Q2 2021 Fairfax Financial Holdings Ltd Earnings Call
Good morning, and welcome to Fairfax is second quarter results conference call. Your lines have been placed in a listen only mode. After the presentation. We will conduct a question and answer session at that time to ask a question. Please press star 1 on your keypad.
Time's sake.
Can we ask that you limit your questions to 1 today's conference is being recorded if you have any objections you may disconnect. At this time your hosts for today's call is prem of Wassa with opening remarks from Mr. Derek <unk>.
Mr. <unk> please begin.
Good morning, and welcome to our call to discuss.
<unk> 2021 second 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 risk factors the.
Most of foreseeable of which are set out under risk factors and our base shelf prospectus, which has been.
The first with Canadian Securities regulators and is available on SEDAR and which now include the risk of adverse consequences to Fairfax is business investments and personnel, resulting from or related to the COVID-19, pandemic Fairfax disclaims any intention or obligation to update or revise any forward looking statements.
And filed the desert required by applicable Securities Law, I will now turn the call over to our chairman and CEO from lots of.
Thank you Derek good morning, ladies and gentlemen, welcome to Fairfax is 2021 second quarter conference call I plan to give you some of the highlights and then pass it onto Peter Clarke, Our Chief operating officer the comment.
Ex insurance and reinsurance operations and Jen Allen, our Chief financial Officer to provide some additional financial details.
Fairfax had an outstanding second quarter with net earnings of $1.2 billion, Alright and esports.
Share of $43 and 25% and gross premiums were up 27%.
And for the combined ratio of 94, 3% and.
Insurance and investments are working well together.
<unk> book value per share and the first 6 months of 2021 increased by 15.
2% adjusted for the $10 per share common dividend paid and the first quarter.
The 2.
$541 per share.
Net earnings of $1.2 billion were a record for a quarter, but of course, the reflected significant unrealized gains.
All of our major insurance companies generated combined ratios of less than 100%.
On this from Peter.
And the block.
And the second quarter operating income was strong at $398 million net gains on investments were $1.3 billion with gains on net equity exposures of approximately 900 million and of $425 million gain on our preferred shares and day.
Digit and charge.
And the net gains on equities, including included unrealized gains on Blackberry Stelco and BBT.
Not included in the net gain numbers of mark to market movements, and non non insurance investments and the associates and certain consolidated and investments.
We have described in our annual report these investments increased and the second quarter by approximately $340 million.
And any gains or losses, and the securities will typically only be accounted for when sold we have provided a table on our MD&A on page 73 that provide.
The unrealized gains and losses on these securities.
As we mentioned at our annual meetings and in our annual reports and quarterly calls with IL 4 and the rest of accounting where stocks and bonds are recorded at market and subject to mark to market gains or losses.
And the annual income will fluctuate and.
Last 1 results will only make sense over the long term.
As I've said previously long term value investing has gone through a very difficult time for many years now.
<unk> of value oriented stocks versus growth stocks, particularly technology.
And have never been so extreme.
<unk>.
And the recent bash exceeding even the extremes of the dot Com era and 2000.
As the economy normalizes, we expect a reversion to the main with value oriented starts coming to the fall.
After the Pfizer vaccine was announced last November we.
And we started to see this take place.
In June we increased our ownership interest and Singapore reinsurance from 28, 2% and 94% for about $103 million. So the completion of a public cash flow and commenced and consolidating the assets liabilities and the results of our operations.
Singapore REIT.
We expect to acquire the remaining 6% and delist the company from Singapore and from the Singapore and stock Exchange, Singapore re as a general property and casualty insurer that underwrites business, primarily and southeast Asia.
Singapore rebuild joined the Fairfax Asia.
Operations and will facilitate the continued expansion and the region.
And on July 14, 2021, the company increased its interest and euro life to 80% by acquiring the interest of all months for cash consideration of approximately $1.43 million the remaining.
And so it's kind of equity interests and Euro life continues to be owned by Eurobank. The company will commence consolidating the assets liabilities results of operations Bureau of life and has consolidated financial reporting and the third quarter of 2021.
Your line is of Greek insurer, which distributor.
<unk>, it's life and non life insurance products and services through Euro banks net book.
Since our initial investment in your life. The company has increased its book value by 22% annually, thanks to exceptional underwriting and investment results.
We continue to have approximately 1.5 billion at the holding.
20 company predominantly and cash and short term securities.
He has no debt cash and the holding company and submit any and every contingency that fairfax might face and the future.
We're not making any long term investments with this cash other than to support the insurance and reinsurance operations.
With the closing of the Riverstone Barbados.
<unk> transaction, which we expect in August 2021, and we intend to fully pay off of our credit facility, while maintaining $1.5 billion and cash at the holding company.
