Q1 2022 Fairfax Financial Holdings Ltd Earnings Call

Good morning, and welcome to Fairfax as first quarter results Conference call. Your lines have been placed in a listen only mode.

Good morning and welcome to Fairfax's first 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.

After the presentation, we will conduct a question and answer session. At that time, to ask a question, please press star 1 on your phone keypad. For time's sake, we ask

For time sake, we ask that you limit your questions to one.

Today's conference is being recorded if you have any objections you may disconnect at this time.

today's conference is being recorded. If you have any objections, you may disconnect at this time. Your host for today's call is Prem Watsa.

Your host for today's call is Prem Watson.

With the opening remarks from Mr. Derek Beulah.

Mr. Bula please begin.

Good morning, and welcome to our call to discuss Fairfax is 2020 to first 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 base shelf.

Good morning and welcome to our call to discuss Fairfax's 2022 first 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 base shelf prospectus, which has been filed with Canadian securities regulators and is available on CDAR, and which now include the risk of adverse consequences to Fairfax's business, investments, and personnel resulting from or related to the COVID-19 pandemic.

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.

Fairfax disclaims any intention or obligation to update or revise any forward-looking statements, except as required by applicable securities law. I'll now turn the call over to our Chairman and CEO , Prem Wadhwa.

Wired by applicable Securities law, and now I'll turn the call over to our chairman and CEO Tim Watson.

Hey, Derek good morning, ladies and gentlemen, welcome to Fairfax is 2022 first quarter conference call I'm trying to give you a couple of highlights and then pass the call Peter.

Thank you, Derek. Good morning, ladies and gentlemen. Welcome to Fairfax's 2022 first quarter conference call. I plan to give you a couple of highlights and then pass the call to Peter Clark, our President, Chief Operating Officer, to comment on the quarter, and Jen Allen, our Chief Financial Officer, to provide some additional financial details.

<unk>, President and Chief operating officer to comment on the quarter and Jen Allen, our Chief financial officer to provide some additional financial details.

And we just had our AGM last week.

A week and so just about a week ago and so I just wanted to refer to some of the slides to make it easy for you. The slides are on our website under news. So if you go to our Fairfax website under news you can see.

Now we just had our AGM last week and so just about a week ago and so I just wanted to refer to some of the slides to make it easy for you. The slides are on our website under news.

So if you go to our Fairfax website, under news, you can see our presentation that we had. So I just wanted to highlight a couple of them. So on slide 12, page 12, it just says,

The presentation that we had.

So I just wanted to highlight a couple of them.

So on slide 12 page 12.

It just saves.

Out of the top 25 companies in the World property casualty companies.

out of the top 25 companies in the world, property casualty companies, growth of 25% was the highest. Well, that continues.

Growth of 25% was the highest but that continued in.

The first quarter, our gross premiums were up 22% net premiums were up 28%.

the first quarter, our gross premiums were up 22%, net premiums were up 28%.

Now you might wonder why we've talked about it Andy but I've talked about it in the in the.

Now you might wonder why we talked about it, Andy Bana talked about it in the AGM. We have very decentralized operations, stable experience management team focused on underwriting profit. That's why we've had this growth, significant growth.

Adrianne.

Very decentralized operations stable experienced management team focused on underwriting profit.

Why.

At this growth Cigna.

Significant growth.

Second point I wanted to make.

Is on investments.

Second point I wanted to make is on investment.

And Thats the best as you go into us.

Page 20 slide 20.

And for this, you go into page 20, slide 20.

There were two major trends that we projected our company from one was rising interest rates interest rates were very low we're getting five or six basis points on our cash. We then reached for yield. So that's on page 20 that shows you that interest rates have been coming down for.

And there were two major trends that we protected our company from. One was rising interest rates. Interest rates were very low. You were getting five and six basis points on our cash. We didn't reach for yields.

So this, on page 20, just shows you that interest rates have been coming down for 40 years. And there's a reversal taking place. It's taking place dramatically. High inflation in the United States, high inflation in many parts of the world, and we really don't know how high rates will go, but then now the 10-year rates, treasury rates, are very close to 3%.

40.

And there's a reversing reversal taking place is taking place dramatically high inflation in the United States high inflation in many parts of the world and we really don't know how high rates will go but then now the 10 year rates Treasury rates are right close to 3%.

Our duration.

Cash and bond portfolio of $37 billion.

Our duration in our cash and bond portfolio of $37 billion is approximately 1.4 years. So there's very little loss to us as interest rates go up.

It's approximately one point for you guys. So that's very level of loss to SaaS interest rates go up.

Slide number 25.

On page 25 and.

Um, slide number 25.

AGM presentation shows that 400 basis points, you have investment income goes up by about $222 million $220 million.

on page 25 in the AGM presentation shows that for 100 basis points, you have investment income goes up by about $222 million, $220 million.

So the investment income goes up because interest rates are going higher and we're rolling over I Rob.

so that investment income goes up because interested to going higher and we're rolling over our uh... uh... uh... cash and uh... short-term holdings and uh... that they're very short so you get the higher interest income and it shows you that the pre-tax unrealized losses on our bonds two hundred ninety four it very low because of course we've got a duration of one point four years

Our cash and short term holdings and.

Any short so you get the higher interest income and it shows you that the pretax unrealized losses on our bonds 294 at very low because of course, we've got a duration of one point for you guys.

<unk>, that's a huge advantage we have.

And I think looking at our competitors' most of our competitors don't have a duration of as low as we have.

You'll find that that's a huge advantage we have and I think looking at our competitors most of our competitors Don't don't have a duration of as low as we have Finally on

Finally on.

The second trend plus was rising interest rates second is the return to value and that drop in technology stocks and high growth.

The second trend, first was rising interest rates, second is the return to value and the drop in technology stocks and high growth stocks, which have been for the last many years now have been going up. So if you look at the slide 22, you'll see that in the dot-com crash.

High growth stocks, which have been for the last many years now have been going up.

So if you look at the.

On slide 22.

You'll see that in the dot com crash.

<unk> Dot com technology stocks came down dramatically and value oriented stocks went up well for.

The dot-com technology stocks came down dramatically and value-oriented stocks went up. Well, for the longest time now, 10 years perhaps, the opposite has taken place from about 2010.

For the longest time now 10 years, perhaps the opposite has taken place from about 2010.

Tech stocks gold stocks have done very well the red line and value stocks have done relatively.

tech stocks, growth stocks have done very well, the red line, and value stocks have done relatively not as well. And that trend, we think, has changed in 2021 and 2022 to date. So value is on its way to bridge.

Not as well and that trend as we think about it.

Has changed in 2021 and 2022 to date.

So value is on its way to bridge the gap.

Now I just got this and it's a good thing to remember.

Now, I just got this and it's a good thing to remember. A friend of mine sent this to me. He said, remember, markets that go parabolic don't correct sideways. They collapse.

A friend of mine centers domain is that remember markets that go parabolic.

Correct sideways, they collapse and we're seeing some of that now.

As slide 21, you can see that in <unk>.

and we're seeing some of that now in slide 21. You can see that in, we say return to value, Netflix is down 70% from its high, and the high is in late 2021.

Say return to value Netflix is down 70% from its high the highest in late 2021.

So quite a few months ago.

<unk> is down 70% shopify down, 75% Facebook down 50%.

So about a few months ago, Netflix down 70% Shopify down 75% Facebook down 50% Facebook meta the new name, zoom, the high was in September 2020 is down 83%. Alphabet.

Our better than your name Zoom. The high was in September 2020 is down 83%.

Alphabet.

