Welcome to Fairfax's third quarter results conference call. Your lines have been placed in a listen-only mode. After the presentation, we will conduct a question-and-answer session. At that time, to ask a question, please press star one on your phone keypad. For time's 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. Your host for today's call is Prem Watsa, with opening remarks from Mr. Derek Bulas. Mr. Bulas, please begin.
Good morning, and welcome to our call to discuss Fairfax's 2022 third quarter results. This call may include forward-looking statements. Actual results may differ, perhaps materially, from those contained in such forward-looking statements as a result of a variety of uncertainties and risk factors, the most foreseeable of which are set out under Risk Factors in our base shelf prospectus, which has been filed with Canadian Securities Administrators and is available on SEDAR. Fairfax disclaims any intention or obligation to update or revise any forward-looking statements, except as required by applicable securities law. I now turn the call over to our Chairman and CEO, Prem Watsa.
Thank you, Derek. Good morning, ladies and gentlemen. Welcome to Fairfax's 2022 third quarter conference call. I plan to give you a couple of highlights, pass the call to Peter Clarke, our President and Chief Operating Officer, to comment on the quarter in general, and our Chief Financial Officer to provide some additional financial details. Earlier this week, Brit issued a press release announcing that Matthew Wilson, following strict orders from his doctors, has decided to step down as Brit's CEO to focus on his family and health. Matthew returned as CEO in September following a leave of absence battling a rare case of blood cancer. It was one of the hardest decisions he ever had to make.
Matthew has been with Brit for 23 years, has been instrumental in building Brit to be one of the most forward-thinking companies in the market, and he leaves a lasting legacy of success across the whole organization. Matthew recommended that Martin Thompson, who filled in for Matthew during his leave of absence, become permanent group CEO, and we are happy to say that Martin has agreed to take on that role full-time. Martin is a highly experienced leader in the insurance sector and demonstrated this when filling in for Matthew. We are very pleased that Matthew will remain as an executive advisory director to Fairfax, Brit, and Ki going forward. Now on the quarter. Favorable market conditions continue in the property casualty markets, and our companies continue to take advantage of that.
The gross premiums up 16% to $6.9 billion in the quarter, and net premiums up 19%. Gross premiums for the nine months were up 20%. Despite heavy catastrophe losses driven by Hurricane Ian, our insurance and reinsurance operations had a combined ratio of 100% that quarter and 96% for the year-to-date. We benefit greatly from our diversification and global presence when dealing with events such as catastrophes, COVID, or war, to name a few. Big advantage of Fairfax now is it's diversified all over the world. Congratulations to all our presidents who continue to grow profitably in a strong rating environment. Our decentralized approach works. Our operating income in the quarter and in the first nine months was up significantly, increasing year-over-year by approximately 75%. For the first nine months, we had record operating earnings of $1.6 billion.
As we continue to deploy cash and short-term investments at higher rates and with strong and increasing underwriting income, we expect our operating earnings to continue to grow. Our book value per share decreased by 8%, adjusted for our dividend in the first nine months, as a result of net losses on our investment portfolio of $2.3 billion, primarily unrealized mark-to-market losses. In the nine months, we've had net losses on investments of $2.3 billion, driven by losses of $1.15 billion in our bond portfolio due to continued rising interest rates and $766 million from mark-to-market movements on our common stocks, reflecting the decline in the stock markets. The sale of our pet insurance business closed on October 31, and after we record the approximately $1 billion net gain, our book value is expected to be up for the 2022.
Almost all of our competitors will show large declines in book value per share because of rising interest rates. For the first nine months, declines in book value per share will range in the main from 20%- 50%. Very, very significant. We have mentioned to you for many years now that we have not reached for yield. We benefited greatly by having such a low duration, 1.2 years, coming into the year on our fixed income portfolio. Our low duration on our $37 billion fixed income portfolio reduced the impact of rising interest rates on our bonds to a decrease of only 3.1% on the fixed income portfolio, significantly less than many of our peer companies. Notwithstanding our low duration, we had $1.15 billion of unrealized bond losses that went through our income in the first nine months of the year.
