Q3 2021 Fairfax Financial Holdings Ltd Earnings Call
Good morning, and welcome to Fairfax is third 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 one on your phone keypad for time sake. We exited you. Please limit your questions to one.
Today's conference is being recorded if you have any objections you may disconnect at this time.
Host for today's call is Prem Watson with opening remarks from Mr. Derek <unk> Mr. <unk>. Please begin.
Good morning, and welcome to our call to discuss Fairfax is 2021 third quarter results. This call may include forward looking statements actual results may differ perhaps materially from those contained in such forward looking statements. As a result of a variety of uncertainties and risk factors. The most foreseeable of which are set out under risk factors in our.
Our base shelf prospectus, which has been filed 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 a related to the COVID-19, pandemic Fairfax disclaims any intention or obligation to update or revise any forward looking.
Statements, except as required by applicable Securities Law, I will now turn the call over to our chairman and CEO Prem Whatsapp. Thank you Eric Good morning, Ladies and gentlemen, welcome to Fairfax is 2021 third quarter conference call I plan to give you some of the highlights to pass the call to Peter Clark.
<unk> operating officer to comment on our insurance and reinsurance operations and Jen Allen, our Chief financial officer to provide some additional financial details.
We've had record earnings of almost $2 5 billion in the first nine months of 2021, it already exceeds our highest annual earnings ever of 2 billion book.
Book value per share grew by almost 20%, including a $10 per share dividend.
Combined ratio for the nine months was 97% the third quarter was impacted by Hurricane Ida and the German flat European floods with a combined ratio of 101%.
Peter will give you more details on that gross premium.
For the nine months were up 23% and 25% in the third quarter with steady rate increases across all our major lines of business with the exception of workers' compensation.
Our insurance and reinsurance business is growing rapidly all over the world and we expect to write about 23 and a half billion.
Gross premiums in 2020, one up about 24% from 2020.
All through 2020 last year at our conference calls.
I had highlighted to you that as shown on page 188 of our 2019 annual report because that that was all that was available than are.
Now page 2001 of our 2020 annual report there were only four years out of 34 years.
When we had a negative investment return in each case, we rebounded significantly that next year.
Just to highlight that again the four years was 1990, we were down four 4% 1991 up 14, 6% and 1999, we brought the whole investment portfolio was down two 7% in 2000 and next year. It was up 12, 2% in 2013.
<unk> the whole investment portfolio was down four 3% 2014, the next tier up.
Eight 6% and finally in 2016, the portfolio was down 2.2% than 17, the following year up six 8%.
Four out of 34 years and each time.
Investors worried about our investments investment results well much better than expected.
In the first quarter of 'twenty 'twenty, we had a negative three 6% return on our investment portfolio, but by the end of the investment returns more than robust and we ended the year with a positive return of two 4%.
And the first nine months of 2021.
Investment return was 7%, which resulted in a total investment return of three 3 billion.
You will of course note that.
Half of the investment portfolio was earning nothing because it is in cash and short term.
Securities.
Our history has shown that our returns are very lumpy and this has worked for us over the last 35 years, we have never focused on steady quarterly earnings quarter by quarter.
Even though the stock market really loves it currently.
Here's how our major common stock positions that are marked to market in our financial statements did in the first nine months of 2021.
Blackberry was up 47% Stelco was up 64% Kennedy Wilson, 17% I have traveled while 56% if you take the top 20.
Common stock positions, which are mark to market in our financial statements. They were up on average about 22%.
Not included in the above IRA associates, and consolidated investments, which are not mark to market. He has another large positions that in the first nine months of 2021 eurobank.
8% Atlas call up 40% quest up 68% resolute up 82% Fairfax, India up 36% recipe up 17% and Thomas Cook up 39% on average.
For that group of names up 32%.
Book value per share as I said was up 20% in the first nine months of 2021. However, this does not include the increase in our equity accounted investments and our consolidated investments, which are not mark to market as we mentioned in our press release, if we did mark them to market, we would add 400.