At June 30 of 2021, the company's insurance and reinsurance companies held approximately 18 billion and cash and short dated.
Building companies, representing approximately 40% of our portfolio of investments.
Sure the interest interest rates rise as they may the value of our fixed income portfolio will be relatively unaffected as we have not reached for yield rising interest rates will lead to increased and most.
When the income as we are positioned to take advantage of it.
We continue to invest with the Kennedy Wilson and first mortgages for the term less than 5 years.
The insurance subsidiaries are growing significantly on track to generate 23 to 24 billion of gross premiums this year at a substantial underwriting.
Underwriting profit and.
Investment portfolio now exceeds 45 billion and our and our reported book value per share as present of 541.
And with strong underwriting underlying upward momentum.
Importantly, our fair and friendly culture.
Developed over 35 years continues to serve us well the.
We think the future is bright and the best is yet to come I will now pass the call to Peter Clarke, Our Chief operating officer to come back to comment on the insurance and reinsurance operations Peter.
Thank you Pam.
And our companies continue to produce outstanding results, the 27% growth and gross written premium over the second quarter of 2020 with 1 of the highest and our history generating premiums of approximately $6 billion in the quarter.
We also produced the combined ratio of 94% or 200.
And the $8 million of underwriting profit. Despite additional COVID-19 losses of $69 million and increased provisions on the first quarter U S winter storms of $87 million.
By comparison in the second quarter of 2020, we produced an underwriting loss of $13 million primarily due to.
Third 20 of our COVID-19 losses of $308 million.
On the underwriting front, northbridge and DNS reported the lowest combined ratios being 85% and 93% respectively.
All of our major companies again produced combined ratios well below 100%.
As mentioned.
And our gross premiums for the quarter was up 27% a per.
Approximately 25% adjusted for foreign exchange and an increase of approximately $1.3 billion in the quarter from the previous year.
This growth has been made possible by the favorable market conditions that prevail and many of our.
Hi, particularly in North America.
Allied World grew its premiums by 29% with growth, especially strong in the directors and officers and excess casualty segments.
Odyssey group's gross premiums were up 25% with expansion in both its insurance and reinsurance segments.
The market.
In Canada, Northbridge is topline expanded 36% and U S. Dollar terms as it continues to register impressive rate increases strong retention and new business.
And Canadian dollar and Canadian dollars premiums were up 22%.
Crum <unk> Forster.
<unk> increased its premiums by 30% driven by its accident and health Division and includes the rebound of its travel business that was significantly affected by the COVID-19 shutdown in 2020.
While these 4 posted the most impressive growth among our major companies breath and zenith also increased premiums.
Some of this quarter as well.
Of note Britt launched its innovative follow ons and syndicate key and the first quarter of 2021, and <unk> had gross written premiums of $77 million and the second quarter, which contributed to the overall, 18% growth rate of brick.
Growth was strong and our international.
National operations, as well with expansion and South South America, Eastern Europe, and South Africa.
Overall, our international companies grew by approximately $125 million year over year.
We expect growth to remain strong as overall price levels continue to rise at.
Double digit pace, our global footprint and exceptional and management teams gives us the ability to generate significant organic growth.
And the second quarter, our combined ratio of $94.3 benefited from a lower level of catastrophe losses and the quarter, but included increased provisions on.
An extraordinary the extraordinary winter freeze event in the U S and the first quarter.
This added to 2 combined ratio points and the quarter.
In addition, we absorb COVID-19 losses of $69 million or 1.7 points and the combined ratio principally in our reinsurance operations.
With the group and Allied World.
With respect of Covid are inception to date losses, now totaled 787 million of which approximately half is held and IBM <unk>.
Based on knowledge today, we expect these provisions to adequately cover our exposure.
At the same time the <unk>.
Endemic is ongoing as is much litigation and therefore, some uncertainty remains.
In the fourth quarter, we recorded favorable reserve development of $32 million or <unk> 8 of a combined ratio of point.
Which includes unfavorable development of $60 million of the previously mentioned.
At our COVID-19 losses that were attributable to the prior years.
Excluding the Covid losses, our reserves develop favorably again by $92 million our reserve.
Position continues to strengthen as our companies expand with today's world price business.
Another important side effect of the growth.
<unk> mentioned, we're experiencing is the reduction and our expense ratio of component of our combined ratio our premiums are growing faster than our underwriting expenses.
Once again this is most apparent at allied world, where the expense ratio and the quarter dropped the full 2 points from 2020.
We expect market conditions to remain strong throughout 2021, and well into 2020 to low interest rates, social inflation and reduced the industry risk appetite will keep the pressure on our companies are well positioned to continue growing organically our.