We expect much of this will be reversed over the next 12-18 months. In the meantime, we've been able to invest at higher rates, increasing our current normalized annual run rate for interest and dividend income to $1.2 billion, up from approximately $530 million at the end of December 31, 2021. Now, I've said previously many times, long-term value investing has gone through a very difficult time for about a decade now. To quote what I said a year ago, "Valuations of value-oriented stocks versus growth stocks, particularly technology, have never been so extreme, exceeding even the extremes of the dot com era in 2000. As the economy continues to normalize, we expect a reversion to the mean with value-oriented stocks coming to the fore.
We continue to believe our common stock positions are very undervalued. I reminded you that in the three years, 2000 to 2002 downturn, most stock market indices were down about 50%, but our stock portfolio was up 100%" . This is about a year ago. In the first nine months of 2022, particularly in the third quarter of this year, technology stocks, including the FANG stocks and Microsoft, have come down significantly. From its high in 2021, Alphabet is down 42%, Amazon 51%, Facebook 76%, Microsoft 36%, Netflix 61%, Tesla 48%. Many of these companies' stock prices made new lows yesterday for 2022. Only Apple has dropped only 20%. Of course, smaller tech companies like Zoom and Shopify are down 80% plus from their high.
If history is any guide, there is more to come. I will note for you that the Nasdaq dropped 50% in 2000 and then dropped another 50% in the next two years. We have taken Recipe private with a 99.9% majority of the minority vote. David Sokol has a deal to take Atlas private at $15.50 per share. Our shareholding in Atlas will continue, and we continue to be very excited to support David Sokol and Bing Chen. I should note that not recorded in our third quarter results is the previously announced sale of our pet insurance business, which I mentioned earlier, to JAB for $1.3 billion pretax gain, which closed on October 31st and will be recorded in the fourth quarter.
The additional pretax gain of $375 million on Digit Insurance that will be taken upon regulatory approval for consolidation. I would like to thank all the employees of pet insurance operations for building such a great asset and wish everyone all the best going forward. We continue to do all we can for our Ukrainian employees. Our whole company is behind all three outstanding Ukrainian operations as they look after our employees under extremely difficult conditions. I should emphasize again that there's no truth to the rumor that we are selling Bangalore International Airport. Bangalore International Airport is the jewel in the Fairfax India crown, and we will be holders for a long, long time. I will now pass the call to Peter Clarke, our President and Chief Operating Officer, for further updates. Peter?
Thank you, Prem. We had a net loss of $75 million in the third quarter of 2022. As Prem highlighted, negatively affected by net investment losses of $519 million, catastrophe losses of $803 million, partially offset by increasing interest and dividend income of $257 million, and our share of profit of associates of $318 million. Please remember that under IFRS accounting, unrealized gains and losses, bonds and stocks, are reflected in income, not other comprehensive income like US GAAP. Our combined ratio in the third quarter was 100.3%, and it included above average catastrophe losses. For the year, our combined ratio was 96% and generated underwriting profit of $609 million.
Gross premiums were up 16% in the quarter, 20% year to date, as we continue to see favorable market conditions in many of our major lines of business. More on the underwriting results later. The operating income of our property and casualty insurance and reinsurance operations increased to $425 million in the third quarter of 2022, up from $245 million in the third quarter of 2021, driven by higher interest and dividend income and an increase in our share of profit of associates. Our investment return in the third quarter was essentially flat at 0.1%, with interest and dividend income and our share of profits of associates offset by unrealized mark-to-market losses on our equities, bonds, and foreign exchange fluctuations.
The net loss on our bond portfolio was $242 million in the third quarter and was generally the result of increasing interest rates. At the end of September, our insurance and reinsurance companies held portfolio investments of $49 billion, of which approximately $8.2 billion was in cash and short-term securities. We continued to deploy that cash primarily into three-year U.S. Treasuries and pick up additional interest income. Our net losses on our equity and equity-related holdings were $155 million in the quarter, driven by the overall drop in equity markets. As mentioned in previous quarters, our book value per share of $570 does not include unrealized gains or losses in our equity accounted investments and our consolidated investments, which are not mark-to-market.