Amazon and Apple in the last week have said that that earnings are not going to be as good that revenues are not growing as fast and the stocks. The fang stocks are getting about 20% today.

and Amazon and Apple in the last week have said that their earnings are not going to be as good, their revenues are not growing as fast, and the Frank stocks are getting hit down 20% today.

I remind you again, we've talked about this many times, but the dotcom dotcom crash took place many many years ago.

And remind you again, we've talked about this many times, when the dot com crash took place many, many years ago, 20 years ago, stocks dropped, the dot com stocks dropped 90%.

As it go stocks dropped the dotcom stocks dropped 90%.

The two big ones, where Microsoft dropped about 85%, but most importantly, Microsoft did very well.

The two big ones were Microsoft, dropped about 85%, but most importantly, Microsoft did very well.

A mildly earnings wise, but you never saw the stock price was 16 yards Cisco.

Fundamentally, earnings wise, but you never saw the stock price for 16 years. Cisco dropped.

Dropped to 85% and earnings have gone up six times since that time period, and the stock is still down 50%.

And earnings have gone up six times since that time period, and the stock is still down 50%. Our experience in slide 23, you can see from 1999 to 2002, all of the indices were down about 50% plus, and our Fairfax equities went up 100%. We expect value to out again.

Our experience in slide 23, you can see.

From $19 99 to 2002, all of the indices were down about 50% plus and Fairfax equities went up a 100%.

We expect value to out again.

And now I, just before and I just wanted to say.

And now, just before I end, I just wanted to say that I mentioned this at our AGM last week. We all feel for Ukraine. After this cowardly attack on them from Russia, I have no doubt Ukraine will prevail and President Putin will be ostracized and have a disaster on his hands.

I mentioned this at our AGM last week, we all feel for Ukraine.

After this cowardly attack on them from Russia.

No doubt to Ukraine will prevail and present potent will be ostracized and have a disaster on his hands, we have about $181 million or 1% of our consolidated premiums in Ukraine in 2021, while it is small we are very concerned about our more than 1000 employees in that country and we have we're very fortunate.

We have about $181 million, or 1% of our consolidated premiums in Ukraine in 2021. While it is small, we are very concerned about our more than 1,000 employees in that country, and we are very fortunate to have three outstanding presidents, as I said, at our AGM. They are keeping our people safe and our heroes working under extraordinarily difficult conditions.

That dropped three outstanding presence as I said at our AGM that keeping our people safe and our heroes working on the extraordinarily different difficult conditions.

Please keep them in your thoughts and prayers and with that I'll pass this call to Peter <unk>, Our President Chief operating officer for further updates Peter.

So please keep them in your thoughts and prayers. And with that, I'll pass this call to Peter Clark, our President, Chief Operating Officer, for further updates. Peter.

Thank you Prem.

We had net earnings of $126 million in the first quarter of 2022 and book value per share grew by 1% adjusted for $10 per share dividend.

We had net earnings of $126 million in the first quarter of 2022, and book value per share grew by 1% adjusted for our $10 per share dividend.

The 1% growth in book value was the result of strong underwriting profit of 324 million.

The 1% growth in book value was the result of strong underwriting profit of $324 million, offset by net losses on investments of $214 million, primarily from unrealized losses on our bond portfolio of $494 million from rising interest rates.

Offset by net losses on investments of $214 million, primarily from unrealized losses on our bond portfolio up $494 million from rising interest rates.

Our combined ratio in the first quarter was excellent at 93, 1%.

Our combined ratio in the first quarter was excellent at 93.1%.

Growth gross premiums were up 22% in the quarter with continued rate increases across all our major lines of business with the exception of workers' compensation.

Growth premiums were up 22% in the quarter, with continued rate increases across all our major lines of business, with the exception of workers' compensation.

More on that later.

The operating income of our property and casualty insurance and reinsurance operations increased to $562 million in the first quarter of 2022.

The operating income of our property and casualty insurance and reinsurance operations increased to $562 million in the first quarter of 2022, up from $298 million in the first quarter of 2021.

Up from $298 million in the first quarter of 2021.

Driven by increased underwriting profit and an increase in our share of profit of our associates.

driven by increased underwriting profit and an increase in our share of profit of our associates.

Our investment return in the first quarter was <unk>, 3%, which resulted in a total investment return of $144 million.

Our investment return in the first quarter was 0.3% which resulted in a total investment return of $144 million.

Excluding the unrealized losses on our bond portfolio, our investment return for the quarter was very strong at one 2%.

Excluding the unrealized losses on our bond portfolio, our investment return for the quarter was very strong at 1.2 percent.

As Prem mentioned with a duration of one four years on our fixed income portfolio. We expect many of these unrealized losses to reverse over the next year.

As Prem mentioned, with a duration of 1.4 years on our fixed income portfolio, we expect many of these unrealized losses to reverse over the next year.

We continue to hold significant cash and short term investments approximately 46% of our portfolio today to protect against the increasing interest rates.

We continue to hold significant cash and short-term investments, approximately 46% of our portfolio today, to protect against increasing interest rates.

Our net gains on our equity and equity related holdings were $263 million in the quarter.

Our net gains on our equity and equity-related holdings were $263 million in the quarter, primarily from unrealized gains on Stelco, Watteris, and Kennedy Wilson.

Primarily from unrealized gains on stelco water risks and Kennedy Wilson.

Except by unrealized losses on Blackberry and commercial International Bank.

offset by unrealized losses on BlackBerry and Commercial International Bank.

We continue to see a return to value.

As mentioned in previous quarters, our book value per share of $626 does not include unrealized gains in our equity accounted investments and our consolidated investments, which are not mark to market.

As mentioned in previous quarters, our book value per share of $626 does not include unrealized gains in our equity-accounted investments and our consolidated investments, which are not mark-to-market. If we did mark-to-market...

If we did mark to market.

Would add.

$344 million or $14 per share on a pre tax basis being the excess of fair value over carrying value at March 31 2022.

$344 million, or $14 per share, on a pre-tax basis, being the excess of fair value over carrying value at March 31, 2022.

At the end of the first quarter, the company's insurance and reinsurance companies held 23 billion in cash and short dated investments representing 46% of our portfolio with every 100 basis point increase in interest rates. This would provide us with approximately $230 million of additional Andy.

At the end of the first quarter, the company's insurance and reinsurance companies held $23 billion in cash and short-dated investments, representing 46% of our portfolio. With every 100 basis point increase in interest rates, this would provide us with approximately $230 million of additional annual income.

<unk> income.

We continue to have approximately $1 2 billion at the holding company predominantly in cash and short term securities.

We continue to have approximately $1.2 billion at the holding company, predominantly in cash and short-term securities, and our $2 billion bank line is totally undrawn.

And our 2 billion Bank line is totally undrawn.

Please note our cash in the holding company is to meet any and every contingency that Fairfax might face we are not making any long term investments with this cash other than to support our insurance and reinsurance operations.

Please note our cash in the holding company is to meet any and every contingency that Fairfax might face. We are not making any long-term investments with this cash other than to support our insurance and reinsurance operations.

As previously mentioned, our insurance and reinsurance businesses continue to grow rapidly all over the world. We wrote $6 6 billion of gross premium in the first quarter of 2022.

As previously mentioned, our insurance and reinsurance businesses continue to grow rapidly all over the world. We wrote $6.6 billion of gross premium in the first quarter of 2022.

The first quarter combined ratio was $93, one and produced an underwriting profit of $324 million the largest quarterly underwriting profit before taking into account favorable reserve development in our history.

The first quarter combined ratio was 93.1 and produced an underwriting profit of $324 million, the largest quarterly underwriting profit before taking into account favorable reserve development in our history.