And our decentralized system allows.
We are the needs to respond quickly to opportunities in their markets when.
And when conditions are improving this is an especially critical Fairfax advantage.
I will now pass the call to Jen Allen, our Chief Financial Officer to comment on our investment results, our non insurance companies performance and overall.
Our commercial position.
Thank you Peter the results of the second quarter of 2021 were very strong building on the momentum we achieved and the fourth quarter of 2020 and and the first quarter of 2021.
We delivered net earnings attributed to shareholders of Fairfax of just over $1.2 billion and in the second quarter.
And in 2021 and of book value per basic share at June 32021 of $541, which represented growth and book value per share of 15, 2%. Adjusted to include the $10 per common share dividend paid and the first quarter of 2021.
Turning to some highlights.
Highlights on our second quarter results, Peter provided detailed commentary on our insurance and reinsurance operations. So I'll start with the results of our non insurance company.
And the second quarter of 2021, our non insurance consolidated companies reporting operating losses of $44 million compared to operating losses of 80.
And $80 million and the second quarter of 2020.
The second quarter of 2021 included Fairfax, India performance fee accrual of $43 million compared to nil and the second quarter of 2020.
And the first 6 months of 2021, Fairfax, India recorded of performance fee accrual of.
Approximately $100 million.
And with pre tax earnings attributed to Fairfax shareholders benefiting by about $71 million at Fairfax, India Noncontrolling interests was allocated 72% of Fairfax, India is expense.
Excluding the impact of Fairfax, India performance fee operating.
And from our non insurance consolidated companies decrease to a nominal loss of $1 million and the second quarter of 2020.
And that compares to $80 million and the second quarter of 2020.
With the significant improvement noted in the restaurant and retail segment.
The second quarter of 2000.
And in 'twenty, 1 saw stronger results from our restaurant and retail segment reported operating income of $16 million compared to an operating loss of $43 million and the second quarter of 2020.
As restrictions eased across Canada, we saw increased foot traffic at the Brit bricks and mortar locations.
This 1 added to robust e-commerce platforms drove significant double digit revenue growth and certain companies.
These factors combined with expense management programs that were already in place delivered healthy gross margins increases across our key operating companies with recognition for golf town for achieving.
Outstanding results from the second quarter of 2021.
And the second quarter of 2021, Thomas Cook, India continued to be negatively impacted by the reduced travel restrictions as a result of COVID-19.
During the second quarter of 2021, India's economy impacted by a second wave of COVID-19 pandemic.
But it appears that the economic damage was less and experienced during 2020 with 2 primary reasons for this first India now has the vaccine program in place and second and there was no nationwide lockdown that was imposed during the second wave as was done in 2020.
With the vacs need vaccination.
The penetration and India expected to continue to improve and the decline and case numbers from the second wave Thomas Cook has seen increased positive travel sentiment.
To this and we saw positive increases in revenue and Thomas Cook in the quarter as compared to last year. However, each follow on wave of COVID-19.
We continue to have an impact on revenues, but with global vaccine Rollouts. We are beginning to see international travel increase and expect this trend to continue.
At June 32021, we've seen significant improvements in the pre tax excess of fair value over the adjusted carrying value of our non insurance.
The mix and certain.
Consolidated non insurance subsidiaries of the company considers to be portfolio of investments.
And I will walk you quickly through a few highlights.
At June 32021, the pretax excess was $754 million compared to a deficiency or our adjusted carrying value.
Associated higher than the fair value at December 31, 2020 by $663 million.
That's an improvement and the first half of 2021 of over $1.4 billion net.
And that is not reflected in our book value per share, but the regularly reviewed by management as an indicator of investment performance.
And with with the restaurant and other segment and Thomas Cook, India, contributing $169 million and $65 million respectively, referring.
I refer you to page 72, and 73 and our second quarter interim report for further details on the underlying positions that are driving that $1.4 billion improvement.
And as we mentioned before we are focused on organic growth supported by smaller friendly acquisitions with the commitment to growing long term shareholder value.
Given our focus on the long term and the near term concerns on inflation, we continue to hold significant portion of our investment portfolio and cash short.
Short term investments and other short dated fixed income securities that represented approximately $18.1 billion or 39, 5% of the insurance and reinsurance companies investment portfolio.
While we've been extremely and low interest rate and inflation rate environment for some time things can turn quickly and significantly.
Gently and we want to make sure we're insulated from large swings that may happen.
This position Dampens, our interest income and the short term, but protects us from rising rates and inflation of tradeoff, we're willing to take to align with the focus on providing long term benefit to our stakeholders and expect to drive long term growth and our book value per share.