At the end of the quarter, the carrying value of these securities is in excess of fair value by $424 million, an unrealized loss position, or $18 per share on a pre-tax basis. As previously mentioned, our insurance and reinsurance businesses continue to grow rapidly all over the world. We wrote $6.9 billion of gross premiums in the third quarter of 2022, and the third quarter combined ratio was 100.3, which produced a small underwriting loss of $17 million. Our gross premiums in the third quarter were up 16%, an increase of approximately $1 billion from the previous year. This growth is driven by the continued favorable market conditions and strong margins that prevail in many of our markets, particularly in North America.
Crum & Forster had the largest percentage growth in the quarter among all our companies, growing 33% in the third quarter of 2022 versus the third quarter of 2021. Crum added $316 million of gross premium year-over-year. Crum's growth was driven by increased by business volumes within its surplus and specialty, A&H, and commercial lines divisions. Odyssey Group's gross premiums were up 27% or almost $350 million in the third quarter, with the majority of the growth coming from their U.S. reinsurance division in both its property and casualty business segments. Odyssey Group's insurance segment continued to expand, but at a slower rate with high single-digit growth. Brit grew 16% in the quarter, with total gross written premium approaching $1 billion for the third quarter. Brit's growth was driven by Ki, Brit's innovative follow-on syndicate.
As you know, Brit has control of Ki, so it's consolidated in their numbers. Excluding Ki, Brit had low single-digit growth driven by its direct business, offset by reductions on its property treaty reinsurance book. Allied World, Northbridge, and Zenith all grew as well at lower levels, increasing their premium by 6%, 4%, and 1% respectively. The premium of our international operations continues to increase. Although they are not seeing the rate increases experienced from the hard market conditions in North America, gross premiums were up almost 7% in the third quarter of 2022 over the previous year. Fairfax Asia led the charge with premiums up 22%. Most of our companies in South America, Central and Eastern Europe, registered strong growth in local currencies, although were somewhat muted in U.S. dollar terms by the strengthening of the U.S. dollar against most currencies.
Over time, we believe our international operations will be a significant source of growth, driven by under-penetrated 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 and could be extended by a very hard reinsurance market leading into the 1/1 renewals. Our companies have taken advantage of strong pricing over the last number of years, growing premium over 60% over the past three years. Not unlike 2021, the underwriting result in the third quarter of 2022 was all about catastrophe losses. The combined ratio in the quarter was 100.3% and included $803 million of catastrophe losses versus a combined ratio of 101.1 % and catastrophe losses of $605 million in 2021.
Hurricane Ian added 10.5 points to our combined ratio, while total catastrophe losses added 15 combined ratio points. Through nine months of 2022, our combined ratio is 96% versus 97.3 % for the first nine months of 2021. Catastrophe losses in 2022 were driven by Hurricane Ian, $561 million, French hailstorms, $93 million, and a high frequency of other smaller but serious weather events, including the Brazilian drought, South African and Australian floods, and Hurricane Fiona. As our premium base has expanded and with the benefits of diversification, we have been able to absorb significant catastrophe losses within underlying underwriting profit. Northbridge had another outstanding quarter, posting a 90.3% combined ratio, benefiting from the compounding of year-over-year price increases and increased new business.
Allied World generated the most underwriting profit in the group at $105 million and produced an outstanding combined ratio of 90.2%, while Crum & Forster continued its steady improvement with a combined ratio of 94.7%, and Zenith had another good quarter at 93.8%. Odyssey Group and Brit were affected the most by catastrophe losses in the quarter, with Odyssey posting a 107.8% combined ratio with 16 points of catastrophe losses and Brit a 117.4% combined ratio with 39 points of catastrophe losses. Our international operations had a combined ratio in the quarter of 96.9%, with favorable development from prior years and moderate catastrophe losses in aggregate. Fairfax Asia had a very strong quarter with a combined ratio of 90.2.%
Our international companies continue to navigate the headwinds of inflationary pressures in many of their countries, especially in Fairfax Latam. For the quarter, our insurance and reinsurance companies recorded favorable reserve development of $48 million, or the benefit of 0.9 points on our combined ratio. This compared to the third quarter of 2021 of $70 million or 1.6 points. Our insurance and reinsurance companies are in the process of their full actuarial reviews, which are done annually in the fourth quarter. Our expense ratio continues to benefit with our earned premium volume outpacing expenses. Our overall underwriting expense ratio is 1.7 points lower year-over-year, with the underwriting expense ratio decreasing at essentially all our insurance and reinsurance operations. Notwithstanding the catastrophes in the third quarter, we expect for the full year of 2022 to have another strong year of underwriting profit.