All of our major operating companies produce combined ratios well below 100%.

All our major operating companies produce combined ratios well below 100%.

The quarter included catastrophe losses of $130 million or two eight combined ratio points and marginal favorable reserve development from prior years.

The quarter included catastrophe losses of $130 million or 2.8 combined ratio points and marginal favorable reserve development from prior years.

Our gross premiums in the first quarter were up 22% an increase of approximately $1 2 billion from the previous year.

Our gross premiums in the first quarter were up 22%, an increase of approximately $1.2 billion from the previous year. This growth is on top of a 25% increase in gross premium for the full year 2021.

This growth is on top of a 25% increase in gross premium for the full year 2021.

Driven by continued favorable market conditions and strong margins that prevail in many of the markets, particularly in North America.

driven by continued favorable market conditions and strong margins that prevail in many of the markets, particularly

Brit had the largest growth in the quarter, adding $207 million of gross premium and growing 30% in the first quarter of 2022 versus the first quarter of 2021 almost half of this amount was from key Brit innovative follow on syndicate.

BRIT had the largest growth in the quarter, adding $207 million of gross premium and growing 30% in the first quarter of 2022 versus the first quarter of 2021. Almost half of this amount was from KEY, BRIT's innovative follow-on syndicate.

Excluding key Brit posted strong growth at 18% with growth across both its direct and reinsurance books of business.

Excluding key, BRIT posted strong growth at 18% with growth across both its direct and reinsurance books of business.

Crum <unk> Forster increased its gross premiums by 29%.

Chrome Enforcer increased its gross premiums by 29%, led by its A&H division and the rebound of its travel and student health.

Led by its A&H division and the rebound if its travel and student health business. Crum also continues to see strong growth in its E&S segment, and its cyber and tech E books of business.

Crum also continues to see strong growth in its E&F segment and its cyber and tech E&O books of business.

Allied World continued its strong momentum from 2021 with gross premium up 24% in the quarter.

Allied World continued its strong momentum from 2021 with gross premium up 24% in the quarter.

With gross growth across most lines of business.

with growth across most lines of business.

The reinsurance business included the timing impact of approximately 100 $100 million of crop business that was renewed in the first quarter, but bound in the second quarter in 2021.

Their reinsurance business included the timing impact of approximately $100 million of crop business that was renewed in the first quarter but bound in the second quarter in 2021.

Allied World continues to benefit from double digit price increases in its insurance business.

Allied World continues to benefit from double-digit price increases in its insurance business.

Odyssey group's gross premiums were up 22% with strong growth in the first quarter in our reinsurance business and continued single digit expansion in its insurance business.

Odyssey Group's gross premiums were up 22% with strong growth in the first quarter in their reinsurance business and continued single-digit expansion in its insurance business.

In Canada, Northbridge was up 16% in U S. Dollar terms as it continues to register favorable rate increases strong retention and healthy growth in new business.

In Canada, Northbridge was up 16% in U.S. dollar terms as it continues to register favorable rate increases, strong retention, and healthy growth in new business.

Premium at Zenith was down 5% as it continues to face competitive pricing in the workers' compensation market in the United States.

Premium at Zenith was down 5% as it continues to face competitive pricing in the workers' compensation market in the United States, although pricing is continuing to stabilize.

So pricing is continued continuing to stabilize.

Our international operations continue to grow as well, although they are not seeing the rate increases experienced from the hard market conditions in North America gross premiums were up $90 million in the first quarter.

Our international operations continue to grow as well. Although they are not seeing the rate increases experienced from the hard market conditions in North America, gross premiums were up $90 million in the first quarter.

Fairfax Asia premiums were up 69%, including Singapore re which was consolidated into our results in the second half of 2021.

Fairfax Asia's premiums were up 69%, including Singapore Re, which was consolidated into our results in the second half of 2021.

11% Asia growth was 11%, excluding Singapore right.

11 percent, Asia's growth was 11 percent, excluding Singapore rates.

Most of our companies in South America, Central and Eastern Europe , and in South Africa, all registered strong growth in the for the year.

Most of our companies in South America, Central and Eastern Europe , and in South Africa all registered strong growth for the year.

Over time, we believe our international operations will be a significant source of growth driven by Underpenetrated insurance markets and strong local economies.

Over time, we believe our international operations will be a significant source of growth driven by underpenetrated insurance markets and strong local economies.

Our companies continue to grow into favorable market conditions, while absolute rate increases may reduce in some lines overall rate level is expected to remain attractive throughout 2022.

Our companies continue to grow into favorable market conditions. While absolute rate increases may reduce in some lines, overall rate level is expected to remain attractive throughout 2022.

Our company has had a great start to the year and our management teams are focused on building on that throughout 2022.

Our companies had a great start to the year and our management teams are focused on building on that throughout 2022.

As previously mentioned, we posted a strong underwriting result in the first quarter with a combined ratio of 93% and an underwriting profit of $324 million versus a combined ratio of 96% an underwriting profit of $149 million in the first quarter of 2021.

As previously mentioned, we posted a strong underwriting result in the first quarter with a combined ratio of 93% and an underwriting profit of $324 million versus a combined ratio of 96% and underwriting profit of $149 million in the first quarter of 2021.

Led again by Northbridge they had another outstanding quarter with 87 combined ratio benefiting from the compounding of year over year price increases.

Led again by Northbridge, they had another outstanding quarter with an 87 combined ratio, benefiting from the compounding of year-over-year price increases.

We are happy to highlight Brit had one of its best quarterly results since our acquisition posting a combined ratio of 92%.

We are happy to highlight BRIT had one of its best quarterly results since our acquisition, posting a combined ratio of 92%.

And Crum <unk> Forster continued its steady decline with a combined ratio of $94 eight.

and Krumman-Forster continued a steady decline with a combined ratio of 94.8.

While Odyssey group Allied World and Zenith, all again produced strong underwriting results.

while Odyssey Group, Allied World, and Zenith all again produced strong underwriting results.

Our international operations had a combined ratio of 98% with Fairfax Asia, posting an excellent combined ratio of 91.

Our international operations had a combined ratio of 98%, with Fairfax, Asia posting an excellent combined ratio of 91, while Fairfax, Brazil had a tough quarter with an underwriting loss of 8.1 million, driven by the effects of drought conditions in its agriculture book. We expect this will reverse throughout 2022.

While Fairfax, Brazil had a tough quarter with an underwriting loss of $8 1 million driven by the effects of drought conditions and its agriculture book, We expect this will reverse throughout 2022.

The company's underwriting activities were not significantly impacted from the conflict in Ukraine, our companies in Ukraine continue to operate while working remotely in a very difficult environment and produced a small underwriting profit in the first quarter.

The company's underwriting activities were not significantly impacted from the conflict in Ukraine. Our companies in Ukraine continue to operate while working remotely in a very difficult environment and produced a small underwriting profit in the first quarter.

Our other insurance and reinsurance operations are not significantly exposed to the lines directly affected by the conflict, namely aviation political violence trade credit in marine.

Our other insurance and reinsurance operations are not significantly exposed to the lines directly affected by the conflict, namely aviation, political violence, trade credit and marine.

Our companies have IV and are up approximately $30 million to cover potential losses.

Our companies have IBNR up at approximately $30 million to cover potential loss.

We are hopeful this conflict will end soon but it is still ongoing so we continue to monitor the monitor the situation closely.

We are hopeful this conflict will end soon, but it is still ongoing, so we continue to monitor the situation closely.

For the quarter, our insurance and reinsurance companies recorded favorable reserve development of $22 million or half a point on our combined ratio.