Our interest and dividend income of $161 million and the second quarter of 2021 was down from the $205 million and the second quarter of 2020, reflecting the lower interest income earned principally due to the general decrease and sovereign bond yields.
All of the maturities of our U S treasury bonds through 2000.
20 <unk>.
And net sales of our U S corporate bonds and the first half of 2021.
We added net purchases of first mortgage loans of 408 million and this first 6 months of 2021 that are secured by high quality real estate and the U S Ireland and the U K and the terms less than 5 years.
These investments will provide some benefit to our interest income in the later half of 2021.
Our consolidated share of profit of associates of $75 million and the second quarter of 2021 reflected strong results from our investments and associates and principally were comprised of share of profit of 27.
$7 million from Euro life 26 from Resolute 23 from Euro Bank $18 million from Atlas Corp, and it was partially offset by $11 million from Bangalore Airport, primarily related to the continued COVID-19 related travel restrictions.
We had a very favorable quarter with respect to our investment.
Portfolio, our net gains on investments of just under $1.3 billion and over $2.1 billion and the first 6 months of 2021.
Net gains on the investments and the second quarter were primarily comprised of the following with the largest component coming from our net gains of $884 million on our long equity exposure.
<unk>, which included unrealized gains on our Blackberry common stock and convertible debenture positions stelco and BTT capital. We continue to hold our long equity total return swaps of approximately 2 million Fairfax subordinate voting shares that had and the original notional amount of approximately $733 million or just.
$303.373 of share as.
As we look at potential investments that are available to Fairfax and fit within our long term focus Fairfax was among the best especially when you consider where our share price is trading.
We feel it's a very strong investment and the total return swap structure allows us to preserve cash and.
Liquidity and a very effective way.
Secondly, $443 million of net gains on our preferred stock with $425 million of that related to our investment and the digit compulsory preferred shares which I will provide details on shortly.
Third $94 million net gain on deconsolidation of of non.
And insurance subsidiary that related to Fairfax, India sales of its 48, 8% equity interest and <unk> for $165 million for a gain of $95 million and lastly, $43 million and our net gains on bonds principally related to our corporate bond portfolio.
A few additional comments on the 420.
And unrealized gain recorded on our investment in the digit compulsory convertible preferred shares.
During June 2021, the Companys, 49% equity accounted associate go digit infill work services or we referred to it as digit entered into agreements with certain third party invest.
5 years, whereas underlying general insurance subsidiary digit insurance will raise approximately $200 million of new equity shares valuing digit insurance at approximately $3.5 billion.
At June 32021, Fairfax estimated the fair value of digit using a probability weighted valuation.
Should model, where we ascribed 60% weighting to the fair value determined through and internal discounted cash flow analysis, and a 40% weighting ascribed to the risk adjusted transaction fair value implying of fair value for our investment and the digit compulsory convertible preferred shares of approximately $900 million.
<unk> that resulted in a net unrealized gain of $425 million representing on an after tax basis of book value per share of $14.60.
Upon closing of the digit insurance equity issuance anticipated and the third quarter of 2021.
And upon final approval by the Indian.
And the government of its previously announced intention to increase the foreign ownership limit from 49% to 74% as well as the company obtaining regulatory approval specific to our holdings and digit we anticipate recording and additional gain of approximately $1.4 billion debt represents an increase.
Book value per share approximately $46.
As we continue to advance our plans to monetize certain investments and strengthen our global insurance footprint. We have a number of key transactions that I would like to highlight that were completed in the quarter or subsequent to 2.
Starting with our insurance company transactions.
<unk> on July 14th 2021, we increased our interest and euro liked to 80% from the 50% by acquiring of the joint venture interest of owners for cash consideration of approximately $143 million.
I want to remind you of the disclosure and our 2021 annual report where we.
<unk> did you with euro life's gross premiums written of $512 million and an investment portfolio of $3.7 billion.
These are significant operations that will be consolidated into our results commencing in the third quarter of 2021.
On June 17th 2021, we increased our ownership.
Ownership and Singapore, REIT from 28, 2% equity interest to 94% for $103 million through completion of a public cash offer and we commenced consolidated the underlying assets liabilities and results of Singapore, REIT and the Fairfax Asia reporting segment and.
And finally as I mentioned previously we also.
We anticipate consolidating digit and the third quarter of 2021, following the receipt of the required approvals.
Over the last few years Fairfax has been quite active with the strategic monetization of investments and the second quarter of 2021, we had 3 transactions to note.
The first was the investment and mosaic.
So where we entered into a privatization of arrangement with the third party purchaser, which will exchange our current holdings of our debentures and warrants and cash of approximately $11 million for newly issued mosaic 25 year debentures will also acquire of 20% interest and the purchaser for approximately 4 million.