83 million or $19 per share on a pre tax basis being the excess of fair value over carrying value as of September 30th 2021.
Also as mentioned digit.
With closing up its share issuance and idea approval to increase our ownership about 49% would add approximately $1 1 billion up $37 per share.
These are added to our book value book value would be in excess of $600 per share.
As I have said previously long term value investing has gone through a very difficult period for about a decade now valuations are value oriented stocks versus good stocks, particularly technology have never been so extreme exceeding even the extremes of the dot com era.
<unk> 2000.
As the economy continues to normalize we expect a reversion reversion to the main with value oriented stocks coming to the fall.
We continue to believe our common stock positions.
<unk> continued to be an undervalued, even though they've gone up significantly as I just mentioned.
I remind you that in the three years.
2000 to 2002, the downturn for the three years 2000 to 2002, most stock market indices in the United States, Canada, and Europe were down about 50%, but our stock portfolio was up 100%.
On August 23rd Fairfax completed the sale of Riverstone, Barbados, receiving total consideration of $696 million.
As part of that transaction, we received a contingent value instrument for potential proceeds for up to $235 million based on future performance of Riverstone in the UK, which we have not recorded any value on.
We've actually Luke.
And the entire Riverstone U K team all the best going forward, we expect them to do very well.
We continue to have approximately one 5 billion at the holding company predominantly in cash and short term securities. Please note our cash in the holding company is to meet any and every contingency that Fairfax might face.
Not making any long term investments with this cash other than to support our insurance and reinsurance operations I'll now pass the call to Peter Clarke, Our Chief operating officer to comment on our insurance and reinsurance operations Peter Thank.
Thank you Prem.
Our company has continued to produce outstanding underlying result, the 25% growth in gross premium written over the third quarter of 2020 was once again very strong.
Generating gross premiums of approximately $6 billion in the quarter.
We produced a combined ratio of 101 or an underwriting loss of $47 million in the quarter, which included $605 million of catastrophe losses, principally from hurricane Ida and the European floods.
Total catastrophe losses added 13 nine points to the combined ratio in the quarter.
By comparison in the third quarter of 2020, we produced an underwriting profit of $53 million or 98, five combined ratio.
<unk> catastrophe losses of $219 million or six combined ratio points.
And COVID-19 losses of 143 million or four combined ratio points.
In the third quarter of 2021, we had no significant COVID-19 COVID-19 related losses.
Adjusting for the above average catastrophe losses are.
Our underlying combined ratio is running at a 94 combined ratio for the year to date and 92 for the quarter.
On the underwriting front.
Northbridge and zenith reported the lowest combined ratio as being 90 and 92, respectively.
While Allied Allied World also had a strong quarter at 94.
Odyssey group and Brett had elevated combined ratios driven principally by catastrophe losses.
As mentioned, our gross premium for the quarter was up 25% an.
An increase of approximately $1 2 billion from the previous year.
This growth has been made possible by the favorable market conditions that prevail in many of our markets, particularly in North America.
Allied World grew its premiums by 24% with growth, especially strong in directors and officers and excess casualty segments.
Odyssey group's gross premiums were up 23%.
And continued expansion in both insurance and reinsurance segments.
Written premium was up 38% in the quarter, including key it's innovated innovative follow on syndicate that started writing business in 2021.
It should be noted that under accounting standards, Brett Maas consolidate 100% of key results.
As it has effective control of the company, even though it only has a 20% economic interest.
Excluding key Brit gross premium was up 18% in the quarter.
In Canada, Northbridge is topline expanded 21% in U S dollar terms.
As it continues to register impressive rate increases strong retention and new business.
Crum <unk> Forster increased its premium 22% driven by its accident and health Division and includes the rebound of its travel and student health business that was significantly affected by the Covid shutdown in 2020.
