Q2 2023 Fairfax Financial Holdings Limited Earnings Call
Good morning, and welcome to Fairfax is 'twenty two 'twenty three second quarter results conference call.
Speaker 1: Good morning and welcome to Fairfax's 2023 second quarter results conference call.
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<unk> conference is being recorded.
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Speaker 1: Your host for today's call is Prem Watsa with opening remarks from Mr. Derek Bules. Mr. Bules, you may begin.
Your host for today's call is Prem Wassa with opening remarks from Mr. Derek <unk>.
And Mr. <unk> you may begin.
Good morning, and welcome to our call to discuss Fairfax is 2023 second quarter results. This call may include forward looking statements actual results may differ perhaps materially from those contained in such forward looking statements. As a result of a variety of uncertainties and risk factors. The most foreseeable of which are set out under risk factors.
Speaker 2: Good morning and welcome to our call to discuss Fairfax's 2023 second quarter results. This call may include forward-looking statements. Actual results may differ, perhaps materially, from those contained in such forward-looking statements as a result of a variety of uncertainties and risk factors, the most 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.
Actors in our base shelf prospectus, which has been filed with Canadian securities regulators and is available on SEDAR.
Speaker 2: 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.
Fairfax disclaims any intention or obligation to update or revise any forward looking statements, except as required by applicable securities law.
Now I'll turn the call over to our chairman and CEO from Whatsapp.
Speaker 3: Thank you, Derek. Good morning, ladies and gentlemen. Welcome to Fairfax's 2023 second quarter conference.
Thank you Derek good morning, ladies and gentlemen, welcome to Fairfax is 2023 second quarter conference call.
Speaker 3: I plan to give you a couple of highlights and then, Patrick, all the Peter Clark, our president and chief operating officer, to comment on the quarter and Jen Allen, our chief financial officer to provide some additional financial details. As I say,
To give you a couple of highlights and then pass the call to Peter Clark, Our President and Chief operating officer to comment on the quarter and Jen Allen, our Chief financial officer to provide some additional financial details.
I said at our first quarter.
Beginning January <unk> 2023.
Speaker 3: beginning January 1, 2023, we were required to adopt IFRS 17 accounts.
We were required to adopt ifr Ias 17 accounting.
Speaker 3: This has resulted in many changes to our financial statements, the most significant change being the discounting of our insurance liabilities and the provision of a specific risk margin for uncertain financial statements.
This has resulted in many changes to our financial statements. The most significant change being that it's scouting up our insurance liabilities and the provision of a specific risk biogen for uncertainty.
I wanted to stress that this new reporting requirements.
Speaker 3: I want to stress that this new reporting requirement will not change the way we manage the business and we will continue to be focused on underwriting profit on an undiscounted basis with strong results.
<unk> change the way, we manage the business and we will continue to be focused on underwriting profit and then undiscovered basis with strong was helping.
Speaker 3: We will continue to show our combined ratios and operating income on an undiscounted base.
We will continue to show a combined ratios in the operating income on an undiscovered basis.
As I said last quarter, the most important point I could make for you.
Speaker 3: As I said last quarter, the most important point I can make for you, again, is to repeat that for the first time in our 37-year history, I can say to you
Again, it's going to repeat that for the first time in our 37 year history.
I can say to you we expect of course with no guarantees.
Speaker 3: of course with no guarantees, operating income to be more than $3 billion annually for the next three years.
Our operating income to be more than 3 billion annually for the next three years.
Operating income consists of one 5 billion plus of them interest and dividend income.
Speaker 3: Operating income consists of 1.5 billion plus from interest and dividend income 1 billion from underwriting profit and half a billion from associates and non-it Jones company
1 billion from underwriting profit and half of billions of associates and non insurance companies. This works out to about $100 per share after interest expenses overhead.
Speaker 3: This works out to about $100 per share after intersex expenses overhead and tax.
Texas.
Speaker 3: We continue to run above these levels with year-to-date operating income of $1.8 billion, excluding the effects of discounting and response.
We continue to run above these levels.
Year to date operating income up one 8 billion, excluding the effects of discounting and risk margin.
Fluctuations in stock and bond prices will be on top of that.
Speaker 3: Fluctuation, then stock and bond prices will be on top of that, but this only really matters over the long.
This only really matters over the long term.
Speaker 3: Our fixed income portfolio remains conservatively positioned with approximately 74% in government securities and only 15% in short-dated corporate bonds.
Our fixed income portfolio remains conservatively positioned with approximately 74% in government securities and only 15% in short dated corporate bonds.
Speaker 3: Insurance and reinsurance operations continue to perform exceptionally well, with gross premiums written in the second quarter of $8 billion, up 10%, a combined ratio of 93.9%, resulting in an underwriting profit of $337 million in the quarter.
Insurance and reinsurance operations continue to perform exceptionally well with gross premiums written in the second quarter of <unk> 8 billion up 10%.
Combined ratio of 93, 9%, resulting in an underwriting profit of $337 million in the quarter.
Speaker 3: Stock positions and associates continues to do very well, particularly Fairfax India, Atlas Corp and Eurobank.
Stock positions and associates continues to do very well, particularly Fairfax India.
<unk> Corp, and Eurobank.
Speaker 3: I want to bring to your attention the table on page 32 in Fairfax India's MDNA, which shows Fairfax India's investment track record.
I want to bring to your attention the table on page 32 in Fairfax, India is M DNA, which shows Fairfax, India is investment track record.
Public equities private equities from cost from the original investment have compounded at about 12, 7% and the ones that have been monetized.
Speaker 3: Public equities, private equities from cost from the original investment have compounded at about 12.7% and the ones that have been monetized.
Speaker 3: which means sold, either partial or full or total, have gone at 17.5%.
Which means sold either partial load for our total have gone at 17, 5%.
Yeah that table is worth looking at it's in the MD&A pledged to page of the MBNA.
Speaker 3: That table is worth looking at. It's in the MDNA, first page of the MDNA on Fairfax India. I will now pass the call to Peter Clark, President and Chief Operating Officer for further updates. Peter...
On Fairfax, India.
I will now pass the call to Peter Clark, Our President and Chief operating officer for further updates Peter.
Thank you Pam.
Speaker 4: We had another strong quarter with net earnings of $734 million for the second quarter of 2023, and book value increased to $834 per share, an increase of 10.8% from year-end adjusted for a $10 dividend.
We had another strong quarter with net earnings of $734 million for the second quarter of 2023 and.
And book value increased to $834 per share an increase of 10, 8% from year end.
Adjusted for $10 dividend.
Speaker 4: The strong performance in the quarter was driven by adjusted operating income of $913 million from our insurance and reinsurance operations, generated through underwriting income of $337 million, interest and dividend income of $407 million, and our share of profit of associates of $169 million.
The strong performance in the quarter was driven by adjusted operating income of $913 million from our insurance and reinsurance operations.
Generated through underwriting income of 337 million interest and dividend income of $407 million.
And our share of profit of associates of $169 million.
Speaker 4: as Prem said, our combined ratio for the second quarter of 2023 was 93.9 and included catastrophe losses of 135 million or 2.4 combined ratio points. While our gross premium-
As Prem said, our combined ratio for the second quarter of 2023 was $93 nine.
And included catastrophe losses of $135 million or two four combined ratio points.
While our gross premium was up 10%.
We continue to see favorable market conditions in many of our major lines of business.