For the quarter, our insurance and reinsurance companies recorded favorable reserve development of $22 million, or 0.5% on our combined ratio. This compares to $43 million, or 1.2% in 2021.

This compares to $43 million or one two points in 2021.

Prior year reserves are generally not significantly adjusted in the first quarter given the thorough actuarial reviews conducted in the fourth quarter.

Prior year reserves are generally not significantly adjusted in the first quarter, given the thorough actuary reviews conducted in the fourth quarter.

Our expense ratio continues to benefit from our earned premium volume outpacing expenses. Our overall underwriting expense ratio is one eight points lower year over year with the underwriting expense ratio decreasing at essentially all our insurance and reinsurance operations.

Our expense ratio continues to benefit from our earned premium volume outpacing expenses. Our overall underwriting expense ratio is 1.8 points lower year over year, with the underwriting expense ratio decreasing at essentially all our insurance and reinsurance operations.

We expect continued growth and strong underwriting results throughout 2022 with our company is very well positioned to capitalize on the opportunities within their markets. The decentralized operating system up Fairfax is critical to our success and allows us to react to local conditions.

We expect continued growth and strong underwriting results throughout 2022 with our companies very well positioned to capitalize on the opportunities within their markets.

The decentralized operating system of Fairfax is critical to our access and allows us to react to local conditions.

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.

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...

Peter before speaking to the financial results in the first quarter of 2022 I wanted to acknowledge all the hard work of our employees in Ukraine, and many others, who are supporting those employees and their families. During these very challenging times.

Thank you, Peter. Before speaking to the financial results in the first quarter of 2022, I wanted to acknowledge all the hard work of our employees in Ukraine and many others who are supporting those employees and their families during these very challenging times.

As a result of the conflict in Ukraine, we completed additional quarterly processes and procedures to address the uncertainty that has been created.

As a result of the conflict in Ukraine, we completed additional quarterly processes and procedures to address the uncertainty that has been created. Specifically, we ensured we addressed and understood potential and known impacts, if any, on our insurance and reinsurance operations, both those directly located in Ukraine as well as the company's insurance and reinsurance operations that may have had exposures through insurance policies that were written.

Specifically, we ensured we addressed I understood potential unknown impact if any on our insurance and reinsurance operations.

Both those directly located in Ukraine, as well as the company's insurance and reinsurance operations that may have had exposures through insurance policies that were written.

In addition, we assess the potential impact the conflict in Ukraine may have had on our investments in our non insurance associate and the consolidated non insurance subsidiary we.

In addition, we assess the potential impact the conflict in Ukraine may have had on our investments in our non-insurance associates and the consolidated non-insurance subsidiaries.

We determined that the company's operating results in the first quarter of 2022 were not significantly impacted by the conflict in Ukraine.

We determined that the company's operating results in the first quarter of 2022 were not significantly impacted by the conflict in Ukraine. I'll refer you to page 26 in our Q1 interim report for additional details.

I'll refer you to page 26, and our Q1 interim report for additional details.

The company will continue to monitor the potential impact of the conflict that it may have on our businesses in the future.

The company will continue to monitor the potential impact of the conflict that it may have on our businesses in the future.

Now looking at our first quarter result, we reported net earnings attributed to shareholders of Fairfax of $126 million in the first quarter of 2022.

Now looking at our first quarter results, we reported net earnings attributed to shareholders of Fairfax of $126 million in the first quarter of 2022, with book value per basic share at March 31, 2022 of $626.21, which represented a growth in the book value per basic share of 1% adjusted for the $10 per common share dividend that was paid in the first quarter of 2022.

Book value per basic share at March 31, 2022 of $626 21, which.

Which represented a growth in our book value per basic share of 1%.

Adjusted for the $10 per common share dividend that was paid in the first quarter of 2022.

Peter has already provided detailed commentary on our insurance and reinsurance companies. So I'll begin additional remarks on our non insurance the consolidated company.

Peter has already provided detailed commentary on our insurance and re-insurance companies, so I'll begin with additional remarks on our non-insurance, the consolidated companies.

Looking at the first quarter of 2022 compared to 2021.

Looking at the first quarter of 2022 compared to 2021, if you exclude the impact of Fairfax India's performance fees, which was a reversal of $3 million or performance fee income in 2022, and the impact of $56 million of performance fee expenses in 2021,

If you exclude the impact of Fairfax, India performance fees, which was a reversal of $3 million or performance fee income in 2022, and the impact of $56 million of performance fee expenses in 2021.

Operating income of the non insurance companies improved by 53 million to $24 million in 2022 from an operating loss of $29 million in 2021.

operating income of the non-insurance companies improved by $53 million to $24 million in 2022 from an operating loss of $29 million in 2021.

With the significant improvement principally being reflected by increased operating income from our restaurant retail segment of $30 million.

With the significant improvement principally being reflected by increased operating income from our restaurant and retail segment of $30 million, that reflected the reduced COVID-19 related lockdown restrictions and the absence of asset impairments.

Reflected the reduced COVID-19 related lockdown restrictions in the absence of asset impairments.

And also higher operating income at Fairfax, India, primarily as a result of higher share profit of associates from their investments in San Mar CSP and ISO finance.

and higher operating income at Fairfax, India, primarily as a result of higher share profit of associates from their investments in Sanmar, CSB and ISL Finance.

At March 31, 2022, the pretax excess of fair value over the adjusted carrying value of our non insurance associates and certain consolidated non insurance subsidiaries that the company considers to be portfolio investments was $344 million, which compared to in excess of.

At March 31, 2022, the pre-tax excess of fair value over the adjusted carrying value of our non-insurance associates and certain consolidated non-insurance subsidiaries that the company considers to be portfolio investments was $344 million, which compared to an excess at December 31, 2021 of $346 million.

At December 31, 2021 of $346 million.

That pretax excess of $344 million is not reflected in our book value per share that is regularly reviewed by management as an indicator of investment performance with additional disclosure provided an interim MD&A.

That pre-tax excess of $344 million is not reflected in our book value per share, but is regularly reviewed by management as an indicator of investment performance, with additional disclosure provided in the interim MD&A.

If we look at the investment performance for the quarter, we can with our continued concern around inflation at March 31, 2022, we continue to hold a significant portion of the investment portfolio and cash short term investments and other short dated fixed income securities.

If we look at the investment performance for the quarter, with our continued concern around inflation, at March 31, 2022, we continued to hold a significant portion of the investment portfolio in cash, short-term investments, and other short-dated fixed income securities.

During the first quarter of 2020, we used proceeds from maturities of our short term investments to make net purchases of seven 4 billion in bonds, which was comprised of $6 4 billion in U S treasuries and approximately $1 billion and Canadian government bonds that had one to two year terms.

During the first quarter of 2022, we used proceeds from maturities of our short-term investments to make net purchases of $7.4 billion in bonds, which was comprised of $6.4 billion in U.S. Treasuries and approximately $1 billion in Canadian government bonds that had one- to two-year terms.

At March 31, 2022 accompanies low duration of only one four years on a $36 9 billion dollar position that is invested in cash and principally the short dated investments.

At March 31, 2022, the company's load duration of only 1.4 years on a $36.9 billion position that is invested in cash and principally the short-dated investments

Which are mainly in U S treasuries limited the impact that the rising interest rate environment had on our bond portfolio in the first quarter of 2022, while enabling the company to benefit significantly from increased interest income and the remainder of 2022 as the portfolio is deployed into one to two year treasury bonds.

which are mainly in the U.S. Treasuries, limited the impact that the rising interest rate environment had on our bond portfolio in the first quarter of 2022, while enabling the company to benefit significantly from increased interest income in the remainder of 2022 as the portfolio is deployed into one- to two-year Treasury bonds.

