brent good ball bonding.
Good morning, yes.
One quick.
Specific one on one more generally if I may specific one has to do with the with the.
Now on realized gain on go digit.
Yes.
Yes, because.
In India annual report of 2000.
18, I see that Youre, 45% stake in that company loans total of 3.4 million on the company lost money on yes.
So I was curious about that yes, so thats a good question.
At this is a company that's totally digitize ride as all does it still growing like a we'd in two years come a score.
The founder of the company has grown up to 300 million and more recent b.
Being able to you've been able to raise we can only own at the moment, 49%.
He's been able to raise about 10% little more than 10% and evaluation of 800 million plus.
And so.
So we might afford but on a 140 million something like that on an 50 million so that increase for our shares.
From 800, plus two what report.
Is that is where that 350 billion comes from but.
John you want to add to that share maybe just to give you Mikael a little bit more color, there's two components to that.
That's not that we hold in digit so that part that you're referring to is the common stock in a small portion of some pressures that we own as Prime noted were limited to a 49% interest in India. Both shares at a historic costs of about 16 million currently carry that Neil because we do our equity pickup on that basis.
49% for large unrealized gain that you've noted of just over 350 million relates to the convertible pref shares so thats, where we as as prime indicated they had three private equity funds come in and value the company at over 850 million our share percentage.
That on the convertible press that are.
Mark to market basis, as what you're seeing come through on net unrealized gain its not the equity accounted physician.
Right. Thank you very much further clarification on.
I have one more general I'm coming back with this year after year over year.
Yes and that is.
Hi, Good study the recent stock pickers market I am pretty confident that's turned parts, we will do very well.
Even if you.
The discrepancy or the divergence between growth and value.
No its closer than us, but im very worried that.
You come front a general.
Paul in start Mark as you are.
Whereas the does she will there be you said record levels.
Valuations anyway, you look at them.
We are extreme.
On.
My worries that if there is a general.
Collapse or slow collapse.
In the stock market.
Hi, I'm still very confident that for Fox coming to start to do much better than day indices, but.
But I sure that.
You'd be tracked down then of course, you can under spend relative.
Dollar losses, no thats, great and you never know and stock market, 50% dropped 30% drop which it could easily do how we would do but I do I mentioned to you to look at 2002, three and four annual report in 1999 to 2000.
To the stock market dropped 50%. This is of course, the dotcom biased, but but the whole market dropped 50% and.
Equity portfolios went up 100%.
So that.
So those.
You know values being.
Had a tough time for years and years, India, perhaps the whole decade. So if some of these high flying stocks come down.
You may not be surprised that the value stocks do well.
If history the any guide that's what's happened before.
Yeah, you know I'm worried that this time, you will be systemic which you wasn't in 2123 and it might it might well be that might well be that you might well be right on it.
Well. Thank you for your question then real added move onto the next one.
Absolutely.
Thank you. The next question is from the line of Jeff.
From Cormark Securities Your line is.
Hi, there can weren't hey, good morning, Jeff so prevalent.
Obviously begin the headlines of late has been the spread of the Corona virus and I've been getting some questions about that with respect to fair packs. So can you just frame.
For us a little bit maybe the extended the risk exposure from here boxes perspective, with respect to things like business interruption insurance and that type of thing is there any any sort of commentary you can offer up on upfront, yes, so on the insurance side Jeff.
Business interruption or anything else would be very minimal.
Yes, very minimal we haven't seen any pickup and claims and Andrea.
Looking at size for example in the past, we don't expect that to be significant.
But it could affect some of our investments in oil business travel might be.
Slow and.
Some other businesses you hear them on making comments at the from the investment side that might be.
A slow up but some of the insurance side Thats.
It's that.
Highly unlikely that will be affected bye bye.
By the current of fibers.
Okay. That's helpful. Thank you and then maybe just turning to be investment gains.
Specific to Q4.
Fairly sizable equity gain there was that the coach digit games it loaded principally in the fourth quarter.
That's correct, yes, yes, but that was in the fourth quarter, Yes, that's exactly right.
Jeff.
And then maybe just one last one here I know what part of the Mark to market.
Ceded with them.
Some capacity, leaving the market, notably from Lloyd.
Do you think that's sustainable or or as the sort of reorganize their ends and we see the rates improving is does that does that capacity starts back into the market in fairly short order.
Not in short order it'll it'll come back, but not in short order and the if history is any guide again, if you see what happened in the past you get a few years of.
Significant price increases you had some big companies like Lloyds is one.
AI Jie as public you said, the reducing capacity significantly that I think disrupted by 75% and a lot of the other large European companies have dropped at the social inflation. This.
This cat exposures so.
These hurricanes that come into Florida.
Big losses, right to the second sometime too.
Hit and.
And and minute tons price increases are taking place now, but but as you said, Jeff ton, but my that you might have a good run for a few years.
Thats whats happened in the past.
Okay. Thank you for that that's all I had.
Thank you Jeff field.
Last question.
Any.
Absolutely.
From sturdy energy private Investor Your line is now.
Hey, guys running Ben.
The press release and on the Great results on Capex, India and such as financial.
So I had a quick question on Bengal over there.
Oh on Capex, India side, So I don't if you have already disclosed this but.
So encouraging infrastructure, all who did affect sold into we'd like to almost or did you guys.
If you lose that inflammation.
And though we are we havent release that yet we will release at sometime but we haven't released it yet we just said that it was a out.
Doug Party institutional investor, although about validated the investment.
Okay, but my question.
Multiples, but.
FX, India sold.
I mean to total putting this JV degree.
The height that could you didnt each designation. So my question is coming from that generally as you know that the future conveniently muted a portable little or.
No I mean, you should look at it like this the whole low we happened to be fortunate but.
The airport other valuation, 100% dollop docking at about 1.4 billion.
And and so the valuation here was about.
2.8 billion less than 3 billion.
3 billion for Bangla International Airport, which is going from 30 million passengers second terminal second runway to 40, 550, 60, 70, and ultimately up to 90 million passengers. If you look at Shanghai is fading in excess of 20 billion us dollars.
So this is trading at 3 billion and it's a long ways off from Shanghai I understand that this is a private airport, it's really well run and.
And that's in the third largest city and and India as you know in Bangalore on and there's a ton of you know a cellphone engine is almost as many as in Silicon Valley.
But.
Yes, Thanks, and then I can validated that I think today, what is really phenomenal lemmings probably the best.
Thats a dubai.
The final question is that separate CMBS surely questions, we sold yet.
Posiet September the normal course, this little bit cancellation, so as we all know and you already mentioned that Thats India.
Sure volumes.
So if I lose.
Undervalued right so yes.
Hi, moving in that you guys could buy back all the bought back 1.2 billion mitigate gave an indication of management that you know is not that undervalued our.
No no no it's like anything else, we buy as much as we can and I forget exactly how much we bought we've disclosed that but.
With a net asset value of close to $17 in stocks trading at 12, and a half I don't think you need a lot of work to be done.
Figure out that it's pretty undervalued on India is in a tremendous witness emotive getting reelected last year has got a huge opportunity. The next five years.
Thanks, So thank you very much for your question and.
And I need thank you very much.
But no more questions.
And so.
Thank you for joining us all on the call. We look forward to seeing you at our annual General meeting a GM on April the 16th we invite you all to come for the meeting and.
Ill call robot will also be there. So we look forward to say you all thank you very much.
And that concludes today's conference. Thank you everyone for participating you may now disconnect.