Speaker 4: We continue to see favorable market conditions in many of our major lines of business. It's more on the...
It's more on the underwriting results later.
Our investment return for the quarter was <unk>, 8%.
Speaker 4: Our investment return for the quarter was 0.8% driven by increased interest and dividend income, strong share of profits of associates, offset by net losses on invest.
Driven by increased interest and dividend income strong share of profits of associates.
Offset by net losses on investments.
Interest and dividend income of $465 million more than doubled from the second quarter of 2022.
Speaker 4: Interest in dividend income of $465 million, more than doubled from the second quarter of 2022.
Speaker 4: benefiting from a very low duration of our fixed income portfolio coming into 2022.
Benefiting from a very low duration of our fixed income portfolio coming into 2022.
Speaker 4: and reinvesting at higher interest rates throughout 2022 and 2023.
And reinvesting at higher entry interest rates throughout 2022 and 2023.
Net losses on investments of $342 million were driven by losses on our bond portfolio of $405 million in the second quarter consisting.
Speaker 4: Net losses on investments of 342 million were driven by losses on our bond portfolio of 405 million in the second quarter, consisting primarily of unrealized losses from US and Canadian government bonds due to increased interest rates in the quarter.
<unk>, primarily of unrealized losses from U S and Canadian government bonds due to increased interest rates in the quarter.
Speaker 4: Our fixed income duration continues to be relatively short at 2.4 years.
Our fixed income duration continues to be relatively short at two four years.
Net gains on our equity and equity related holdings were $164 million in the quarter.
Speaker 4: Net gains on our equity and equity related holdings were 164 million in the quarter.
As mentioned in previous quarters, our book value per share of $834 does not include unrealized gains or losses in our equity accounted investments and our consolidated investments, which are not mark to market.
Speaker 4: As mentioned in previous quarters, our book value per share of $834 does not include unrealized gains or losses in our equity-accounted investments and our consolidated investments, which are not marked a mark.
At the end of the second quarter, the fair value of these securities in excess of carrying value.
Speaker 4: at the end of the second quarter, the fair value of these securities in excess of carrying value.
It was in excess of carrying value by $761 million in unrealized gain position or $33 per share on a pre tax basis.
Speaker 4: It was an excess of carrying value by 761 million and unrealized gain position or $33 per share on a pre-tax base.
Under <unk> 17, our net earnings are affected by the discounting of our insurance liabilities and the application of the risk adjustment.
Speaker 4: Under IFRS 17, our net earnings are affected by the discounting of our insurance liabilities and the application of a risk adjust.
Speaker 4: In the second quarter of 2023, our net earnings benefited $221 million pre-tax from the effects of discounting losses occurring in the current quarter, changes in the risk margin, the unwinding of the discount from previous years, and changes in the discount rate on prior year liability.
In the second quarter of 2023, our net earnings benefited $221 million pretax from the effects of discounting losses occurring in the current quarter chain.
Changes in the risk margin the unwinding of the discount from previous years and changes in the discount rate on prior year liabilities.
As interest rates move up and down we will see positive or negative effects on earnings from discounting.
Speaker 4: As interest rates move up and down, we will see positive or negative effects on earnings from discounting.
Our insurance and reinsurance businesses continue to grow all over the world as we wrote 8 billion of gross premium in the second quarter of 2023.
Speaker 4: Our insurance and reinsurance businesses continue to grow all over the world as we rode $8 billion of gross premium in the second quarter of 2023.
Speaker 4: Our gross premiums were up 10% this quarter, versus the second quarter of 2022, an increase of approximately 728 million.
Our gross premiums were up 10% this quarter.
Versus the second quarter of 2022, an increase of approximately $728 million.
This growth is driven by continued rate and the strong margins that prevail in many of our markets driven by increased pricing on property business, especially catastrophe exposed.
Speaker 4: This growth is driven by continued rate and the strong margins that prevail in many of our markets driven by increased pricing on property business, especially catastrophe exposed.
Our North American insurance segment increased gross premiums by $254 million or 13, 1%.
Speaker 4: Our North American insurance segment increased gross premiums by $254 million or 13.1%.
From enforced or had double digit growth at 18%.
Speaker 4: From Enforcer had double digit growth at 18%, driven again by its axis.
Given again by its accident and health business.
North bridge was up almost 12% in Canadian dollars.
Speaker 4: Northbridge was up almost 12% in Canadian dollars due to high customer intentions.
Due to high customer retention and rate increases.
Speaker 4: And Zina's premiums were up 6% year over year, driven primarily by its agribus.
And Z net premiums were up 6% year over year, driven primarily by its agribusiness.
Speaker 4: Our global insurer and re-insurer's segment grew gross premium by 233 million, up 5% this quarter versus the second quarter of 2022.
Our global insurer and Reinsurer segment grew gross premiums by $233 million up 5% this quarter versus the second quarter of 2022.
Odyssey group was up seven 3%, while Allied World was up four 6% in the quarter.
Speaker 4: Odyssey Group was up 7.3% while Allied World was up 4.6% in the quarter. Both driven by double digit, digit premium growth in their reinsurance operate.
Both driven by double digit premium growth in the reinsurance operations.
Written premium was up 2% with premium up at key almost 30%.
Speaker 4: Brit's premium was up 2% with premium up at key almost 30.
Speaker 4: while premiums were down at Brits other business, largely due to reductions in its casualty and thin pro business.
While premiums were down at brick other business largely due to the reductions in its casualty and thin pro business.
The premium of our international operations was up the most of all our segments on a percentage basis, increasing 36% or $241 million in the second quarter versus the second quarter of 2022.
Speaker 4: The premium of our international operations was up the most of all our segments on a percentage basis, increasing 36% or 241 million in the second quarter versus the second quarter of 2022.
Growth was exceptionally strong at Fairfax Asia up, 60%, driven by Singapore, REIT and Pacific insurance.
Speaker 4: Growth was exceptionally strong at Fairfax Asia, up 60% driven by Singaporean and Pacific insurance. Both who are benefiting from firming rates.
Both who are benefiting from firming rates on property business.
All the free also had strong growth in the quarter doubling its premium volume versus the second quarter of 2022.
Speaker 4: Holy Shree also had strong growth in the quarter, doubling its premium volume versus the second quarter of 2022.
Speaker 4: benefiting from increased reinsurance rates in Eastern Europe .
And a fitting from increased reinsurance rates in eastern Europe .
We also saw double digit growth at Fairfax, Brazil, Latam and colonnade insurance.
Speaker 4: We also saw a double-digit growth at Fairfax Brazil by Tam and Colin Adenchern.
On closing of our acquisition of additional 46% of golf insurance.
Speaker 4: On closing of our acquisition of additional 46% of golf insurance, which we believe will occur in the second half of 2023,
We believe will occur in the second half of 2023.
Speaker 4: We will begin consolidating the results, adding approximately 2.7 billion and gross premium annually to our international business.
We will begin consolidating the results, adding approximately $2 7 billion in gross premium annually to our international business.
We are very excited about the long term prospects of our international operations.
Speaker 4: We are very excited about the long-term prospects of our international operation.
Speaker 4: and will be a significant source of growth over time.
And we will be a significant source of growth over time drill.
Driven by our excellent management teams Underpenetrated insurance markets and strong local economies.
Speaker 4: driven by excellent management teams under penetrated insurance markets and strong local economy.