Our interest and dividend income of $169 million in the first quarter of 2022 remained stable compared to a $168 million in the first quarter of 2021, but the composition of the income earned has changed principal changes reflected higher interest income earned from our first.

Our interest in dividend income of $169 million in the first quarter of 2022 remained stable compared to $168 million in the first quarter of 2021, but the composition of the income earned has changed. Principal changes reflected higher interest income earned from our first mortgage loan portfolio, other government bonds and U.S. Treasuries, and increased dividend income earned from our preferred stock investment.

Mortgage loan portfolio.

Other government bonds and U S treasuries and increased dividend income earned from our preferred stock investment.

This was offset by lower interest and dividend income from our U S corporate bonds and certain long equity total return swap positions as a result of net sales.

This was offset by lower interest and dividend income from our U.S. corporate bonds and certain long equity total return swap positions as a result of net sales.

As I noted we had added seven 4 billion in U S treasuries and Canadian government bonds with low durations of one to two year term.

As I noted, we had added $7.4 billion in U.S. Treasuries and Canadian government bonds with low durations of 1-2 year terms, which will provide us with increased interest income for the remainder of 2022.

Alex will provide us with increased interest income for the remainder of 2022.

Our consolidated share of profit of associates of $184 million in the first quarter of 2022 reflected strong results from our investments and were principally comprised of a share of profit of $50 million from Atlas Corp.

Our consolidated share of profit of Associates of $184 million in the first quarter of 2022 reflected strong results from our investments and were principally comprised of a share of profit of $50 million from Atlas Corp., $38 million from Exco Resources, and $31 million from Eurobank.

$38 million from Exco resources and $31 million from Eurobank.

That compared to a share of profit of $44 million in 2021, which was primarily comprised of a $76 million.

That compared to a share of profits of $44 million in 2021, which was primarily comprised of a $76 million profit from Eurobank that was partially offset by a share of loss of $31 million from Atlas Corp.

<unk> from Eurobank that was partially offset offset by a share of loss of $31 million from Atlas Corp.

Turning to our net losses on investments in the first quarter of 2022 up 214 million. They were primarily comprised of net losses on bond of $494 million that was partially offset by net gains on our equity exposures of $263 million.

Turning to our net losses on investments in the first quarter of 2022 of $214 million, they were primarily comprised of net losses on bonds of $494 million that was partially offset by net gains on our equity exposures of $263 million.

The net losses on bonds at $494 million included the net losses on our U S treasuries and the Canadian government bonds are 233 million.

The net losses on bonds of $494 million included the net losses on our U.S. Treasuries and the Canadian government bonds of $233 million, of which $158 million related to the net purchases I referred to earlier of the $7.4 billion.

Of which $158 million related to the net purchases I referred to earlier of the $7 4 billion.

It also included unrealized losses of $72 million on the Greek government bonds, which Fox zero license reserves and net losses of $108 $83 million on our corporate and other bonds related principally to Canadian and U S corporates.

It also included unrealized losses of $72 million on the Greek government bonds, which backed Zero Life's reserves, and net losses of $183 million on our corporate and other bonds related principally to Canadian and U.S. corporate.

This was partially offset by gains on our U S treasury forward contracts of $69 million.

This was partially offset by gains on our U.S. Treasury bond forward contracts of $69 million.

Given the low duration of only one four years on the $36 $9 billion invest invested principally in cash in our short dated investments.

Given the low duration of only 1.4 years on the $36.9 billion invested principally in cash and our short-dated investments, if those fixed income investments are held to maturity, that net unrealized loss that we recorded in the first quarter of 2022 will be reversed in future periods.

Fixed income investments are held to maturity at net unrealized loss that we recorded in the first quarter of 2022 will be reversed in future periods.

The net losses on bonds was partially offset by net gains on equity exposures of $263 million that comprised of realized and unrealized depreciation on our common stock and our equity total return swaps, which included 95 million of net gains on the equity total return swap investments that the company.

The net losses on bonds was partially offset by net gains on equity exposures of $263 million that comprised of realized and unrealized depreciation on our common stocks and our equity total return swaps, which included $95 million of net gains on the equity total return swap investment that the company continues to hold on the Fairfax subordinate shares.

To hold on the Fairfax subordinate voting shares.

In prior quarters. The conference call. We had mentioned the ability for the company to increase its ownership in digit above 49%.

In prior quarters, the conference calls, we had mentioned the ability for the company to increase its ownership in digit above 49% to a controlling interest upon receipt of regulatory approvals in India.

To a controlling interest upon receipt of regulatory approvals in India.

Given the regulatory approvals remain pending to permit the company to obtain controlling digit the company did not record any gains in the first quarter of 2022 on its 49% equity accounted investment in good shape.

Given the regulatory approvals remain pending to permit the company to obtain control in Digit, the company did not record any gains in the first quarter of 2022 on its 49% equity accounted investment in Digit.

In closing a few comments on our financial condition position.

Our liquidity and the position of the company remains very strong with our cash and investments at the holding company at one approximately $1 2 billion at March 31, 2022 and.

In closing, a few comments on our financial condition position. Our liquidity in the position of the company remains very strong, with our cash and investments at the holding company at approximately $1.2 billion at March 31, 2022, and our $2 billion unsecured revolving credits facility was fully undrawn.

And our 2 billion unsecured revolving credit facility was fully undrawn.

As Peter mentioned, our holding company cash and investments.

It supports our companys decentralized structure and enables the company to deploy capital efficiently to our insurance and reinsurance company.

As Peter mentioned, our holding company, Cash and Investment.

It supports our company's decentralized structure and enables the company to deploy capital efficiently to our insurance and reinsurance companies.

Our total debt to total cap ratio, excluding the investments that are consolidated in non insurance companies. It was 24, 2% at March 31, 2022, and remained stable compared to the $24. One reported at December 31 2021.

Our total debt-to-total CAF ratio, excluding the investments that are consolidated in non-insurance companies, was 24.2% at March 31, 2022 and remained stable compared to the 24.1% reported at December 31, 2021.

And finally, our common shareholders' equity decreased slightly to $14 9 billion at March 31, 2022 from just over 15 billion at December 31, 2021, which primarily reflected the payment of our common and preferred share dividends of $261 million in the first quarter of 2012.

And finally, our common shareholder's equity, it decreased slightly to $14.9 billion at March 31, 2022, from just over $15 billion at December 31, 2021, which primarily reflected the payments of our common and preferred share dividends of $261 million in the first quarter of 2022, and that was partially offset by the reported net earnings attributed to shareholders of Fairfax of $126 million. Thank you, and I'll now turn the call.

<unk> and that was partially offset by the reported net earnings attributed to shareholders of Fairfax of $126 million.

Thank you and I'll now turn the call back over to Prem.

But jen we now look forward to answering your questions. Please give us your name your company name and try to limit your question to only one so fair to all of the call.

by Jen. We now look forward to answering your questions. Please give us your name, your company name, and try to limit your questions to only one so that it's fair to all on the call. Okay, Jill, we are ready for the questions.

Okay gel, we are ready for the questions.

Thank you Mr. <unk> as he reminding please press star one and record your name and company. If you would like to ask a question and.

Thank you, Mr. Watsa. As reminding, please press star one and record your name and company if you would like to ask a question. And we have a question from Tom McKinnon with BMO Capital.

And we have a question from Tom Mackinnon with BMO capital.

Sir your line is open.

Yeah. Thanks, good morning Prem.

Hey, good morning, gentlemen.

Question with respect to the.

Yeah, thanks. Good morning, Pram. Hey, good morning, Tom. Question with respect to the digitization... That's a little louder, Tom.