Growth at Zenith was more modest as it continues to face the headwinds of the competitive workers' compensation market in the United States.
Expansion was strong in our international operations as well with growth of approximately $150 million year over year fair.
Fairfax Asia's premium was up 29% this quarter and included a full quarter from recently consolidated Singapore REIT.
Our companies in South America, Central and Eastern Europe, and in South Africa, all registered strong growth in the quarter.
Across all of Fairfax, We expect these trends to continue as rate increases remain robust our diversified portfolio global footprint and exceptional management teams gives us the ability to generate significant organic growth.
As previously mentioned our combined ratio of 101, one included 13 nine points of catastrophe losses.
Hurricane Ida and the European floods were the main drivers of the catastrophe losses.
Which resulted in losses of $340 million and $174 million respectively.
Hurricane Ida as to estimated to be one of the top five cost costly storms in history.
Made landfall in Louisiana as a category four and went onto to produce flooding as it as its remnants pass through northeastern United States.
As mentioned previously key is consolidated into <unk> results.
For the year to date September 30, excluding key Brit combined ratio was 101 point $103 one.
As Kees earned premium catches up to its underwriting expenses and its catastrophe losses, we expect he will benefit Brit combined ratio going forward beginning in 2022.
Year to date aggregate catastrophe losses, and Covid losses of over 1 billion had been absorbed without and within our reported combined ratio of 97, 3%.
In the quarter, we recorded modest favorable reserve development of $70 million or one six points on our combined ratio.
There were no material changes in our Colgate ultimate losses in the quarter and.
And as of the end of the third quarter, we hold $431 million and net unpaid claims for COVID-19 of which 73% is IV NR.
We believe the reserve position in our main operating companies continues to strengthen.
As we expand with today's well priced business with price increases exceeding loss cost.
The companies are currently in the process of their annual actuarial reserve reviews, which will be reflected in our fourth quarter results.
As has been the case in recent quarters. Our expense ratio has continued to benefit from the sharp increase in premium volume. Our overall underwriting expense ratio is one five points lower quarter over quarter.
Helped mainly by Allied World, where the expense ratio in the quarter dropped two nine points in 2021 versus 2020.
Yes.
We expect market conditions to remain strong throughout 2021 and well into 2022.
The main drivers of the hard market continue to be low interest rates social inflation.
And in this industry participants reevaluating their risk appetite and capacity deployment.
Our decentralized operating system continues to service well, allowing our companies to respond quickly to opportunities and opportunities in their markets.
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 financial position.
Thank you Peter.
Results of the third quarter of 2021 continued to be positive building on our momentum we achieved in the fourth quarter of 2020 in the first half of 2021, we reported net earnings attributable to shareholders of Fairfax of $462 million and just under $2 5 billion in the third quarter and first nine months.
2021, respectively.
With book value per basic share at September 32021, $562, which represented a year to date growth in book value per share of 19, 7% adjusted to include our $10 common share dividend paid in the first quarter of 2021.
Peter has already provided detailed commentary on our insurance and reinsurance company. So all focused on highlighting the results from our non insurance company.
Excluding the impact of Fairfax, India is $18 6 million of performance fees to Fairfax recorded in the third quarter of 2021.
And nil in the third quarter of 2020, the operating income of our non insurance companies improved by $43 7 million.
Which principally reflected higher share of profit from Fairfax, India is an investment in their associate ICL finance.
Stronger results from our restaurant and retail segment, which reported an operating income of $59 million compared with $47 million in the third quarter of 2020 with the third quarter of 2020 benefiting from the government subsidies that reduced the 2020 expenses.
Revenue grew by 12, 8%, reflecting easing of COVID-19 restrictions across Canada that drove the increased foot traffic at the bricks and mortar location.
The growth in those revenues combined with expense management programs that were already in place noted healthy gross margins across the key operating companies.
And lastly, a lower operating loss in our other segment, which primarily reflected the deconsolidation of Fairfax Africa and its subsidiary <unk>.