Our company has continued to grow into favorable market conditions, while we see rate increases moderating or rates, reducing in some lines public D&O and cyber for example, overall margins remain attractive.
Speaker 4: Our companies continue to grow into favorable market conditions. While we see rate increases moderating or rates reducing in some lines, public DNO and cyber for example, overall margins remain attractive.
Speaker 4: The re-insurance market continues to harden, especially for property business. And we expect that will continue throughout 2023 for longer.
The reinsurance market continues to harden, especially for property business and we expect that will continue throughout 2023 for longer.
As previously mentioned, our combined ratio was $93 nine in the second quarter of 2023.
Speaker 4: As previously mentioned, our combined ratio was 93.9 in the second quarter of 2023, producing underwriting profit of $337 million.
Producing underwriting profit of $337 million.
The combined ratio included catastrophe losses of $135 million, adding.
Speaker 4: The combined ratio included catastophyll losses of 135 million, adding 2.4 combined ratio points.
Adding to four combined ratio points.
Primarily from Attritional losses, and additional losses from the first quarter earthquake in Turkey.
Speaker 4: Primarily from attracional losses and additional losses from the first quarter earthquake in Turkey.
Speaker 4: If compares to a combined ratio of 94.1 and catastrophe losses of 3.2 points in the second quarter of 2020.
This compares to a combined ratio of $94, one and catastrophe losses of three two points in the second quarter of 2022.
As our premium base has expanded significantly and with the benefits of diversification, we expect to be able to absorb significant catastrophe losses within our underlying underwriting profit.
Speaker 4: As our premium base has expanded significantly and with the benefits of diversification, we expect to be able to absorb significant catastrophe losses within our underlying underwriting profit.
Our global insurers and reinsurers posted a combined ratio of 93, 3%.
Speaker 4: Are global insurers and reenters posted a combined ratio of 93.3? Led by Allied World, who had a combined ratio of 91 with its global insurance segment producing a 90 combined, while its re-insurance segment was at 90.
Led by Allied World, who had a combined ratio of 91 with its global insurance segment, producing a 90 combined.
While its reinsurance segment was at 93 three.
Speaker 4: both Odyssey Group and Brit produced combined ratios below 95 at 94.3 and 94.8.
Odyssey group and Brit produced combined ratios below 95% at 94, three and $94 eight.
Our North American insurers had a combined ratio of $94 seven led by North bridge with a combined ratio of 93 two.
Speaker 4: Our North American insurers had a combined ratio of 94.7 led by Northbridge with a combined ratio of 93.2.
North bridges combined ratio was six points higher than last year due to increased frequency of large losses in the second quarter, we expect that will normalize over the rest of the year.
Speaker 4: North Bridge's combined ratio was six points higher than last year due to increased frequency of large losses in the second quarter. We expect that will normalize over the rest of the year.
From an Forrester posted a 995 combined ratio, which included catastrophe losses of one seven points approximately one full point higher than the previous year.
Speaker 4: from Enforcer Post-Dedent 95 Combined Ratio, which included catastrophe losses of 1.7 points, approximately one full point higher than the previous year. Well Zena had a combined ratio of 96.6.
While <unk> had a combined ratio of $96 six.
Benefiting again from favorable reserve development.
Speaker 4: Our international operations delivered a combined ratio for the quarter of 95.3.
Our international operations delivered a combined ratio for the quarter of 95 three.
Speaker 4: Colonnade had a great quarter with a combined ratio of 90.2.
<unk> had a great quarter with a combined ratio of 92.
Benefiting from good underlying business and favorable reserve development.
Speaker 4: benefiting from good underlying business and favorable reserve development.
Speaker 4: BRIGHT in South Africa posted a strong quarter of 94 after a couple of tough years of catastrophe lost...
Bright in South Africa posted a strong quarter of 94 after a couple of tough years of catastrophe losses.
While Latin America continued to perform well with a combined ratio of 95 three.
Speaker 4: while Latin America continued to perform well with a combined ratio of 95.
Fairfax Asia had an elevated combined ratio compared to prior quarters, although still produced an underwriting profit with a 98 four combined ratio.
Speaker 4: Fairfax Asia had an elevated combined ratio compared to prior quarters, although still produced an underwriting profit with a 98.4 combined ratio.
Our international operations continue to perform very well with each of our segments contributing to the underwriting profit of the group.
Speaker 4: Our international operations continue to perform very well with each of our segments contributing to the underwriting profit of
For the quarter, our insurance and reinsurance companies recorded favorable reserve development of $72 million or a benefit of one three points on our combined ratio.
Speaker 4: For the quarter, our insurance and re-insurance companies recorded favorable reserve development of 72 million, or a benefit of 1.3 points on our combined ratio.
This is compared to $48 million or the benefit of <unk> nine points in 2022.
Speaker 4: This is compared to 48 million or the benefit of 0.9 points in 2022.
Prior year reserve moments movements tend to be less than the first half of the year given the extensive actuarial reserve reviews performed in the third and fourth quarters.
Speaker 4: Prior your reserve movements tend to be last in the first half of the year, given the extensive actuarial reserve reviews performed in the third and fourth.
Our expense ratio was up approximately half of combined ratio points in the second quarter of 2023 versus the second quarter of 2022, partially due to the effects of inflation on salaries and investments in people and technology.
Speaker 4: Our expense ratio was up approximately half a combined ratio point in the second quarter of 2023 versus the second quarter of 2022 partially due to the effects of inflation on salaries and investments in people and technology offset by
Offset by increased earned premiums.
Our insurance and reinsurance operations had a great first half of the year, producing underwriting income over $650 million, while continuing to grow profitably.
Speaker 4: Our insurance and re-insurance operations had a great first half of the year, producing underwriting income over 650 million while continuing to grow profitably.
We are led by exceptional management teams and our companies are positioned very well to capitalize on their opportunities in their respective markets.
Speaker 4: We are led by exceptional management teams and our companies are positioned very well to capitalize on their opportunities in their respective markets.
I will now pass the call to Jen Allen, our Chief Financial Officer to comment on our noninterest company's performance overall financial position and recent transactions.
Speaker 4: I will now pass the call to Jen Allen, our Chief Financial Officer, to comment on our non-insurance company's performance, overall financial position, and recent trends.
Speaker 1: Thank you, Peter. As we disclose in our first quarter, 2023 interim report, on January 1, 2023, the company adopted the new accounting standard for insurance contracts by FF-7.
Thank you Peter.
As we disclosed in our first quarter 2023 interim report on January one 2023, the company adopted the new accounting standard for insurance contracts <unk> 17.
Speaker 1: Within our Q2 2023 interim report, I want to refer you to Note 3 and sections within our MDNA under the heading adoption of IFS 17 contract on January 1st, 2023, and accounting disclosure and matters. For detailed adoption and impact on our consolidated financial statements relating to this new accounting standard.
Within our Q2 2023 interim report I want to refer you to note three and sections within our MD&A under the heading adoption of <unk> 17 contracts on January one 2023, and accounting disclosure and matters for detailed arsenic option.
<unk> consolidated financial statements relating to this new accounting standard.
Before I provide commentary on our second quarter results I would like to highlight that consistent with our Q1 2023 interim report our comparative periods in the company's Q2 'twenty three interim report had been restated and presented under <unk> 17.
Speaker 1: Before I provide commentary on our second quarter results, I would like to highlight that consistent with our Q1 2023 interim report, our comparative periods in the company's Q2 2023 interim report have been restated and presented under IFRS 17.