Captain and upon closing, which is expected to occur and the third quarter of 2021, we anticipate the deconsolidation mosaic of capital and commence supply and the equity method of accounting to our interest position of the purchaser.
The second transaction on June 11, 2021, which was with recipe.
They entered into and.
To sell substantially all of the assets and liabilities comprising its milestones restaurant brand transat.
Transaction will enable recipe to focus on the larger brands that generate significant free cash flow and dominate the segment segment with younger brands that offer attractive opportunities for accelerated new restaurant growth.
The asset.
Green liabilities for both mosaic and milestones were recorded as assets held for sale at June 32021, and lastly, as I already noted and the net gains commentary Fairfax, India sold its equity interest and Privy.
Various initiatives are underway as we continue to look for opportunities to monetize our investment.
Assets and turning to our liquidity position, we remained strong with our cash and investments at the holding company with being just under $1.5 billion at June 32021.
And the cash provides us with distinctive advantage that supports the decentralized structure and enables us to deploy our capital to the insurance companies efficiently.
We're not making any long term investments with this cash other than to support our insurance and reinsurance operations.
We continue to be prudent in terms of the deployment of capital strategy and to note on June 29, 2021, we amended and restated our 2 billion unsecured revolving credit facility with the.
Syndicate of lenders, which extended our term from.
From December 2022 to June 2026.
Our total debt to total cap ratio excluding earned on our consolidated non insurance companies decreased to $28.4 at June 32021.
$29.7 at December.
And for 2020.
Primarily reflecting the significant increase and our shareholders' equity and we anticipate at the close of the Riverstone Barbados traction transaction that we would have paid off the facility completely and our total debt to total cap ratio would've been the 27% of it closed prior to June 30.
In summary, it's been a very positive first half of 2021 with the dynamics of the market remaining strong. Our plan is to remain focused on organic growth looking forward to strong insurance and reinsurance subsidiaries focused on the underwriting profitability and the prudent reserving combined with our conservative investment managed philosophy.
<unk> Fairfax to continue to deliver excellent long term results.
Before closing I, just wanted to touch on our commitment to ESG, which has been meaningful from Fairfax since we began.
And as you've seen earlier this year, we published our first ESG or environmental social governance report that highlights the importance.
The <unk>, we've made to date, we think about ESG as being truly committed to doing good by doing well recognizing that theres always room to grow and improve we will continue to enhance our initiatives through 2021 and beyond.
Thank you for your attention and I'll turn it back over to prep and factory.
Jan rebel and look forward.
And it's Sri and your questions. Please give us your name and the company name and try to limit your questions Jordan. The 1 so the first of all of the coal Okay. Catherine we're ready for the questions.
And once again, if you would like to ask your question. Please press star 1 on your telephone keypad. The first question is coming from Jeff Fenwick of hormone Securities. Your line is open.
Hi, good morning, everyone.
Good morning.
Alright Jackson from them.
Hard markets continue to be very beneficial for Fairfax, I know, you're making the most of it.
And so just wanted to touch on that and this morning. The first 1 was with bridge.
There has been a period of time here, where they can reorienting the business.
And we're starting to see from some very good results there and the benefits from there and are.
Key insurance platform I noticed in your release there.
And you intend to sell of 14%.
Britt to owners and the transaction just wondering whats the decision to do that as it gets the job, bringing some additional capital and continue the growth.
And with that.
Yes.
So Jeff the reason for that is just what we announced some time back and we're going to conclude.
Conclude with the.
The Riverstone U K shale and.
And basically it gives us a lot of flexibility with the stock we should have the.
And the flexibility and we have a very good relationship with the homage and we can.
We can.
And by that back.
Soon so Peter you want to add to that.
Yes, no I think of discipline at all release, Jeff to the Riverstone U K transaction and.
Or 1 homers had and investment in there and now Theyre moving some of that those proceeds of over 2.2 Brent.
And like Prime side and continue our long term relationship with Walmart, which has worked out extremely well.
Okay. Thank you that's helpful and then just 1 more.
With respect to Crum <unk> Forster.
Sure.
Crum really saw a very significant step up and the other reported premium growth and the quarter and it'll be doing well, but this quarter was.
30% I believe year over year in terms of net premiums so what sort of triggered that that acceleration of chrome is just pushing on some new lines and <unk>.
The event.
The hard markets, there or any color you can offer on that might be helpful.
Sure, Yes, I think the biggest the biggest thing that Crum <unk> Forster was there.
And you started writing premium again and their travel book.
The second quarter of 2020, essentially their travel premium.
Advantage and went to zero and and so now they are starting to write that business again, and it's starting to grow so that was probably just the biggest.