And our fourth quarter of 2020, which negatively impacted the third quarter of 2020 by $45 million.
And it was also we saw the benefit in 2021 of increased business volumes at boat rocker and Dextera group if.
If you exclude the impact of Fairfax, India is $118 million of performance fees to Fairfax and the first nine months of 2021 and the reversal of the performance fee of $47 million in the first nine months of 2020.
The operating income of the non insurance companies improved by about $175 million.
With $141 million attributable to our restaurant and retail segment, an improvement of about $29 million at Fairfax, India.
As noted in the first nine months of 2021, Fairfax, India required a performance fee accrual of 118 million with pretax earnings attributed to Fairfax shareholders benefiting by about $83 million at Fairfax, India, Noncontrolling interests will be allocated 70% of India's extend.
Yeah.
At September 32021, our pretax excess of fair value over the adjusted value of our non insurance associates.
And certain consolidated non insurance subsidiary that the company considers to be portfolio investments was $483 million, which compared to a deficiency or our adjusted carrying value was higher than the fair value at December 31, 2020 of $663 million.
That improvement in the first nine months of 2021 of over $1 $1 billion has not been reflected in our book value per share, but it is regularly reviewed by manager management as an indicator of the investment performance.
The non insurance associates accounted for $912 million of that appreciation principally attributed to Atlas Corp, a $422 million quest at 243 million Euro bank of $184 million and the improvements in certain consolidated non insurance subsidiaries of $234 million, which are <unk>.
Primarily Fairfax, India of 128, and Thomas Cook at 78 million I'll refer you to page 79, and our third quarter interim report for further details on the underlying position that drove that $1 1 billion improvement.
As we mentioned before we're focused on organic growth supported by smaller friendly acquisitions with our commitment to growing long term shareholder value.
Focusing on growing long term shareholder value with and with our concerns on inflation. We continue to hold a significant portion of our investment portfolio and cash short term investments and other short dated fixed income securities that represented about $21 2 billion.
Or 44, 1% of the insurance and reinsurance companies investment portfolio as.
As we said previously this position Dampens interest income in the short term, but will protect us from rising rates and inflation.
Our interest and dividend income of $167 million in the third quarter of 2021 was down from the $182 million in the third quarter of 2020, and primarily reflected lower interest income earned principally due to a general decrease in our sovereign bond yields.
Sales of maturities of our U S treasury bonds throughout 2020, and net sales of our U S corporate bonds in 2021.
Was partially offset by higher dividend income on common and preferred stocks.
We added net purchases of $1 2 billion of Indian government bonds with an average maturity of 4.0 years and first mortgage loans at $501 million in the first nine months of 2021, which are secured by high quality real estate in the U S. Ireland U K and have terms of less than five years.
Investments will provide some benefit to our interest income in the remainder of 2021 in the coming years.
Looking at our consolidated share profit of associates of 227 million in the third quarter of 2021, reflecting strong results from our investments in associates and were principally comprised of a share of profit of $82 million from resolute $43 million from Eurobank and $20 million from Atlas Corp.
Looking to our net gains on investments in the third quarter of $3 70, $375 million just over $2 5 billion for our nine months 2021.
The net gains on investments in the third quarter of 2021 were comprised primarily of net gains of $397 million on our digit compulsory convertible preferred shares which I will provide further details shortly.
Net gains of $31 million on our long equity exposures, primarily reflecting net gains of $157 million on our common stocks and a net gain of about $86 million on the sales of toys R Us Canada.
That was partially offset by net losses of $117 million on our other equity derivatives that were mainly our long equity total return swaps and net losses of $106 million on convertible bonds, which primarily related to our Blackberry convertible debentures.
A few additional comments on the $397 million in realized gain recorded on our investment in digital.
You recall from our second quarter conference call, we hold a 49% equity interest in associate go digit infill work services or we refer to it as digit who entered into agreements with third party investors, where its underlying insurance subsidiary digit insurance is going to raise $200 million in new equity shares.