Speaker 1: Our Q Q2 023 interim report includes restated comparable reporting periods for the consolidated statement of earnings, comprehensive income and cash flows for the three and six month period ended June 30th, 2022. Our consolidated statement has changed its inequity for the six months ended June 30th, 2022, and we restated the consolidated balance sheets as of January 31st, 2022, and January 1st, 2022.
Our Q2 2023 interim report include restated comparable reporting periods for the consolidated statement of earnings comprehensive income and cash flows for the three and six months period ended June 32022, our consolidated statement of changes in equity for the six months ended June 32022.
And we restated the consolidated balance sheet as of January 31, 'twenty, two and January one 2022.
Speaker 1: So all the comparative periods presented now in our Q223 Interm Report are on the same measurement basis under IFRS 17.
So all of the period comparative periods presented now in our Q2 'twenty three interim report are on the same measurement basis under <unk> 17.
And our Q2 2023 press release on page two and N. DNA page 44, we have disclosed a table that reconciles our insurance service results under <unk> 17 for our property and casualty insurance and reinsurance operations you underwriting profit at.
Speaker 1: In our Q2 2020-3 press release on page 2 and MDMA page 44, we've disclosed a table that reconciled our insurance service result under IFRS 17 for our property and casualty insurance and re-insurance operations through underwriting process.
Speaker 1: a key performance measure used by the company and the property and casualty industry which we operate to evaluate and manage the business.
A key performance measure used by the company and the property and casualty industry, which we operate to evaluate and manage the business.
Speaker 1: The primary reconciling adjustments presented in these tables are, first, we adjust to include other insurance operating expenses, which are presented in the statement of earnings outside of the insurance service results. And secondly, we adjust for the effects of discounting on the net losses on claims and changes in the risk adjustments, which are included in that insurance service result in our consolidated statement of earnings.
The primary reconciling adjustments presented in these tables are first we adjust to include other insurance operating expenses, which are presented in the statement of earnings outside of the insurance service results.
And secondly, we adjust for the effects of discounting on the net losses on claims and changes in the risk adjustment, which are included in that insurance surface results in our consolidated statement of earnings.
Our traditional performance measures of underwriting profit in combined ratios are on a discounted basis as discussed by Peter.
Speaker 1: Our traditional performance measures of underwriting profit and combined ratios are on an undiscounted basis as discussed by Peter.
So I'll begin my comments in the second quarter on the impact of <unk> 17 within our results.
Speaker 1: So I'll begin my comments in the second quarter on the impact of IFRS 17 within our results.
Speaker 1: And the second quarter of 23, the net earnings of 734.4 million included a pre-tax net benefit of 221 million related
In the second quarter of 'twenty three.
Net earnings of $734 4 million included a pre tax net benefit of $221 million.
Related to <unk> 17 that pre tax benefit of $221 million is reported within key financial statement lines in our consolidated statement of earnings.
Speaker 1: That pre-tax benefit of 221 million is reported within two financial statement lines in our consolidated statement of earnings.
First included within the insurance service result line is the benefit of discounting our losses and ceded loss on claims net of any change in risk adjustment recorded in the second quarter of 'twenty three.
Speaker 1: First, included within the Insurance Service Result Line, is a benefit of discounting our losses and seated loss on claims. Net of any change in risk adjustment recorded in the second quarter of 23 of 645 million.
$645 million.
Speaker 1: That was partially offset by the second component that's presented in a separate line called net finance expense from insurance and re- insurance contract for $424 million that predominantly consisted of interest accretion of $347 million, which is a result of the unwinding of the effects from discounting associated with our net claim payments made during the period.
That was partially offset by the second component that's presented in a separate line called net finance expense from insurance and reinsurance contracts for $424 million that predominantly consisted of interest accretion of $347 million, which is a result of the unwinding of the effects from discounting.
Associated with their net claim payments made during the period.
Speaker 1: This compares to a net pre-tax benefit in the second quarter of 2022 of 1.1 billion, which was comprised of the same components I just previously mentioned, which namely included within our insurance service result, the benefit of discounting losses and seated loss on claims, net eventing change in the risk adjustments of 346 million.
This compares to a net pre tax benefit in the second quarter of 2022 of $1 1 billion, which was comprised of the same components I. Just previously mentioned, which mainly included it within our insurance service result.
The benefit of gift counting losses and ceded loss on claims net of any change in the risk adjustment of $346 million.
And in the prior year, it was actually a benefit or a net finance income from insurance and reinsurance contracts are $730 million.
Speaker 1: In the prior year, it was actually a benefit or net finance income from insurance and re- insurance contracts of $730 million.
Speaker 1: which reflected an increase in the discount rates in the period of $770 million, which was a result in the change in the interest rate environment being more pronounced in the first six months of 2022 compared to the respective period in 23, which was partially offset by the unwind or interest accretion relating to the effects of discounting associated with the net claim payment.
Which reflected an increase in the discount rates in the period of $770 million, which was a result in the change in the interest rate environment being more pronounced in the first six months of 2022 compared to the respective period in 'twenty, three which was partially offset by the unwind or interest accretion related to the effects of that.
County associated with the net claim payments.
Speaker 1: I'll refer you to note four in our Q2 2023 interim report for additional details on the discount rate applied on the losses and seated loss on claims recorded within the period.
I'll refer you to note four in our Q2 2023 interim report for additional details on the discount rate applied on the losses and ceded lockout claims recorded within the period.
A few comments on our non insurance company results in the quarter.
Speaker 1: If you comment on our non-insurance company results in the quarter.
The operating income of our non insurance company reported segment increased to $36 9 million in the second quarter of 2023.
Speaker 1: The operating income of our non-insurance company reported segment increased to 36.9 million in the second quarter of 2023.
Speaker 1: from 7.5 million in the second quarter of 2022.
From seven 5 million in the second quarter of 2022.
You exclude the following two items, which is first Fairfax, India performance fees to Fairfax, which was an accrual of $36 million in 'twenty, three and a reversal of a performance fee payable of $47 million in 'twenty two.
Speaker 1: If you exclude the following two items, which is first Fairfax India's performance fees to Fairfax, which was an accrual of 36 million in 23 and a reversal of a performance fee payable of 47 million in 22, and secondly, the impact of a non-cash impairment charge recorded in the second quarter of 22 of 109 million related to our investment in Farmers' Edge.
And secondly, the impact of a noncash impairment charge recorded in the second quarter of 2000 $209 million related to our investment in farmers edge.
Speaker 1: we would have an adjusted operating income for our non-insurance companies reporting segment increasing to 72.5 million in the second quarter of 23 from 69.7 million in the prior period.
We would have an adjusted operating income for our non insurance companies reporting segment, increasing to 17 $72 5 million in the second quarter of 23 from $69 7 million in the prior period.
And that principally reflected continued favorable results from our restaurant and retail segment, we had higher business volumes at Thomas Cook, India, and higher share of profit of associates at Fairfax, India.
Speaker 1: And that principally reflected continue favorable results from our restaurant and retail segment. We had higher business volumes at Thomas Cook India and higher share of profit of associates at Fairfax India.
If we turn and look to our share of profit from our investments in associates in the second quarter of 'twenty three.
Speaker 1: If we turn and look to our share of profit from our investments in Associates in the second quarter of 23,
Speaker 1: we reported continued strong profits from the investments in Associates in the second quarter, with profits of Associates of $269.2 million compared to $265.7 million in 2022.