That's a little louder Tom.

Oh, yes.

Second here.

Is this better can you hear me better here is that better.

Okay.

Okay question with respect to the $400 million are you still anticipate.

<unk> a $400 million gain.

Are you still anticipating a $400 million gain when you get the regulatory approvals with respect to Digit, and is that expected in the second quarter?

Again when.

When you are.

Clothes. This when you get the regulatory approvals with respect to digital.

And is that expected in the second quarter.

Yeah, Tom It should come sometime soon.

It's already pass through Parliament and so we'd look at it as soon as that gets approved Peter you want to add anything for that.

Yeah, Tom, it should come sometime soon. It's already passed through Parliament, and so we'd look at it as soon as it gets approved. Peter, you want to add anything for that?

Yeah, No we're still expecting it and.

It is we need regulatory approval just two to consolidate and we're hoping it comes soon.

Yeah, no, we're still expecting it and we need regulatory approval just to consolidate and we're hoping it comes.

Okay. So.

There wasn't any.

Uh huh.

Seeing noted in the press release this quarter although.

There wasn't anything noted in the press release this quarter about $400 million being a potential gain, although that was noted in the prior quarter. So you're still expecting a $400 million gain upon getting the regulatory approvals? We're looking at that, Tom, as it comes. That was the estimate we made some time back and we'll look at it again, but it's going to be very significant, yes.

About $400 million being a potential gain although that was noted in the prior quarter, So you're still expecting a $400 million gain upon.

Getting the regulatory approvals.

Looking at that time that that comes that was the estimate we made some time back and.

We look at it again, but it is going to be very significant yes.

Okay, that's great.

Then.

In terms of deploying some more cash into bonds.

In terms of deploying some more cash into bonds, are you finished with that now or would you look at putting more of your substantial cash position into bonds going forward?

Are you kind of finished with that now or would you look at putting more of your substantial cash position into bonds going forward.

Yeah. So Tom we think the big risk today is the fact that people have not expire for 40 as interest rates have gone down.

uh... yet but on the picked up a request today is the fact that people have not expected for forty years and to take the gun down

And you have to be in the business for a long time like in the seventies too have seen how interest rates went up inflation went up interest rates went up.

And you have to be in the business for a long time, like in the 70s, to have seen how interest rates went up, inflation went up, interest rates went up.

So the big risk today, as I said as interest rates going up and we don't know how long how high it's going to go. So what we've done is just wanted to your bonds were limiting our.

So the big risk today, as I said, is interest rates going up, and we don't know how high it's gonna go. So what we've done is just one and two-year bonds. We're limiting our investments to one and two years, which, by the way, is a significant increase in interest rates that have taken place in that term, one to two years. And Brian Bradstreet, that's what he's limiting it to, two years max, and just rolling it over, as Peter told you in his presentation.

Investments to one or two years, which by the way is a significant increase in interest rates have taken place and that Tom.

Tom one to two years.

And Brian Bradstreet Thats, what is limiting it to two years Max and this rolling at OSB to told UN hedged.

In his presentation.

And if rates continue to rise would you would you look at deploying more ore.

If rates continued to rise, would you look at deploying more, or what would be your thinking in terms of what you would want to see before you deploy more? If you were in the 70s, you'd have thought the rates were much higher then, of course, but 5, 6, 7% would have been good rates, 8% would have been good rates, 10, 11, 12 would have been good rates, went to 21%, long Canada's.

What would be the your thinking in terms of what you would want to see before you answer that one.

Tom Yeah, you know everybody a few were in the seven days you would have thought the rates were much higher than of course, what 567% would've been good rates, 8% would have been good rates stand 11, 12 would've been go to went to 21% long Canada's.

So D O Canada's went to an unbelievable, 16% on the other side and the pandemic treasury bonds. When 10 year treasuries went to half a percent never in the history of it leaves a modern history, including depression.

That's 30-year Canada's went to an unbelievable 16%. On the other side.

Treasury bonds, when 10-year treasuries went to half a percent, never in the history of at least the modern history, including depression of the 30s, did 10-year treasuries go to half a percent. They did. And they stayed for some time. So you have to be just very, very careful. You can't have preconceived ideas as to what can happen. And we're just being very, very careful. We've protected our company for 36 years. We want to last 100 years. We want to be very careful.

The thirty's.

10 year Treasury is going to have a percent they did and they said for some time. So you have to be just very very careful you can't have.

Preconceived ideas as to what can happen and we're just being very very careful we protected our company for 36 years. We wanted to last 100 years, there won't be very careful.

Alright I appreciate the color. Thank you very much thank.

Thank you Tom next question Joe.

All right, appreciate the colors. Thanks very much. Thank you, Tom. Next question, Jal.

Our next question is from Mark <unk> with RBC capital markets. Your line is open Sir.

Our next question is from Mark Dwelley with RBC Capital Markets. Your line is open, sir.

Good morning, Mark good morning.

Hey, good morning Prem.

Just building on some of the questions.

Tom was just asking on the interest rates do you have a kind of an annualized run rate of what interest and dividend income might look like now I know you've given.

Good morning, Prem. Just building on some of the questions that Tom was just asking on the interest rates, do you have a kind of an annualized run rate of what interest and dividend income might look like now? I know you've given kind of broad estimates of that in the past. Do you have a kind of an annualized run rate of what interest and dividend income might look like now?

<unk> brought estimates of that in the past yeah. So as who are Mark right now Peter said numbers around 700 million normalized and down as interest rates go higher and as maturities roll over that number we expect to go higher there is lots of things that can change the numbers. So you can.

Yes, so Mark, right now Peter said our numbers are around 700 million normalized and as interest rates go higher and as our maturities roll over, that number we expect to go higher. There's lots of things that can change the number, so you can't...

And.

No guarantees on that.

Mark, but yes, we expect it to go higher beta here would you add anything to that no thats. Our current run rate today, and we're continuing to monitor it and we are.

uh... and no guarantees on that uh... uh... uh... mark but uh... yeah we expected to go higher that period would you add anything to that now that their current run rate today and we're continuing to monitor it and we uh... we uh...

We look at it on a daily basis.

So mark if you had a form of five year duration and they had very little cash and most people most companies in our business have very little cash because cash was giving and five basis points and so the others are not going to be able to have interest income in the main the lump sum cash coming in I guess, but in the main increased.

we look at it uh... on a daily basis so that's a month if you had a four or five year duration and they had very little cash and most people have uh... most companies in our business have very little cash because cash was giving you five basis points

And so the others are not going to be able to have interest income in the main, they'll have some cash coming in I guess, but in the main, increased investment income, we'll have that and our bond portfolios are going to go down much, much less than anyone else.

Our investment income will have that and our bond portfolios are going to go down much much less than anyone else.

No definitely you guys did a great job of protecting the balance sheet, there as I'm sure you've seen the spin.

No, definitely. You guys did a great job of protecting the balance sheet there, as I'm sure you've seen. Some of your competitors have seen 5% and 10% impacts to their book value. It's a small catastrophe in my book. That's exactly right, Tom.

Some of your competitors have seen 5%, 10% impacts to their book values. So small catastrophe in my book.

Thats exactly right Josh.

One other question is I noticed in the.

In the interim report I guess, there was a $180 million injection of capital into the run off segment. I was curious if you could elaborate on that it didn't look like it had any particular large losses.

One other question, as I noticed in the interim report, I guess there was a $180 million injection of capital into the runoff segment and I was curious if you could elaborate on that. It didn't look like it had any particular large losses but it was a fair amount of capital inflow for a unit that's been stable for a very long time.

There was a fair amount of capital inflow.

For a unit that's been stable for a very long time.