That value digit insurance at $3 5 billion in.
In addition to that 49% equity interest in digit Fairfax also whole digit compulsory convertible preferred shares which are accounted for at a fair value through profit and loss.
At September 32021, Fairfax estimated the fair value of its investment in those digit compulsory convertible preferred shares by updating the probability weighted valuation model that we described last quarter.
We've now attributed a higher weighting of 65% to the risk adjusted transaction fair value and ascribes, 35% weighting to the fair value that was determined to an internal discounted cash flow analysis with the change in that probability weighting, reflecting positive developments occurring in the third quarter of 2021.
Relating to the closing of the underlying $200 million capital raise.
The implied fair value of our investment in the digit compulsory convertible shares was approximately $1 3 billion, which resulted in net unrealized gain of $3 97 in the quarter and 820 <unk> in the first nine months of 2021.
Upon closing of the digit insurance 200 million equity raise that's now anticipated to be completed in the fourth quarter.
And the company consolidating digit upon attaining a specific regulatory approvals to increase our equity interest above 49% can be controlling interest we anticipate to record an additional gain of approximately $1 1 billion that will increase our book value per share by about $37.
Looking at a couple of key transactions just to highlight that completed in the quarter with our insurance companies. We mentioned earlier last quarter on July 14th we increased our interest in euro life to 80% from 50% by acquiring the joint venture interest of owners for cash consideration of approximately.
143 million and.
And started consolidating the assets liabilities and results of Euro life.
We re measured our 50% joint venture interest in your life to its fair value of $450 million and recorded a net gain of $131 million.
On August 23rd we completed the sale of our 60% joint venture interest in Riverstone, Barbados to CVC and received consideration of $696 million.
And then on August 27th Brit issued its shares representing about a 13, 9% equity interest in two owners for cash consideration of $375 million that was subsequently paid by Brit as a dividend to Fairfax.
And lastly, looking at our non insurance companies, we continue to look for opportunities to monetize our investment.
And we completed the sales of toys R. US Canada on August 19th 2021 week, we sold the operations, we still maintain the underlying real estate of toys R. US Canada for consideration of $90 million and we deconsolidation the toys R US Canada from the non insurance companies reporting segment and recorded a real.
Life gain of $86 million.
The liquidity position of the company remains strong with our cash and investments at the holding company of over $1 5 billion at September 32021, and our credit facility borrowings have been fully repaid.
The holding company cash as we have mentioned before supports the decentralized structure and enables us to deploy capital to our insurance companies efficiently.
We continue to be prudent in terms of our capital deployment strategy and our total debt to total cap ratio, excluding the consolidated non insurance companies decreased by 4% to 25, 7% at September 32021 from 29, 7% at December 31 2020.
Which reflected significant increase in our shareholders' equity attributed to our net earnings of just under $2 5 billion and a reduction in the debt both at the holding company and our insurance and reinsurance operations.
During the third quarter, we repaid $500 million on the credit facility, leaving no amount drawn at September 30th.
In addition, subsequent to the quarter on October 29, 2021, we redeemed 85 million principal of our unsecured secured notes that were due in February 2024 at par.
In summary, after the first nine months of the year. The company is very well positioned to continue to benefit from the strong insurance market remaining focused on organic growth underwriting profitability and prudent reserving and with the easing of the COVID-19 restrictions are non insurance associate and certain consolidated non insurance subsidiaries that we can.
<unk> to be portfolio investments are now benefiting the company's consolidated results, helping to drive the growth in our book value per basic share.
Thank you and I'll now turn it back over to Prem.
Thank you very much and we look forward to answering your questions. Please give us your name and your company name and try to limit your questions to only one so that it's fair to all of the coal Okay. Cedric we're ready for the questions.
As a quick reminder, if you'd like to ask a question. Please press Star then one on your phone if you'd like to withdraw that question you May press star two.