We reported continued strong profits from the investments and associates in the second quarter with profits of associates of $269 2 million compared to $265 7 million in 2022.
Speaker 1: These numbers reflected share of profits from Eurobank at $130.5 million compared to $118.7 million in 2022.
These numbers reflected share of profits from Euro bank at $130 5 million compared to $118 7 million in 2022.
Exco resources contributed $46 2 million in the quarter compared to a loss in the prior period of $38 5 million.
Speaker 1: Exco resources contributed 46.2 million in the quarter compared to a loss in the prior period of 38.5 million
Speaker 1: In gulf insurance benefited the number by 24.1 million compared to 17.7 in the prior period.
Golf insurance benefited the number by $24 1 million compared to $17 seven in the prior period.
This was partially offset by reduced share of profits from Poseidon or formerly known as Atlas at $6 3 million compared to $72 million in the prior period, reflecting higher interest expense and interest rate hedging losses compared to hedging gains in the prior year, which fluctuate quarterly and transaction cost.
Speaker 1: This was partially offset by reduced share profits from Poseidon, or formerly known as Atlas, of 6.3 million compared to 72 million in the prior period, reflecting higher interest expense and interest rate hedging losses compared to hedging beans in the prior year, which fluctuate quarterly and transaction costs related to the first quarter privatization of the company.
Costs related to the first quarter of privatization of the company.
Speaker 1: And also to note Resolute, we have no share of profit from Resolute in our second quarter, 2023, as a result of the disposition of the investment in March 1, 2023.
And also to note resolute, we have no share profit from regularly in our second quarter 2023, as a result of the disposition of the investment in March one 2023.
You train the transaction in the quarter comments on that is on May 10, 2023, Britt sold Amyris Ambridge, it's managing general underwriting operations to admit to group.
Speaker 1: The transaction in the quarter comments on that is on May 10, 2023. BRIT sold Amherst and Bridgett's managing general underwriting operations to admitted groups.
Speaker 1: The company received 379 million as part of this transaction, which was comprised of cash of 266 million and a promissory note with a fair value of 113 million.
The company received $379 million as part of this transaction.
Which was comprised of cash of $266 million and a promissory note with the fair value of $113 million.
Speaker 1: An additional 100 million may be receivable subject to the clawback based on 2023 performance targets of Amber.
An additional 100 million may be receivable subject to a clawback based on 2023 performance targets of Ambridge.
Speaker 1: As a result of this sale, the company recorded a pre-tax and after-tax gain of $259 million, which is presented in the line called Gain on Sale of Insurance Subsidiary within our Consolidated Statement of Earnings.
As a result of this sale the company recorded a pretax and after tax gain of $259 million, which is presented in the line called gain on sale of insurance subsidiary within our consolidated statement of earnings.
Speaker 1: And we deconsolidated the assets and liabilities with carrying values of 309 million and 191 million respectively.
And we deconsolidation of the assets and liabilities with carrying values of $309 million and $191 million respectively.
Speaker 1: There were no other significant acquisitions or investors that closed during the second quarter of 2023.
There were no other significant acquisitions or divestitures that closed during the second quarter of 2023.
As Peter noted.
Speaker 1: As Peter noted, I expect to close sometime in the second half of 2023 our acquisition of additional interest and golf insurance.
We expect to close sometime in the second half of 2023, our acquisition of additional interest in golf insurance.
On April 19, 2023, we entered into an agreement pursuant to which we will acquire all of those shares of golf insurance under the control of KEPCO and certain of its affiliates that represents 46, 3% of the equity of golf insurance.
Speaker 1: On April 19, 2023, we entered into an agreement pursuant to which we will acquire all of those shares of golf insurance under control of Kipco, and certain of its affiliates that represent 46.3% of the equity of golf insurance.
Speaker 1: On closing of that transaction, we anticipate we will consolidate the assets and liabilities of Gulf Insurance and increase our equity interest from current 43.7% to a controlling interest of 90%. And we will expect to record a pre-tax gain related to this transaction at $290 million, with changes to that number reflected in the company's carrying value of its equity-accounted investment in Gulf Insurance up until the date of closing.
On closing of that transaction, we anticipate we will consolidate the assets and liabilities of Gulf insurance.
And increase our equity interest from current 43, 7% to a controlling interest of 90%.
And we will expect to record a pretax gain related related to this transaction at $290 million with changes to that number reflected in the company's carrying value of its equity accounted investment in golf insurance up until the date of closing.
In closing a few comments on our financial condition.
Speaker 1: In closing, a few comments on our financial condition. The liquidity position of the company remains strong with our cash and investments at the holding company at 1.1 billion at June 30, 2023 with principally held in cash and short-term dated investments and access to our fully undrawn 2 billion unsecured revolving credit facility that was renewed and extended for one year in the second quarter.
Our liquidity position of the company remained strong with our cash and investments at the holding company at $1 1 billion at June 30th 2023.
Principally held in cash and short term investments and access to our fully Undrawn 2 billion in secured revolving credit facility that was renewed and extended for one year in the second quarter.
Also in the second quarter of 2023, we paid Brit paid a special dividend of $275 million to the holding company as a result of that sale of Enbridge.
Speaker 1: Also in the second quarter of 2023, we've paid a special dividend of $275 million to the holding company as a result of that sale of amber.
Speaker 1: At June 30, 2023, the excess of fair value overcarrying value of investments in non-insurance associates and market-traded consolidated non-insurance subsidiaries with 761 million.
At June 30th 2023, the excess of fair value over carrying value of investments in non insurance associate and market traded consolidated non insurance subsidiaries was $761 million.
Speaker 1: compared to 310 million at December 31st, 2022.
Compared to $310 million at December 31, 2022.
Speaker 1: Included in the June 30, 2013 amounts is the company's investment in Poseidon, or known as Atlas, but prior.
Included in the June 30th twenty-three amounts of the company's investment in Poseidon are known as Atlas the prior.
Speaker 1: Where the company estimated the fair value of its interest is deciding that June 30th, 2023, based on the cash purchase price, a 1550, for Atlas Common Shares, pursuant to the privatization transactions that we describe in notes fixed to our interim report.
Where the company estimated the fair value of its interest in Poseidon at June 32023, based on the cash purchase price of $15 50 per outlet common shares pursuant to the privatization transaction that we described in note six to our interim report.
Speaker 1: That pre-tax excess of 761 million is not reflected in the company's book value per share, but is regularly reviewed by management as an indicator of the investment performance.
That pretax excess of $761 million is not reflected in the company's book value per share, but is regularly reviewed by management as an indicator of the investment performance.
Speaker 1: At June , sorry, on June 23rd, 2023, the company purchased shares from our minority shareholders of Allied World for cash consideration of 31 million, increasing the ownership in the Allied world from 82.9 to 83.4.
At June sorry on June 23, 2023, the company purchased shares from our minority shareholders of Allied World.
For cash consideration of $31 million increase in the ownership and Allied world from 82, 9% to $83 four.
Speaker 1: Concurrently, certain terms of the Allied World Shareholder Agreement were amended to extend the company's option to purchase the remaining interest of the minority shareholders in Allied World at certain dates from September 2024 to September 2026.
Concurrently certain terms of the allied world's shareholder agreement were amended to extend the company's option to purchase the remaining interest of the minority shareholders and Allied world at certain dates from September 2024 to September 2026.