Factor and the sort of the significant growth.
And from Forrester.
Okay.
Okay, well I'll re queue and let someone else ask the question. Thanks terrific. Thank you Jeff Catherine next question. The next question is coming from Tom Mackinnon BMO capital cash flow.
Okay.
Yeah, Thanks, very much and morning, everyone Goodbye and Tom.
With respect of digits.
Premiums.
Still the intention that you expect $1.4 billion.
The unrealized gain and the third quarter and.
And then another potential $400 million when the final approval to increase foreign ownership comes and does that still the thinking.
And I know it's.
425 million, that's what Jim talked about and the second quarter. The 1.4 billion will come after the regulatory approval and the approval by the.
The government, it's more like the administrative rulings to go to 74% as already phosphide legislation, but.
Those 2 things have to be done and.
And I have had the gets done and the third quarter all of the fourth quarters whenever it gets done but the.
Addition will be $1.4 billion.
Okay. So the total addition will be 1.4.
Julian.
So the other way to look.
<unk> got a 1.8 billion and in total of which $400 million.
Mark to market accounting rules, we don't like reporting it to let's actually happen.
But accounting rules of very specific you have to show the.
Because its 200 million that came in and you have to show.
The.
The increase in and.
And value of digit and so that's what we did.
Okay. So it was $1.8 billion sort of in total and you booked $425 million of that now so there's another $1.4 billion to come is that the way to think of that that's the way to look at it yes.
That's great and just.
With respect to the.
2 other transactions that will close soon riverstone and.
And.
Rich.
It looks like your book some gain from the Riverstone transaction and the second quarter would we anticipate.
And any sort of game when that closes in August of 2021 and.
And then what about as well is there a potential gain when that's a 14% sales transaction is completed.
The.
And so the.
Riverstone transaction will close but there's a there's.
Portfolio of approximately of failure and $1 billion to Jan debt.
And 3 that we will.
Buying back and the next 2 years at the end of next year, so of the year and a half.
And that's.
For our rig count and the fluctuations and that that portfolio accrue to us at the end of the first quarter. It was.
Small deficit at the end of.
The second quarter was a positive number so that youll see that.
Going up and down over the quarters still.
Should we take and we can take at any time up to the end of December 2022.
And now and then Brett is there a gain there and Britt.
And Britain, but theres no.
The changes that Tom.
It's fixed and we don't get any gain we don't get any loss.
Okay. Thanks for that.
Thank you Tom and next question Catherine. The next question is can be from Jimmy <unk> National Bank Financial Your line is open.
Yes, thanks, and good morning, and good bye.
Hey, Jamie.
The first question is on the on the reserve development and the quarter and I guess for the first the first half of the year kind of coming in the 1 percentage range I'm seeing some a little bit more favorable reserve development from other insurance companies and I'm. Just wondering if you can give us a little bit more detail as to what youre seeing that.
Yeah.
On that front, if there are and you can have any comments and maybe around the Odyssey, where we saw.
Some unfavorable reserve development.
Net.
Jamie and we've got beta yeah of the Chief operating officer, and he used to be chief actuary. So Peter.
Got my share.
Yes.
Yes.
Jamie I think what's distorting the numbers a little bit is.
We had approximately $60 million and development on Covid losses.
So that's sort of a 1 off thing and our mines.
And excluding the Covid losses, I think we had favorable development of around $90 million, which isn't.
Isn't that far off from the previous year.
And generally speaking.
It's the second half of the year, where we do more thorough reserve reviews spin.
Specifically off the third quarter reserves and that's when we'll make more significant adjustments.
Is there a sort of continue.
We are extremely strong and I think.
Our companies are very conservative on the loss picks theyre, making on the current years.
You know.
And we would expect that we'd be building up some redundancy as we go through this the strong pricing environment.
Our basic view.
Jamie that we've said for many many years now is that the past reserves can.
And developed favorably.
Unfavorably and we just want it to be developing favorably and so it's a.
Risk and the property casualty business and.
We've had favorable development I think.
More than a decade now and.
Perhaps even longer than that but that's a very important.
And a requisite and the property casualty business.
Okay understood on the.
On the Covid.
Loss development.
Can you describe what it was that was driving that is that anything related to B I R.
A little bit more color on those Covid reserve development.
Yes really.
It relates to our reinsurance business, primarily at Allied and and.
And the Odyssey.
And it's a non non U S. So it's in Europe, where there's still uncertainty around what's covered what's not covered is it 1 of many events. So.
And it's.
It's really just IV and are that's still being put up on.
On the <unk>.
Book, mostly in Europe.
Okay and related to be I guess related to <unk> and some of the issues you might remember there was the <unk>.