Yeah, we just we just.

Do you want to keep it safe.

Mark you know you have all of these.

Yeah, we just, you know, we just want to keep it safe, Mark. You know, you have all of these.

Unexpected as we said in our annual report unexpected.

As we said in our annual report, unexpected runoff-type exposures that are coming in, but I don't know. Peter, would you add to that? Yes, I think specifically on the $180 million, it really related to last year's results. We were just actually putting the capital in the first quarter, but it related to 2020.

A.

A run off type.

Exposures that are coming in.

But I don't know Peter would you add to that.

Yes, I think specifically on the $180 million.

Really related to last year's results. So we were just.

Actually putting the capital into in the first quarter, but it related to 2021.

Understood. Thank you.

I think that's all my questions very clean quarter. Thanks.

Understood. Thank you. I think that's all my questions. Very clean quarter. Thanks. Hey, thank you very much, Mark. Jill, next question, please.

Thank you very much Mark Joe next question. Please.

Our next question comes from Howard <unk> with Blinker and company. Your line is open Sir.

Our next question comes from Howard Flinker with Flinker & Company. Your line is open.

Hi, John .

Good morning.

Hi.

A minor question did your <unk>.

Hi, Prem. Hi, John . Hey, good morning, Howard. Hi. A minor question. Did your drop in interest expense come from some...

Drop in interest expense come from some derivative as you head.

Interest expense how much of it no.

We break it down, but you want to add to that.

Interest expense, Howard? No, we break it down, but do you want to add to that, Peter? I think the drop was last year we bought back some bonds, so we had some early redemption fees in that number. This year, that's not in there. Anything to add? Yeah, Howard, maybe if I can refer you to page 43 in the interim report.

I think the droplets are last year, we bought back some bonds. So we had some early redemption fees in that number.

This year, that's not in there.

Yes, Howard maybe if I can refer you to page 43 in the interim report we give the components in interest expense in 2022 compared to <unk> 21.

We give the components and interest expense in 2022 compared to 2021. You can see up at the holding company and the insurance companies, including the non-insurance, it was $92 million compared to $151 million, but as Peter indicated, in the prior year is that redemption loss of about $46 million. When you adjust for that, you're pretty much normalized on a year-over-year with some benefit coming through on the lower-yield bonds that we issued last year. Okay, thanks guys.

So you can see up at the holding company and the insurance companies, including the non insurance it was $92 million compared to $1 51, but as Peter indicated in the prior year as that redemption loss of about $46 million. So when you adjust for that you're pretty much normalized on a year over year with some benefit coming through on the lower yield.

Bonds that we issued last year, okay. Thanks, guys.

Thank you Howard Jill now next question please.

As a reminder, please press star one if you would like to ask a question. Our question comes from Jamie <unk> with National Bank Financial Your line is open.

As a reminder, please press star 1 if you would like to ask a question. Our question comes from Jamie Glone with National Bank Financial. Your line is open.

Yes. Good morning, Good morning, Jeremy only one question today, just wanted to get a little bit more color on the reserve development this quarter coming in flat pretty flat across.

Yeah, good morning. Only one question today. I just wanted to get a little bit more colour on the reserve development this quarter coming in flat and pretty flat across.

Most of the most of the business lines, so a little bit more color as to perhaps what we're seeing there to drive less reserve development this quarter relative to prior years, Yeah, I'll ask Peter to add but I just want to make a point Joe reserves. When you expand and this was what we found in the 2000.

most of the business wide. So a little bit more color as to perhaps what we're seeing there to drive less reserve development this quarter relative to prior years. Yeah, I'll ask Peter to add that, but I just want to make a point here. Reserves, when you expand, and this was what we found in the 2001 hard market after September 11th, for the next six, seven years we had huge redundancy.

And then one odd market. After September 11 for the next six seven years, we add huge redundancies, we're expecting the same now the first quarter. We didn't show any significant redundancies that would be the same because we look at it once a year at the end of the <unk>.

We're expecting the same. Now, the first quarter, we didn't show any significant redundancies, as Peter said, because we look at it once a year at the end of the year.

And so will our.

A review of our reserve is quite because we've grown so significantly in a hard market, 25% in 2021, 22% this year.

and so we'll review our reserves. But because we've grown so significantly in our hard market, 25% in 2021, 22% this year, the reserve redundancies we think will last for some time.

The reserve redundancies, we think will last for some time don't ask me how long, but that's been our experience in the past.

Don't ask me how long, but that's been our experience in the past.

Because these the pricing rate increases that we've had have been very significant.

uh... because these uh... the price and the rate increases that we've had have been very significant we've uh... we're expanding we're very underwriting profit focused we're expanding because we're getting paid to take the risk as simple as that

Expanding but everybody underwriting profit focused we're expanding because we're getting paid to take the risk as simple as that and so we think Jamie that over time.

Our reserves will be.

And so we think, Jimmy, that over time, reserves will be redundant.

Be redundant.

Peter I don't know if you want to add anything to that I think just specifically on your question in the current quarter.

Peter, I don't know if you want to add anything to that. I think just specifically on your question in the current quarter, in the fourth quarter we do thorough actuarial reviews for all our companies and usually we make adjustments then and unless there's some adverse development that we see, we typically don't react too much in the first quarter, maybe on some short tail lines of business.

In the fourth quarter, we do thorough actuarial reviews for all of our companies and usually we make adjustments then.

Unless there is some adverse development that we see we typically don't react too much in the first quarter, maybe on some shorter tail lines of business.

So thats why I generally in the first quarter, you won't see as much movement as.

So that's why generally in the first quarter you won't see as much movement as the other quarters. So nothing unusual there. And Jamie, you know when you look at our annual report and see the 10 years worth of reserve development, our companies have had significant reserve redundancies year after year after year and we expect them to continue to do that.

Other quarters, so nothing nothing unusual there and Jamie you know when you look at our annual report on form 10 Years' worth of reserves develop on our companies have had significant reserve redundancies year after year after year, and we expect them to continue to do that.

Okay, great. Yeah, that's that's the basis for the question and in fact, if I just wanted to confirm there was.

Okay, great, yeah, that's the basis for the question. In fact, I just wanted to confirm there was, there's nothing like inflationary or otherwise that caught you off guard this quarter relative to prior years. So it sounds like all is still normal. Thank you. Thank you, Jamie. Jill, next question. Our next question comes from Payson Hunter with CIBC. Your line is open, sir. Good morning, Payson.

Nothing like inflationary or otherwise.

Got you off guard this quarter.

Relative to prior year, so it sounds like.

All are still normal thank you.

Thank you Jeremy Jill next question.

Our next question comes from Pacer Hunter with CIBC. Your line is open Sir.

Good morning, Jason.

Good morning.

I just have a general question.

Inquiring as to what you invest.

Investment policy parameters are towards the use of total return swaps.

as to what your investment policy parameters are towards the use of total return swaps.

Tony.

No.

With an eye on our policy on total return swaps.

On our policy on total return swaps, we do use some total return swaps to replicate long positions, but we have said in the past that we're no longer going to use total return swaps, shorting any stocks or use TRS for that.

We do use some total return swaps to replicate long positions, but we are we have said in the past that we're no longer going to use total return swap shorting any stocks or Trs for that yes.

No Sean snow.

For the index all for the in for individual stocks and then the total return swaps rehab.

Yeah, so there's no shorts for the index or for individual stocks and then total return swaps we have just one or two and we intend to keep them but not use more of them.

I wanted to and we intend to keep them, but not to use more of them.

Are there any limitations and the total quantity as a percentage of your portfolio.

Are there any limitations in the total quantity as a percentage of your investment portfolio?