Speaker 1: The company's total debt to total calf ratio, excluding our non-insurance companies, improved to 22.5% at June 30th, 23%.
The company's total debt to total cap ratio, excluding our non insurance companies improved to 22, 5% at June 30th 23 <unk>.
Speaker 1: compared to 23.7% at December 31st, 2022.
Compared to 23, 7% at December 31, 2022.
Speaker 1: and reflected the strong net earnings that we reported in the first six months of 2023 of two billion that included the underwriting profit of 651 million, interest in dividend income of 847 million, and the share of profit of associates of 603 million.
And reflecting the strong net earnings that we reported in the first six months of 2023 or 2 billion that included the underwriting profit of $651 million interest and dividend income was $847 million and a share of profit of associates at $603 million.
The holding company has no significant holding company debt maturities until August 2024.
Speaker 1: The holding company has no significant holding company debt maturities until August , 2024.
Speaker 1: And lastly, a comment on our common shareholder equity, which increased by 1.6 billion to 19.4 billion at June 30th, 2023.
And lastly, a comment on our common shareholder equity, which increased by $1 6 billion to $19 4 billion at June 30th 2023 from.
Speaker 1: from 17.8 billion at December 31st, 22, and it reflected the net earnings of the 2.2 billion noted, which was partially offset by payments of common and preferred shared dividends of 270 million, and purchases of 179,000 subordinate boarding shares for cancellation, for cash consideration of 115 million, or approximately 639 per share.
From $17 8 billion at December 31, 22, and it reflected the net earnings of the two point of the 2 billion noted, which was partially offset by payments of common and preferred share dividends of $270 million in purchases of 179000 subordinate voting shares for cancellation.
For cash consideration of $115 million or approximately $6 39 per share.
Speaker 1: That concludes my remarks for the second quarter of 23, and I'll turn this call back over to Prem.
That concludes my remarks for the second quarter of 'twenty, three and I'll turn the call back over to prep.
Speaker 3: Thank you very much, Jan. 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 of not call. The friend we're ready for the question.
Thank you very much and we now look forward to answering your questions. Please give us your name.
Company name and try to limit your questions to only one so that it's fair to all of the call. So friend, we're ready for the questions.
Speaker 1: Thank you so very much. Now our first is from Nick Prebe with CIBC Capital Markets. And Mr. Prebe, your line is open.
Thank you so very much now our first is from Nik priebe with CIBC capital markets and Mr. <unk>. Your line is open.
Okay. Thanks for the question.
Speaker 5: Okay, thanks for the question. The pricing environment across the P and C sector appears to be firming a bit on the whole with a lot of that strength concentrated in cat exposed property lines.
The pricing environment across the P&C sector appears to be firming, a bit on the hole with a lot of that strength concentrated in cat exposed property lines.
Speaker 5: As other capacity providers withdraw from the market or retrench, are you leaning into that space in a more meaningful way? Would just be interested to hear your thoughts on where you see the highest ROE opportunities on the underwriting side and how tactical you might be in pushing around the marginal dollar in the direction of those opportunities.
As other capacity providers withdraw from the market or retrench are you leaning into that space in a more meaningful way.
Would just be interested to hear your thoughts on where you see the highest ROE opportunities on the underwriting side and.
And how tactical you might be pushing around the marginal dollar and the direction of those opportunities.
Nick that's a very good question and I'll pass it onto our President Peter Clark and beta Eddie comments.
Speaker 3: Nick, that's a very good question. I'll pass it on to our president, Peter Clark, and Peter, any comments?
Yeah. Thanks, Nick.
Speaker 4: Yeah, thanks, Nick. You're exactly right. The markets continue to harden, but especially on the property side and the property cat side. Today we've grown marginally on property cat. We're taking advantages. We're seeing rate in excess of 30%. And our net. We're seeing rate in excess of 30%.
Youre exactly right the the markets continue to to harden, but especially on the property side and the property cat side.
To date today, we have growing marginally.
On property Cat.
We're taking advantages we're seeing rate in excess of 30%.
And or are nuts.
Speaker 4: has been going up as we reduce the amount of re-insurance we've bought. But generally speaking, we're evaluating that as we speak. It continues to be a very good market, the property cap market, and we'll look at it again on the one-one render.
Exposure has been going up as we reduce the amount of reinsurance we bought.
But generally speaking we're evaluating that.
As we speak it continues to be a very good market the property cat market and we'll look at it again on the one one renewals.
Speaker 3: Don't think the only thing I would add is cat exposures, you know, you don't know where it can come. So you could get a terrific hurricane or an earthquake. So they're very, very careful about our exposures. You know, we take worst case exposures, like limit losses because that's the one area where you could lose your company.
So I think the only thing I would add is our cat exposures.
You don't know where it can come so you could get a terrific hurricane or not quick. So we're very very careful about our exposures are.
Take worst case, our exposures like limit losses, because that's the one area, where you could lose your company and we've seen many companies are taking a hit.
Speaker 3: And we've seen many companies have taken a hit in the past. The pricing's really good. We're taking advantage, as Peter said, but you have to be careful about the downside. Next-
In the past.
Pricing is really good taking advantage of free to set but do you have to be careful about the downside.
Next question a friend.
Thank you, Sir Jamie <unk> with National Bank Financial your line is open now.
Speaker 1: Thank you, sir. Jamie Gloyne with National Bank Financial. Your line is open now.
Speaker 6: Yeah, thanks. Another group quarter on the interest and dividend income interest rates continue to track higher. You got the PAC West deal in the books. I would look at the run rate being greater than one and a half billion and maybe even additional contribution to do it against Wednesday.
Yes. Thanks.
They're good quarter on the interest and dividend income.
Just rates continuing to track higher you've got the Pac West deal in the books I would look at the run rate being greater than one 5 billion and maybe even approaching 2 billion soon.
Speaker 6: But then your guy is just still kind of look at 1.5 billion and that build up to the 3 billion for the next three years. Like, well, I guess the question is, what will it take for you to revise that 3 billion? Am I directionally right with how I'm thinking about this? And should we expect to see that sort of turn higher here?
But in your guidance you still kind of look out $1 5 billion in the buildup to the 3 billion for the next three years ago I guess the question is.
What will it take for you to revise that $3 billion in bi directionally right with all when thinking about this and should we expect to see that sort of trend higher here.
So Jimmy it's is moving up all the reasons you said.
Speaker 3: So Jamie, it's moving higher for all the reasons you said, but we look at it again at the end of the year. And, you know, we're not in a forecasting business. It's only that it was so significant, as we mentioned in our Rennier report, that, you know,
But we look at it again at the end of the and you know we're not in the forecasting business. Its only that it was so significant desert you mentioned it already a report that you know.
Speaker 3: For the first time, we were able to look at three years at say an operating income of $3 billion, and which is like $100 a share. We've never been able to do that. And what's happened in the Senate in the annual report is that two significant things happened. One, the size of our company.
For the first time, we were able to look at three years I'd say, an operating income of 3 billion.
And which is like $100 are shared we've never been able to do that.
And what's happened in the Senate and the annual report is that two significant things happened one the size of our company $30 billion of premium U S dollars gross written premium, but that's what we're running at and.