Our insurance and reinsurance operations are very well positioned to capitalize on the opportunities in their respective markets. I will now pass the call to Jennifer Allen, our Chief Financial Officer, to comment on our non-insurance companies' performance, overall financial position, and recent transactions.
Thank you, Peter. Peter has provided detailed commentary on the operating income of our property and casualty insurance and reinsurance operations, which included a discussion on the underwriting performance, the interest and dividend income, and net gains and losses on investments. As Peter noted, I'll begin my remarks with the results of our non-insurance consolidated companies. Looking to the third quarter of 2022 compared to the third quarter of 2021, and excluding the impact of Fairfax India's performance fee expense to Fairfax, which was $5 million in the third quarter of 2022, compared to $19 million in the third quarter of 2021. Operating income of the non-insurance companies improved significantly by $86 million to $130 million in the third quarter of 2022, compared to an operating income of $44 million in the third quarter of 2021.
This improvement of $86 million principally reflected higher operating income from our other segment of $51 million that reflected higher business volumes driven by strong retail sales and improved margins, primarily at AGT. We had higher operating income at Fairfax India of $35 million. That was a result of their higher share of profit of associates from its underlying investments in Sanmar and the Bangalore airport, and higher operating income at Thomas Cook of $18 million, which reflected higher business volumes as a result of the continued easing of COVID-19 related travel restrictions that significantly benefited both domestic and international travel. This was partially offset by lower operating income from the restaurant and retail segment of $18 million, primarily reflecting lower business volumes at Golf Town and the deconsolidation of Toys R Us in August 2021.
Looking at the first nine months of 2022 and comparing it to the first nine months of 2021, again, excluding the impact of Fairfax India's performance fee, which was a reversal of $45 million of a performance fee payable in 2022 versus an accrual of $118 million of a performance fee expense in 2021.
If we exclude the impact of the non-cash goodwill impairment charge that we recorded in the second quarter of 2022 of $109 million, which related to our investment in Farmers Edge, we had operating income from our non-insurance companies increasing significantly by $210 million or to $224 million in the first nine months of 2022. That compared to operating income of only $15 million in the first nine months of 2021. That significant improvement of $210 million reflected higher operating income of $90 million at Fairfax India, again reflecting their higher share of profit of associates from its underlying investments in Sanmar, Bangalore Airport and CSB Bank. We had higher operating income of $44 million at Thomas Cook India, as noted, reflecting the factors that previously discussed for the third quarter.
We had higher operating income of $42 million in our restaurant and retail segment. That reflected higher business volumes for the nine months at Recipe related to the reduced COVID-19 restrictions in the first nine months compared to the prior period, and also the deconsolidation of Toys "R" Us Canada. That was partially offset by lower business volumes at Golf Town. We had higher operating income of $34 million in the other reporting segment that reflected the higher business volumes and improved margins at AGT, which was partially offset, though, by our deconsolidation in Mosaic Capital back in August 2021.
If we look at our investment performance from our investments in associates in the quarter and nine months, our consolidated share of profit of associates was $318 million in the third quarter of 2022, and it reflected continued strong results from our investments in associates. It was principally comprised of share of profit of $81 million from Resolute, $80 million from Eurobank, and $58 million from Atlas Corp, which compared to share of profits of $227 million in the third quarter of 2021, that was primarily comprised of share of profit of $82 million from Resolute, $46 million from Gulf Insurance, and $43 million from Eurobank.
Similarly, for the first nine months of 2022, the share of profit of associates of $758 million reflected strong results, with share of profits of $230 million coming in from Eurobank, $180 million from Atlas Corp., $159 million from Resolute. That was significantly higher compared to the $347 million of share of profit of associates that was reported in the first nine months of 2021. That was primarily comprised of share of profit of $142 million from Eurobank and $107 million from Resolute. We had a few key transactions that I would like to highlight and provide comments on.