First question comes from Julien Roch, who is a private investor Your line is open.
Congratulations on being a wonderful evening.
A question for you Fairfax, India, and Fairfax financial and now the gap is over like 40, 50% between book value and the actual share price. What do you guys plan or how do you guys think we could get it narrow or closer to the actual book value for Fairfax, India and Fairfax financial.
Thank you junior for your question first of all we're focused on performance right.
Long term performance and our stock price we can control.
We can buy back stock when we buy back our stock we think its very attractive we've said that before we.
We look at the financial Soundness first we've got to be financially sound, which we are we've got.
One 5 billion of agenda said in CAD.
Cash and marketable securities $2 billion of credit.
Credit line Undrawn five years, so we're very very strong and no maturities for a few years three years.
So financially sound.
Our insurance businesses are expanding significantly all over the world as Brito said and so the second point is to always have capital to take advantage of the marketplace, because you're getting paid to take risk today and and finally.
All of those are met then we'd look at buying back our shares. So that's how we look at it.
But we're focused on performance.
Thanks, and congratulations again on a wonderful quarter.
Junior next question Oliver Cedric.
Our next question comes from Mark Dwelle with RBC capital markets. Your line is open.
Yes, good morning, Mark a couple of questions of course on the maybe that's a question for Peter.
With the losses in the quarter were probably a bit higher than I would've thought based on your historical performance.
I appreciate the events this quarter were very large.
Grid in particular was one.
Kind of stood out to me is having a much higher percentage of its equity exposure to cat losses.
Talk through.
How are you kind of manage the overall cabinet catastrophe exposure the risk aggregation all from an overall company standpoint.
Kind of how you help them the numbers came out relative to your expectations.
<unk> to.
Add to that but overall, we look our cat exposures are very very important they can destroy companies Mark as you know so we're very focused on.
Cat losses, and we would take.
We'd take extreme events, we take like a 100 $150 billion in Miami.
Which would be like a hurricane five category five getting into Miami.
And or Houston.
You know a large earthquake. So we're looking at that at all times and we.
This previously, but we don't want to lose more than investment income. So we don't want.
<unk>.
Our capital shareholders' equity to drop.
Because of cat exposures, so given that.
Peter just your view on that exposure is the fact that our premiums are going up and specifically at Brit.
Sure, Hey, Hi, Mark.
Yeah CAD exposure is something we look at quite closely at the Fairfax level. So it's managed it's managed at the company level and then we aggregated as well at the Fairfax level and monitor.
Monitor that on a quarter to quarter basis, generally speaking, our premium which has been growing like 25%.
Our CAD exposure hasnt been going up.
It's basically been flat so on a proportional basis.
Our cat exposure when we look at our overall book of business is decreasing.
Hum.
Yeah.
As a as a risk exposure to overall Fairfax its coming down.
Specifically in the quarter.
It was a it was a heavy cat quarter.
And Hum.
Hurricane Ida was a big event and when we when typically when we get bigger events.
Our reinsurance books get here and that's what happened in the case of Odyssey, when Theres Big Hurricane losses, they're going to get they're going to get a higher proportion in row losses.
If you go back and look at Odyssey.
For the better part of 10 years. This is only the second quarter that they've had a combined ratio above 100%.
And the other quarter was the third quarter again in 2017, where there was a heavy hurricane activity with Harvey and Irma and I think the other one was Maria.
Outstanding results, but when these events take place.
<unk> is going to have losses.
And half of their book is reinsurance so.
So not an and not an unexpected result at breadth.
Brit again too.
20% of their book is reinsurance business. So again the same applies to.
To Odyssey.
But they also have a property binders book in an open market property book.
So they get they get catastrophe losses on the insurance side as well.
And in this quarter, our Ida, which added about 33 points to the combined ratio.
Idaho was the region and it hit in Louisiana and on its open market property book They have a lot more exposure in that region. So that affected the results somewhat as well and lastly at at Brit.