Speaker 3: $30 billion of premium US dollars Gross wouldn't premium that's what we're running at
Speaker 3: And that's not including, as Peter said, the 2.73 billion of GIG growth burden premium, the Middle Eastern company. So the size has improved huge. And the second is the operating income, which you just mentioned. We've never had that before. And that operating income of $100 a share, we look at it again at the year end. And what's happening, James?
And and that's not including as Peter said that $2 73 billion of a G.
G I G.
Gross written premiums.
Middle Eastern company. So we've the sizes improved are huge and the second is the operating income would you just mentioned we've never had that before.
And and that operating income of $100 a share we look at it again at the yearend.
And what's happened Jamie is that.
We've always focused on the long tail and so you'll have periods, where you don't perform as well I know, we're all shareholders would have been happy with US and then suddenly things change and so we haven't changed at all long term underwriting profit.
Speaker 3: we've always focused on the long term. And so you have periods where you don't perform as well. I know our shareholders wouldn't have been happy with us, and then suddenly things change. And so we haven't changed at all. Long term, underwriting profit.
Speaker 3: focus on good reserving and value investing always protect the downside first and that's what you're seeing, Jamie.
Our focus on good reserving and value investing have always protected always protect the downside first.
And and that's what you're saying.
J P.
Next question Fran.
Speaker 1: Thank you, Mr. Wattsa. Tom McKinnon with DMO, your line is now open.
Thank you Mr. Watson, Tom Mackinnon with BMO. Your line is now open.
Yeah, Thanks, very much good morning, and private goodbye.
Speaker 4: Yeah, thanks very much. Good morning, and my question really more on the fact that, especially from an operating perspective, I mean, everything is going very smoothly here with better underwriting income, better interest in dividend income, and better earnings from your associates.
My question really.
More on the fact that especially from an operating perspective, I mean, everything is going very smoothly here.
With you know.
Better underwriting income better interest and dividend income and better earnings from your associates.
Speaker 4: You're well capitalized here. Why not step up on the buyback a little bit more here, especially given the stock fill trays below book Valley?
You can't you're well capitalized here.
Why not step up and on the buyback a little bit more here, especially given the stock still trades below book value.
Yeah.
Speaker 3: Yeah, Tom, that's our first year of member we've talked about before. The first thing is to be financially sound, always.
That's a first.
You remember we've talked about this before the first thing is to be financially sound.
Always second financially sound means as Jan was saying throw a billion dollars in cash and marketable securities are the $2 billion line of credit and no maturities other than the one that you've talked about ex U S.
Speaker 3: The second and financial sound means, as Jen was saying, through a billion dollars in cash and marketable securities, the two billion dollars line a credit. And no majorities, other than the one that he talked about next year, now bond majorities.
Bond maturities, so so for last year.
Speaker 3: So financially we'd like to think we're very, very sound and strong. And then we look at buying back common shares.
We'd like to think of a very very sound and strong and that'd be look at you.
You know buying back our common shares and a beta has a you.
Speaker 3: And Peter has, you know, that's, we've got some more shares as we, in the second quarter, but Peter, in terms of our perspective on bike bikes, it's.
You know that's we bought some more shares.
In the second quarter, but Peter in terms of a prospective on buying back shares and I guess on the other thing to remember is that and.
Speaker 7: And I get on the other thing to remember is that and we're still growing and we grew 10% in the quarter. So we still continue to grow profitably, which we like and we fully support. And you know, that would be our number one priority right now with our capital. But as that growth slows down over time, we will very quickly produce excess capital. And um...
We're still growing and we grew 10% in the quarter. So we still continue to grow profitably, which we like and we fully support and you know that would be our number one priority right now with our capital.
But as that as that growth slows down overtime, we it will very quickly produce excess capital and and Ah you know gives.
Speaker 7: and gives us a lot of flexibility with what we can do with that. But that's the other point. We're going to manage our capital and we have lots of options, but right now we continue to grow and we're happy to fund that growth through internal capital.
Gives us a lot of flexibility with what we can do with that but that's the other point, we're going to we're going to manage our capital and we have lots of options but.
Right now we continue to grow and we're happy to to fund a fund that growth through internal capital.
Speaker 3: And Tom one other point on the buying back in our annual report, we said that our book value for share grew at 18.8% from inception compounded at 18.8.
And one other point on the buying back in a variety of a board. We've said that our book value per share grew at 18, 8% from inception compound it at 18, 8%.
Speaker 3: A stock price sometimes compounds above and sometimes below. Well, at the end of 2022, we said, what stock price, create dollars, would make the book value compound and the stock price compound the same.
<unk>, probably sometimes compounds above and sometimes below well at the end of 'twenty 'twenty. Two we've said, what's what stock price get $8 would make the book value of compounds and the stock price gotbaum to say.
Speaker 3: And that number we put in the annual report was $1375. That just makes it same.
And that's not him, but we put it in the Arab World was $13 $13 75, one 375 that just makes it safe.
Speaker 3: You know, book value is a first indication. We are book value, we think is very understated and our book value, intrinsic value, which I'll leave you guys to estimate, is worth a lot more than the book value. But that's how we look at it. So at the end of the year, 1375, if we can buy our shares, we think we're doing all shareholders, we're doing well by all shareholders, by buying back the stock.
Book value as oppose syndication read a book value. We think is they are decided at a book value.
Intrinsic value, which I'll leave you guys to estimate is worth a lot more than the book value, but that's that's how we look at it. So at the end of the 13 75, if we can buy a says we think we're doing all shareholders.
Oh, we're doing well by all shareholders by buying back the stock.
Next question friend.
Speaker 1: Thank you. Scott Halaniak with RBC Capital Markets. Your line is now open.
Thank you Scott <unk> with RBC capital markets. Your line is now open.
Yes. Good morning wondering if you could talk about just in general loss cost trends in social inflation, those who've come up big topics on a lot of the P&C insurer conference calls.
Speaker 5: Yes, good morning. What is he could talk about just in general lost cost trends and social inflation? Those have come up big topics on a lot of the P and T and Sure conference calls. What do you see in across your book? Any areas that stand out, where you're seeing kind of a change or uptick in lost cost trends and social inflation, if any. And.
Wondering if you can just expand you know what are you seeing across your book any areas that stand out where you're seeing kind of a change or uptick in loss cost trends in social inflation.
If any and.
Speaker 5: Yeah, if you could identify anything kind of you're seeing any observations relative to the last few quarters and any change or observations.
Yeah, if you could identify anything kind of youre seeing any observations.
Relative to <unk>.
The last few quarters and any any change your observations.
Speaker 3: Got that good question and it's a concern and the property cargy business, especially in the United States. Peter.
But that's a good question and it's a concern in the property casualty business, especially in the United States.
Peyto.
Yes so.
As I said before we still were still getting fairly good rate and we believe in in aggregate rate above loss costs.
Speaker 7: As I said before, we're still getting fairly good rate and we believe in aggregate rate above loss cost.
Speaker 7: probably in the 6, 6 and a half percent range rate.
Probably in the 665% range right.
Speaker 7: But you're exactly right. On the casualty side is where we watch it very, very closely. And I think in the last number of years, we've been able to get rate in access of social inflation in particular.
But you're exactly right on the casualty side is where you were we watch it very very closely and I think that you know in the last number of years, we've been able to get right in in excess of inflation social inflation in particular.
Speaker 7: But we still in those accident years, 2014 to 2018, we do see some continuing development on the casualty line.