K ruling came out late last year, and Thats still filtering through the system.
Okay.
And good understood allowance.
<unk> My second question with volume would be on.
On the share buybacks.
Stock trading fairly low of the cash position as the.
The building and I saw some buybacks for the treasury.
Can you update your comments and views and thoughts on the share buybacks and as it relates to I.
The swap that's still in place.
Yes.
Yes, the swap.
Jen mentioned.
We're very we think of.
The shares we agree with you of the shares are undervalued and.
And in terms of buying banks, we always balance that of being financially sound and we've got a hard market.
Banding.
So we have to be.
The cognizant of that so we can take all of that into account.
And.
Jamie and and.
And then react accordingly.
Okay I'll re queue.
Thank you Jamie next question.
Catherine and and.
Next question is coming from Julien Roch private Investor Your line is open.
Good morning, congratulations on the wonderful quarter for the total return swaps what are the expiring.
And they now and it can be extended beta they can they don't expire on anytime day and weekend.
Can continue to extend them as we as we like junior.
Okay. Thanks, and in terms of the monetization of the investments are you guys looking to do any other big monetization in 2021 or is that just ongoing process.
It's ongoing of course these are things.
And that are in the marketplace. So we can talk about the until we actually have done it.
But but you don't know as Jen mentioned, we continue the process.
Okay. Thanks, a lot.
Thank you and junior and next question.
Catherine and.
The next question is can be from Jack Grant of water Securities. Your line is.
And it's open.
Good morning.
Graduations on the great job, you've been doing from much like Berkshire Hathaway has run into the asked about succession plans and the future can you share anything on that front in terms of what the future holds.
Maybe retire.
We are available to run the show the Fairfax. Thank you on that.
Very good question.
It's a very important.
And then and.
And that's a question that refocus on of course, all the time of directors focus on it.
I focus on it because we are trying to build our company over the long.
A long term and.
And so we made out of something happens and me today, the director of know exactly what to do.
The 62 the controlling.
The company knows exactly what to do and.
So of course.
Much focus on what you say all of our companies.
Half of succession plans.
Through the organization.
And the.
And you might've seen over the years.
<unk>.
The internal succession.
Always be in terms of succession and would be in terms of succession for each of our companies and it will be in terms of succession from me. So.
With review of it and.
And feel very comfortable that we've got the right people to take over.
But good question Jack.
Thank you.
Okay.
Catherine next question please.
And the next question is coming from the council of basketball basketball capital.
Capital Management your line.
And as open.
Very much for taking my questions I have 2 if I may but the first 1 is on the evaluation of digit and if I've understood correctly.
The you value are a combination of a D C S and.
Based on the transaction.
The.
The company is doing with the private equity firms.
Yeah.
If I understand correctly.
The the reevaluation of digits.
Despite.
And not being totally dependent on the.
Private equity people has been performed.
Following the investment by the private equity people. So my question would be if that transaction and finally doesn't come to fruit to them and regardless of any penalties from the investors or anything like.
The would you would you.
Revert back to the valuation of <unk>.
That's my first 1 and the second 1.
And I may and.
Yeah.
To do with the reconciliation on page 73 of the.
And <unk>.
Of the report.
And because I've looked at it and and I see that the.
For the non insurance of.
Associates that are not least debt the reconciliation.
Not necessarily because the debt.
The dollar figures.
Core insight, but that's not the case with the with the restaurants and the other Fairfax, India and amongst Cook, India and if you could help me bridge the gap or understand why.
The the the figures are different and how Ho Hum to go from 1 to the.
And roughly the that'd be often great of a little so thank you very much. Okay. Thank you for the both questions. The first 1 non digit that's a.
And when 200 million comes out at the 3 and a half billion dollar market capitalization and very good investors, but are very significant.
Uh huh.
Market cap on a company thats growing significantly but its running at the last number. We gave you all was about $450 million of revenue growing at a huge rate and India, India is itself growing.
And market cap is very significant.
So the $3.5 billion.
And results in a $1.8 billion gain and the question is how much do you recognize that the second quarter and how much do you recognize that.
Of those 2 things happen that I talked to you about.
And so the gen explain that using models, we figured it was 400 and.
At value and.
$25 million.
But that's that's just the judgment call the 1.8.
The billion will be the number at the end of the day, but that's the.
That's subject to a very subjective because it's only 200 million that's gone and on a $3.5 billion of market cap.
We think.
And did it is going.
And to grow very significantly we've got a great guy and <unk> going out of the building the company.
But there is no risk of that number of being at.
The turn back if for the.
If we don't get regulatory approval of whatever because these.