They didn't get any benefit from their cat reinsurance program.
Basically as of now there are aggregate cat losses for the year are just coming up to there the retention of their cover.
So the good news is any further.
Any further development or losses in the fourth quarter.
Will be minimal for Brit.
Yes, so just to add to that Mike.
Brito has mentioned for the nine months, we had cat losses of approximately $1 billion in the past if we had.
$1 billion.
Our combined ratio would have been above 100, we've got a combined ratio of 97% for the nine months and and remember when you look at Brit, We have consolidated key and Thats just on the as Vito has said is just on the.
The expansion mode, and if you take out key.
And take only a 20% interest as we've disclosed in the notes to the financial statements in our press release, we don't like it.
103% for nine months, and Theyre, very well reserved and as Peter was saying, we do our reserves in the fourth quarter and we expect with some good fortune that.
The reserve redundancies will get that combined ratio below 100%, but.
Very well, we don't look at reserves every every quarter, we did once a year as Peter was saying in the fourth quarter.
So so yeah. So that's how we look at CAD, but your point's well taken CAD is a big risk in the.
Insurance reinsurance business and.
Very careful about it.
I appreciate the color on that that's very helpful.
Can I ask one other question John went through a number of points related to digital and I appreciate the color there.
The one thing I guess I just wanted to talk through again briefly what are the remaining steps what needs to happen.
In order to see the recognition of that.
Including $7 estimated $37.
And then you've suggested fourth quarter is the timeframe, which is great just trying to get some.
Some feedback in terms of what needs to happen and when it myself.
That's a good question Mark basically very simply they did that 200 million.
Issue as Jen and.
And Peter I have said that $3 5 billion that 200 million.
Stock issue from outside investors has been has to be approved by the <unk>, which is the Indian regulatory body. So that's number one that should happen anytime.
Simple.
Approval process should happen anytime we don't see any.
Our problem about that the second step is that the Indian government has passed this into law that.
The limit for foreign companies with 49% it goes to 74%.
That's been passed in the Parliament now the administrative stuff has to be done by the <unk> the regulatory body in its waiting for that and I think those are the only two things Peter and Jim.
I think that's right. There is one other competition filing in relation to our step up to the 74%.
So there might be a little bit of timing on that second leg of the consolidation, but do you anticipate the larger piece of the digits ccs's to come through in the fourth quarter I indicated so we don't know.
<unk> see any risk in it but timing in India.
The approvals and all of that so if it doesn't come in the fourth quarter it'll be.
It'll be in the first quarter, we were expecting a bit come there is no.
It's not a big deal of elements already passed the 74% a 200 million will get approved.
But but I just caution you that these approvals take time and.
Countries like India and so.
<unk>.
They're there.
They're trying to do it as quickly as possible, but all sorts of approvals take time, but.
In our mind. The reason we disclosed it is because we think there's very little risk in terms of.
Taking place so so it's going to happen and we didn't want it not to be disclosed so we disclose it and everyone knows that.
We don't think there's any risk.
It'll only be accounting, where whether we account for it in the fourth quarter. The first quarter. So we expect it to be as we said fourth quarter, but do you know how these things.
Any other question.
No. That's it I appreciate the insight as we all know governments are going to move at the pace. They are going to move there's not much we can do.
The color and Thats all over the World I mean, yeah, but.
And.
The next question.
<unk> is another quick reminder, if you'd like to ask a question. Please press Star then one on next question comes from Craig Champion with Leucadia investment Your line is open.
Hello, I would like to applaud our.
All the insurance subsidiaries that came in under 100%, So thats, great I'd like to see those combined ratios.
Hello, I'm out here in California, I noticed zenith consistently comes in under 100 or.
So I'd like to give kudos to carry van Gundy doing a great job out here and also prem personal personally like to applaud your buyback last year.
The $150 million, so youre showing confidence so I guess that.