Hello.

The total return swaps when we look at our equity exposure, we look at the notional amount.

The total return swaps, when we look at our equity exposure, we look at the notional amount and we add that to our total equity exposure and we take capital charges on that. That's how it's limited to the amount of exposure that we can take.

And we add that to our total equity exposure and we take capital charges on that so that in.

That's how it's limited to the amount of exposure that we can take.

Thank you very much.

Thank you very much creation.

Next question.

Our next question comes from Ron Bachman with capital returns. Your line is open Sir.

Our next question comes from Ron Bobman with Capital Returns. Your line is open.

Hi, Thanks, and congrats on another very very fine quarter, combining Rob hi.

Hi, thanks and congrats on another very, very fine quarter. Bye, Rob. Hi. Prem, I had a sort of a stock price-related question that, you know...

Uh huh.

Stock.

Price related question.

No.

<unk>.

We're enjoying really good and improving underwriting environment the portfolio of companies that make up fair effects are.

We're enjoying really good and improving an underwriting environment. The portfolio of companies that make up Fairfax are performing very, very well and improving.

Performing very very well and improving.

Even further.

And despite that the stock price even from your own comments at the AGM.

even further. And despite that, you know, the stock price, even from your own comments at the AGM, shareholders of late, I think was your comment, have not enjoyed the extraordinary returns that over the long haul, shareholders have returned. And that, you know, you're sort of focused on changing that, I guess, in some respects was the thrust of your comment at the AGM.

Shareholders of late I think was your comment of not enjoyed that.

Extraordinary returns that over the long haul shareholders have returned and that you know you're sort of focused on changing that I guess in some respects was the thrust of your comment at the AGM.

And I'm wondering what what do you attribute when you think about what what are the elements that are suppressing the stock performance. What do you think the lead items are.

And I'm wondering, what do you attribute, when you think about what are the elements that are suppressing the stock performance, what do you think the lead items are? And then, so far, the primary tool has been buybacks and selling some small...

Then.

So far the primary tool has been buybacks.

And selling some small pieces of some of the.

Degree days assets inside a fair effects, what other tools or levers can you pull to sort of remedy that.

the great assets inside of Fairfax, what other tools or levers can you pull to sort of remedy that situation? Thanks. So, Ron, that's a very good question. You never know. These are markets, right? So you never can tell. In our annual report, I made the point that if you go back and look at 36 years, our stock price, many a time, has gone up 100%. Did we know that it would?

Situation. Thanks.

So that's a very good question you never know these are markets right. So you never can tell in our annual report I made the point that if you go back and look at 36 yours stock price. Many a time has gone up 100%.

That we know that it would do that no. So we are we can't predict stock price, whether it goes up or down.

So we can't predict our stock price, whether it goes up or down.

What we can do and we don't give guidance and we don't play the game of quarterly earnings and all of that we don't do that never done that and so.

uh... what we can do and and we don't get guidance and we don't play the game of uh... you know or clear names and all of that we don't do that never done that

And we are not promotional and we have one AGM and of that AGM. As you know we answer every single question that comes from anywhere and so we're not.

And so, and we're not promotional. We have one AGM and at that AGM, as you know, we answer every single question that comes from anywhere. And so we're not oriented towards promoting our stock.

<unk> oriented towards promoting our stock, but over the long term our stock always reflects underlying value and when it doesn't we pay a ton of run on buying back the stock. So we bought 2 million shares at the end of 2021 and that's the number one possibility for us in terms.

So continuing to buy the more we buy on stock the better it is for each individual shareholder who is remaining and I know it's taken a long term view now when the stock Wouldnt react and how it will react from I wish I knew.

A very large shareholder.

So I'm very interested in that Brian in my view the answer to that I mean, we know.

Okay, well, thanks operationally everything is great and it's been very very good capital management to some happy but.

I'm wondering if this is more levers thanks again and best of luck hope it continues.

Thank you Ron just to just to continue that in terms of Ron's question and comments, we have and I've said this at the AGM got nothing to do with me one of the best insurance companies in the World.

Not in Canada, not in the United States I'm talking the World and the reason, it's one of the best in the World is because we've got decentralized operations I think 23 companies in total and we've got experienced management teams who've been with us for 20 plus years.

No change consistent then below them, there's a whole consistent management team very small.

Our holding company.

So these are president of Asta 23 of them run a fine business and.

So the biggest company. We have is about 6 billion in premium out of the 24 that we did last year only six so for us to grow as opposed to a large competitors, which are more centralized is a much easier because people are reacting to.

The opportunity that they find right ahead of them.

And and it's a huge plus it takes a tough time and it takes a long time too.

Develop and and we've got excellent management teams.

And behind it all as I said at the AGM as a culture, we've got a wonderful culture.

Fairfax, which you can experience and.

If you come to our AGM.

Next question Joe.

As a reminder, if you would like to ask a question. Please press star one on your Touchtone phone, we have a question from Ashwin more Johnny with Edward Jones. Your line is open Sir.

Thank you hi from.

Do you foresee any additional contributions to the insurance subs from the Holdco.

Just to support growth and I guess, Conversely, if soft insurance market arises years from now.

How do you think about withdrawing capital from insurance subs and bring it back to the Holdco.

Yes, so companies that are all very well.

Financed whether you're a wells capitalize.

Capital lines to all of them, we have to put money last year as we've said in a variety of important.

But today they are all very well capitalized we don't see any.

More money going in there.

They are expanding significantly.

Our earning some.

It's an underwriting profit as you saw in 93% combined ratio.

We will be writing Peter Im thinking about $20 billion plus of net written premium and a 5% underwriting profit is $1 billion.

And methods less than 95% of gone so it's even more than $1 billion.

10% of the $2 billion. So we've got a huge underwriting profit.

Coming forward and our investment income, which was running at $700 million as interest rates go up should continue to do that.

<unk> move upwards, which was <unk>.

Very good earnings quarter by quarter, who knows.

What will happen, we've never focus on a on a quarterly basis.

And then remember we have rented as Jan was saying a restaurant business.

All closed and and independent make our travel business travel, which is like Thomas Cook.

Went through a really rough time Fairfax, India. It is trading at $12 $5. We said at our AGM. The book value net asset value of $20, India is on a tear so you've got a lot of companies that we have we talked about the Atlas at the AGM.

Fabulous team managed by David Sokol, and Bank Cheng huge opportunity there and then full Purion who manages.

Our.

Interest in <unk>.

Eurobank.

Tremendous opportunity so you're on and on you go on and you'll see not only interest income going in and value stocks that we have could do extremely well. So you put all that together we're.

Quite excited about the opportunity we don't we don't think capital is a problem at all but.

Peter any comment to add to his question.

No I think you.

Thank you.

Answered it.

You've got the right answer.

We think through strong underwriting profit increased interest and dividend income that the insurance companies will be able to you know what.

Fund any additional capital through growth and.

And Gen. For example in the first quarter I think the company has returned.

190 million that's correct. So that there is capital flowing both ways.

As Prem noted on the decentralized structure it with the holding company at the $1 2 billion. It gives us the flexibility to put capital down into the needed companies example, with runoff in the quarter, but also take capital back up through those companies that have access and it was about a $190 million in dividends that did come up to the holdco in the first quarter.

By 2022.

Thank you very much.

Thank you very much.

Sure and and.

Any question gel any more questions that you have.

No Mr. <unk>, we have no further questions at this time.

Well I have no further questions then thank you for joining us on this call and thank you very much for Hum coordinating and Jill Thank you.

You're very welcome. This does conclude today's conference call. We thank you all for participating you may now disconnect and have a great rest of your day.