First, on July 5th, 2022, we increased our interest in Grivalia Hospitality to about 78.4% interest from a 33.5% ownership by acquiring additional shares for cash consideration of approximately $195 million. We've commenced consolidating Grivalia Hospitality in the third quarter of 2022. Grivalia Hospitality acquires, develops, and manages hospitality real estate in Greece, Cyprus, and Panama. The next few transactions I'll highlight closed or are closing subsequent to September 30th, 2022. First, as Prem noted, on October 31st, 2022, the company sold its interest in Crum & Forster's Pet Insurance Group and Pethealth, including all of their worldwide operations.
The company received proceeds of $1.4 billion that was in the form of $1.15 billion in cash and $250 million in seller debentures. Our consolidated financial reporting in the fourth quarter will record the gain of approximately $1.3 billion and the after-tax gain of just under $1 billion. Our second transaction on October 31, a consortium that was comprised of the company, the Washington family, David Sokol, which is the chairman of the board of directors of Atlas, Ocean Network Express, signed a definitive agreement to acquire all of the outstanding shares of Atlas, other than those shares that are owned by the consortium at a cash purchase price of $15.50, plus a payment of any ordinary course dividends up until the closing of the transaction.
Fairfax will transfer its approximate 45% in Atlas, which is comprised of the eventual exercise of the Holdings' remaining Atlas equity warrants, plus our current investment in associate interest into the new entity formed by that consortium. Fairfax is not obligated to purchase any additional interest not already owned by the consortium, and the consortium is fully committed to fund the cash component of the transaction. Fairfax will continue its ownership in Atlas as part of that consortium, with the transaction expected to be completed in the first half of 2023. The third transaction, as noted on the prior conference calls, we had mentioned the ability for the company to increase its ownership in Digit above the 49% to a controlling interest upon receipt of regulatory approval in India.
In June 2022, Digit Insurance and the company applied to the Insurance Regulatory and Development Authority of India or the IRDAI, for approval to convert the company's holdings in compulsory convertible preferred shares of Digit by Go Digit Infoworks, referred to as the Digit CCPSs in our financials, into equity shares of Go Digit Infoworks. The IRDAI subsequently communicated that the application cannot be considered in the current form, as the conversion of Digit CCPSs would result in Digit, which has currently been classified as an Indian promoter of the underlying Digit Insurance, becoming a subsidiary of the company, which is currently prohibited for Indian promoters. Notwithstanding the foreign direct investment rules that were amended to allow foreign investors to own up to 74% of an Indian insurance company.
Digit Insurance and the company intend and continue to explore all avenues under applicable law to achieve the company's majority ownership in Digit Insurance through conversion of the company's Digit CCPSs. We expect to report a gain of approximately $375 million when we achieve majority ownership in Digit Insurance. The fourth transaction relates to Recipe. On October 28, 2022, we acquired all of the multiple voting shares and subordinate voting shares of Recipe other than those owned by the company and approximately 9.4 million multiple voting shares owned by Cara for a cash purchase price of CAD 20.73 per share or approximately CAD 342 million in aggregate. It increased our ownership in Recipe from 39.4% at September 30th, 2022 to approximately 84%.
In the fourth quarter of 2022, as Fairfax controlled and consolidated Recipe pre- and post- the transaction, any impact as a result of this transaction will be recorded directly in our shareholder equity. Lastly, on July 5th, 2022, Domtar Corporation entered into an agreement with Resolute to acquire all of the outstanding common shares of Resolute for a combined cash consideration of $20.50 and a contingent value right per Resolute's common share of up to $6. That contingent value right provides the holders with the right to share of any future softwood lumber duty deposits. Closing of this transaction is still subject to regulatory approval and is expected to be in the first half of 2023.
As a result of the proposed transaction, on July 5th, we remeasured our investment in Resolute as a held-for-sale investment, and we ceased applying the equity method of accounting, where our carrying value of that associate at September 30th, 2022 equaled the fair value of the cash consideration of $20.50 per share or $508 million in aggregate. Consequently, the company currently does not expect to record any gains on closing of the proposed transaction. In closing, a few comments on our financial condition. Our liquidity of the company remains strong with our cash and investments at the holding company at approximately $900 million at September 30th, 2022, which is predominantly held in cash and short-dated investments remain strong, and we still have access to our $2 billion unsecured credit facility.