It gives us a little confidence too as far as that Fairfax actually doing the <unk>.
Corporate buybacks, probably a good thing I mean, the stock prices, so low might as well do it normally I don't like to see that it just.
Rewards insiders in short term traders. So my question is.
How can we reward the long term investors I know wall Street.
Doesn't have us on their radar Fairfax is not on their computer algorithms.
But it seems like we have enough free cash flow.
To raise the payout ratio for the dividend.
So I'd like to see like a 20 dollar just double the dividend raised it to $20. This year, what's the chances of that Prem.
Craig first of all thank you for your.
Your compliments and Kari Van Gundy has done a fantastic job where we.
Zinc zenith is perhaps the best workers compensation business in the United States.
They're underwriting the services they provide their customers is second to none of our experienced it when I go then visit them and I must tell you. It's a special special company and the results I mean, I think Peter it's like 15 their loss ratio of about 15 points below that the IND.
History, the loss ratio for Zenith is about 15 points below the industry and the reserving is so conservative.
Dia route.
So your point's well taken.
Greg on buying.
Buying banks and dividends as we look at it all the time and.
By the way on dividends.
I've never taken more than a $600000 salary.
I have no bonus and.
I don't get any shares.
Compared to all the people in our company.
And the.
Among the lowest spade among the offices.
I'm not asking for a raise but I'd say, but it makes it easier for the board of directors, because when I'm recommending something that doesn't come back to me. So it's not like thank beta as they make more money and then I have to make more money than beat up it already makes more money than me, but I'm going to I'm, the largest shareholder and I link.
Two one Fairfax for 35 years as a shareholder and so we pay on a dividend up 10 Bucks every shareholder gets it.
And I get $10 also I have a few more shares but.
But that's how it works everyone gets the same amount I like as a controlling shareholder I think that's the right way to do it.
Now in terms of.
Hum.
Look at all the possibilities of a shareholder came to US and said one of our large shareholders and said why don't you increase the dividend on a regular basis.
We think buying back our stock is a good idea we bought as much as we can I think it's oh, it's cheap, but I'll tell you over 35 years, Craig our stock has been rather a very expensive, sometimes and sometimes like right now, it's very cheap and it's incredibly cheap I've said that.
But you know this is a market by crypto currencies like ridiculously priced and now you have a high tech everyone's looking at Hy Tech and they're growing like a weed, making no money and then you'll see what happens a peloton.
Mr. Some estimates and the stock is down 30%.
There's no underlying fundamental value then the dotcom time period.
These stocks dropped like 75%, 80% someday, we think that'll happen on our stock provides unbelievable value for our shareholders and we think it's only a question of time I've been in the market for a long time and the market will shift in 2000 2001 2002.
Most markets cumulative dropped by about 45% to 50%, Greg in United States, Canada, and in Europe, and our stock portfolios went up a 100% in fact in the following year. They went up another 50%, 60% and so.
Value investing the names that we have you know Atlas is.
Container ship company.
And David are run by David Sokol, and they showed their earnings are needed on a double in the next three or four years. It's all in the market based stock as our IP moat, everyone wants to buy the.
The cryptocurrencies of this world and so that's just how the stock market behaves and but it will change and when it changes we'll be the beneficiary.
That's how we'd look at it Greg So thank you for your question. Thanks for the support.
Okay. Thanks, I think maybe we should give you a raise.
Yes.
Hopefully, we can raise the dividend because I totally follow your philosophy, and I personally own agco and they do pay out a good dividend. So maybe we can pass that along to the Fairfax people too. Thanks, a lot okay.
Thank you Greg.
Now from Locadia, and we've always admired leucadia. So thank you very much.
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I'm showing no further questions at this time.
Okay, no more questions. So cedric thank you very much.
Hosting the call and we look forward to all of you joining us on our next call.
Thank you.
Thank you and that concludes today's conference you may all disconnect at this time.
Speakers you may standby for post conference.