400, and done deals like the $200 million has been signed sealed and delivered so there's no risk that they can back out and so on the regulatory approval and now and the 74% going through.
On your second question why don't I pass it to.
Jen.
And I think.
If you wanted the additional details and you're more than welcome to call. After by high level I think the easiest answer can explain it would be your biggest driver is for Fairfax, India portfolio.
And note 6 where we show the total carrying value versus fair value you have Bangalore airport in there which is the way.
And the accounting standard works is that Fairfax, India is carrying value and Fairfax only has a 28%.
Equity interest in Fairfax, India. So when you actually look to the back of at page 73, We're then taking only or 28% interest so that would be your largest disconnect on how.
We look at it because note fix is almost like a gross debt basis, and then and the back of what our attributable book value per share would be accretive for our Fairfax, India, but if you want more details I can I can walk you through it offline and the Gen. We talked about that and the Rob.
The annual report and explain all of that data yes.
And I know that might be a good place to look as well and page 10 of the annual report we have the similar table and and we provide the reconciliation.
So thank you very much of your question.
Catherine next question, please turn rate, yes, yes.
Yes. Thank.
Thank you.
The next question is coming from Alan Parsow Elkhorn partners.
Your line is open.
Hey, Praful, great quarter, and good morning, Alan.
Oh.
And I think I heard just Friday and on a trip so I'm on the mobile, but I think I heard that you talked when you talked about the unrealized and the equity portfolio.
You mentioned and the second.
What are the there were significant gains and Blackberry and unrealized and both of the debentures and the common.
Oh, It does does that and for which I think it does but I don't know does that infer that none of the Blackberry was sold and the second quarter.
Yeah, that's exactly.
Great.
And none of the Blackberry was sold because the total unrealized yes.
Okay. So the.
Up to this point the company hasn't been able to take advantage of.
Of.
So the true.
And <unk>.
Them or the other.
The significant.
Or outsized gains and well fluctuations of let's just say.
No I think thats right, we haven't been.
EBITDA to take advantage of it.
We're insiders, we've got restrictions and.
We talked about that last quarter too and.
Active and of course, we are very supportive of John Chen and all of the good things that he's doing with with Blackberry.
Right, but I thought if I heard you correctly you after the first quarter call debt any restrictions.
Disappear or is just after the first quarter or does that mean that.
The company is permanently.
Permanently on the.
The list of.
And Thats a good question on and I know, it's not permanently but when you're on the board and we've got the significant interest that we have.
There are.
The times quite periods and.
And.
Restrictions that apply to significant shareholders and but it is not known.
Youre not permanently restricted at all.
Okay. Thank you.
Thank you very much Allen can be of the next question Catherine.
The next question is coming from.
Jamie Diamond of National.
The financial your line is open.
Oh, yes.
Yeah, and he's going to follow up on the on the performance of non insurance subs and.
And it looks like it's a little bit better and Q2 and are hoping you can give us some mass from additional color and commentary on how the non insurance subs retail.
Of all restaurants on the scope of performing early into Q3.
And in particular, and Canada, where we're at where we're much more open and this month and we have been yeah. So that's of Jamie the restaurants, and you'll see that runs out and so they haven't really without having to come out I think the recipe that will come out and and Theyre doing and.
Better but of course.
Ontario has just opened.
And a dining and our dining and.
And for the most of the year.
And there are very difficult the restaurants out of a very difficult time in terms of being closed if youll see what's happened in the United States once the.
And much went restaurants will open and they've gone through 2019 level and so we expect the restaurants will bounce back significantly Fairfax, India had Thomas Cook business went to zero.
No travel out to speak of so that was difficult.
So.
So this pandemic from many of our and investments was difficult.
But that's all you know I'm exaggerating to make the point, but and.
And that's all in the past it's on its way back and these are good companies good management and we.
And we see over the long term.
The good returns from them.
Yes.
And I was also just can opt in terms of like the revenue side looks like it can be good are you.
What do you of any comments on the.
Labour side of it or the expense side of it on the Azure reopened and are we can see that revenue uptick flow.
And to the bottom line and those.
Yes, Jamie.
All of those things and pruning of the restaurants, we think will the revenue will be through 2019 levels. Once we back up and unfortunately lots of smaller restaurants have gone out of business and so if you want to go out of dining.
No.
The big restaurant chains that where the action is going to ban.
And.
Of.
Yeah.
Recipe of expects and the yes to come to do well.
Okay. Thanks.
Thank you Jamie any more questions okay.
Net.
We have no further questions at this time.
Okay and there are no further question. Thank you all for joining us on this call and thank you Catherine for the hosting it.
And so thank you John next call. Thank you very much.
This will conclude today's conference all parties may disconnect at this time.