But we still are in those accident years are our 2014 to 2018, we do see some you know continuing development on the casualty lines.
Speaker 7: Now that's more, you know, it's been offset by redundancies we have in other lines, but you continue to see it in those accident years.
That's more of a you know it's been offset by redundancies, we have in in other lines, but you continue to see it in those accident years, we haven't touched any of our reserves on the more recent casualty years.
Speaker 7: We haven't touched any of our reserves on the more recent casualty years, and we really haven't
And and we really haven't taken up.
Speaker 7: a lot of the rate that we got in those years to the bottom line.
A lot of the rate that we got on those years to the bottom line. So we continue to monitor it closely and and watch it throughout the group.
Speaker 7: We continue to monitor it closely and watch it throughout the group. That's an important point, really, you just made with a reserve. We look at it basically once a year. And we've expanded in the hard market significantly. And we've expanded in the past in 2001, 2002. And we saw what happened in terms of reserve return.
That's an important point you just made with a reserve we looked at it basically once a year.
And you know we've expanded in the HUD market significantly we've expanded in the past in 2001 designed to do and we saw what happened in terms of reserve redundancies.
Speaker 3: We're focused on the long term. And so we think, Reservoir and Dutton, she's very much ahead of us. But the social inflation is one uncertainty. The others, of course, is inflation, interest rates, recession. So you got all of these uncertainties, which in a sense help the properly casually cycle.
We are focused on the long term and so we think reserve redundancies, though very much ahead of us.
But there is social inflation is one uncertainty the others of course is inflation interest rates recession. So you got all of these uncertainties, which and does in a sense help the property casualty cycle.
Speaker 3: But one of these days it'll end, there'll be people wanting to come in and and right around business at much lower rates and and as Peter was saying that's the time when our business would perhaps be flat and maybe even come down.
But one of these days Atlanta, there'll be people wanting to come in and and right Bob right.
Right.
This set.
Lower rates and low and as Peter was saying that's the time when the.
Business with.
Or perhaps are we flat and maybe even come down.
Brian next question.
Speaker 1: Our next question from Junior Raw, a private investor and your line is now open. Good morning, congratulations.
Our next question from junior Raw, a private investor and your line is now open.
Good morning, congratulations on the terrific.
Speaker 5: Congratulations on the good quarter and the good website too you guys did a good update there Question of a Bangalore Airport. Is there an impact to the IPL with the future purchase of the 7% or are we still on target to IPL that within the next couple years?
Congratulations on the good.
Corridor and a good website until you guys did a good update there.
A question about Bangalore Airport is there an impact to the ideal with the future purchase of the 7% or are we still on target to I feel that within the next couple of years.
Speaker 3: Yeah, we've mentioned that we're in the course of looking at an IPO through Anchorage, but we part 3% and we really like the Bangalore International Airport, and we like the valuation, and we think long term, long term, it's really attractive for us, the jewel and the crown for Perplex India. And you want to add to that, Peter?
Yeah, We you know we will.
Mentioned that we have.
In the course of looking at them.
At IPO through Anchorage, but we bought 3% then we'd be really liked the Bangalore International Airport and we like the valuation and we think our long term long term, it's a extra extremely attractive for us it's a jewel in the crown for Fairfax, India and.
You want to add to that Peter.
Speaker 7: I don't think in any way the incremental increase affects any IPO consideration. No, it doesn't. We're just buying, if we can buy it at a good price, long term, it's a good price for Siemens who's selling at a fair price, but for us with the gear of it in the long term.
I don't I don't think in any way the incremental increase affects any IPO consideration no no. It doesn't resist buying what about if we could buy it and a at a good price long term good price for Siemens who is selling at a fair price.
But for us with big deal, but it doesn't in the long term.
Thank you Julia.
Next question Fred.
Thank you very much now Tom Mackinnon with BMO. Your line is open.
Speaker 1: Thank you very much. Now Tom McKinnon with BMO, your line is open.
Yeah. Thanks, a follow up question just with respect to the workings Avaya for F 17, when we have you've got if I look at your balance sheet, you got about 33 billion in bonds and obviously movements in interest rates rising interest rates are.
Speaker 4: Yeah, thanks. A follow-up question just with respect to the workings of IFRS 17. When we have, you've got, I'll look at your balance sheet. You've got about 33 billion in bonds and obviously movements in interest rates, rising interest rates.
Speaker 4: are going to negatively impact that. But then if I look at your insurance contract liabilities, you know,
Going to.
Negatively impact that but then if I look at your insurance contract liabilities you know net.
Of reinsurance you got about 31 billion and that and so you know you get when you get necessarily the reverse move there.
Speaker 4: of reinsurance, you got about 31 billion in that. And so, you know, when you get necessarily the reverse move there to offset the market movement on the bonds, it didn't
To offset the mark to market movements on the bonds.
It didn't fully work in the quarter the hit to the assets was over four it was about $400 million, but the increase in AR as a result of discount rate moves was to hunt was a little over 200 million. So.
Speaker 4: fully work in the quarter. The hit to the assets was over 400 million, but the increase in as a result of discount rate moves was 200 million.
Speaker 4: Why would those two things largely offset? I assume they're kind of about the same duration, but maybe can help me their thing.
Why wouldn't those two things largely offset I assume they're kind of about the same duration, but maybe you can help me there. Thanks.
Yeah.
Speaker 3: The first fall, the lability is a longer duration than our assets, but the amount of money only to have.
First of all love that the liabilities are longer duration that IRA assets, but then our bonds I buy in zone, two and a half.
Got.
Duration for liabilities jetty, then yeah, and I think I think the complexity to them, that's coming and so you're referencing the bond loss of about $405 million.
Speaker 3: duration for our liabilities for gentlemen. Yeah, and I think the complexity Tom that's coming in. So you're referencing the bond loss of about 405 million. And the total IFS 17 benefit was 221.
And the total <unk> 17 benefit was through 'twenty one.
Speaker 8: Part of the issue is within the quarter, as you go longer out on that tail on the liabilities, it's not a match on the asset site. So you're getting a bit of a disconnect. If you look on the Y2D basis, so the bond portfolio was nominal loss, but you do have a significant benefit of about 532 million coming in on the six months.
Part of the issue is within the quarter as you go longer out on that tail on on the liabilities. It's not a match on the asset side, so you're getting a bit of a disconnect. If you look on the YTD basis. So you know the bond portfolio with nominal loss, but you do have a significant benefit of about 532 million coming in.
Six months.
Speaker 8: and you're going to get a disconnect marginally because we don't match duration and we also have currency that's mismatched. So your bonds is more driven by your US. On the liability side, we've got mixed currencies in there so it won't be a perfect match but overall when you hit six months it is a net benefit. Thank you for that question.
And you didn't get a disconnect marginally because we don't match duration and we also have currency. That's mismatched. So your bonds is more driven by your U S. On the liability side. We've got mixed current season, there. So it won't be a perfect match, but overall when you hit six months. It is a net benefit.
Thank you for that question, John My friend any more questions.
No Sir no Mr Watson and I'll turn it back to you.
Well. Thank you very much for a friend if there are no further questions. We thank you all for joining us on this call. Thank you.
Speaker 3: Thank you very much for our friend. If there are no other questions, we thank you all for joining us on this call. Thank you.
Conference is now concluded again. Thank you for your participation you may please disconnect at this time.
Speaker 1: Conference has now concluded again, thank you for your participation. You may please disconnect.