Subsequent to the quarter on October 31st, excluding the $250 million in seller debentures, the holding company cash increased by approximately $900 million, reflecting the net cash proceeds that we received on the sale of Crum & Forster Pet Insurance Group and Pethealth. As discussed previously, the holding company cash and investments is there to meet any and every contingency that Fairfax may face. We do not make any long-term investments with the cash other than to support our decentralized structure for our insurance and reinsurance companies. On August 16th, 2022, we completed an offering of $750 million principal amount of 5.625% unsecured notes that are due in August 20, 2032, and we received proceeds of $743 million.
Subsequently, on September 27th, 2022, we increased our ownership interest in Allied World to about 82.9% from 70.9% for total consideration of $734 million that was inclusive of a fair value of a call option that we exercised and an accrued dividend that was paid. As a result, a loss was recorded in retained earnings for approximately $228 million. In closing, a few final remarks on our total debt to total cap ratio. If you exclude our investments in the consolidated non-insurance companies, it was 28.3% at September 30th, 2022, an increase compared to 24% at December 31, 2021, primarily due to the issuance of the unsecured notes that I noted that were completed in the quarter.
We don't have any significant holding company debt maturities now until August 2024. A decrease in shareholders' equity that reflected the net loss of $831 million in the first nine months of 2022. Also other comprehensive income loss of $493 million that related to primarily unrealized foreign currency losses. Our payment of common share preferred dividends of approximately $283 million. As noted, the decrease in non-controlling interest as a result of the acquisition of the additional common shares in Allied World. That concludes my remarks for the quarter, and I'll turn the call back over to Prem.
Thank you very much, Jen. Please give us your name and your company name and try to limit your questions to only one so that's fair to all on that call. Okay, Catherine, we're ready for the questions.
Once again, to ask your question, you may press star one on your telephone keypad. The first question is coming from Tom MacKinnon of BMO Capital. Your line is open.
Yeah, thanks. Good morning, Prem. Good morning, everyone. Question just with respect to if you can just tell us again what's happening with Digit. When is it that you expect this $375 million income gain to come in? Why does this keep getting pushed out? I have a follow-up. Thanks.
Yeah. No, thank you, Tom. Good morning. On Digit, as we've said in the disclosure, it's subject to regulatory approval. The government has allowed companies to go from 49% to 74%. While they've accepted that, there are some internal rules on a subsidiary of a subsidiary merging. We're just working through all of that. We just think it's a question of time and we will get the approval. The government's already taken the 49% to 74%, and that's the key, and it's the internal workings of the legal system in India that we are working through.
Do you think it's, like, imminent, or is it a later 2023 event?
I'd love to tell you the timing.
Okay.
You know, Tom, when you're dealing with a government, you never can tell.
Understood. On the Atlas transaction, how much are you spending? What are you taking your ownership up to, and how much are you spending for that? Just strictly Fairfax.
So, uh-
The Fairfax's portion of the of that new vehicle.
Yeah. We're not spending anything other than the warrants. For the warrants, Jen, how much money was that?
It's less than $100 million, Tom. It'll take our ownership up to 45%, approximately.
It'll take it up to 45%, Tom. Basically we're rolling over. We had about $1.3 billion plus or minus in terms of our cost. It's done very well. Our average cost might be $10 and change, and it's at $15.50. But we're so excited, as I said before, backing David Sokol and Bing Chen. David, of course, built MidAmerican Energy and Berkshire Hathaway over 20 years with a 20% compounder in revenue and earnings. He's already done extremely well, and we think the best is yet to come.
Okay, that's just really moving. Currently, you have 41%, and you're just moving up to 45% with respect to that. Is that correct?
Yeah. Approximately, that's right. Yeah.
Okay. Finally, just with respect to the Grivalia deal that was done in the quarter, is this now an investment in associate?
We own about 78% of Grivalia Hospitality. It's run by a guy by the name of George Chryssikos, who you might remember when Grivalia was public. He's just a fantastic operator, fantastic real estate person. How do we account for it, Jen?
It was an investment in associate, and then when we stepped up to the 78%, it's now a consolidated investment. It's in our non-insurance segment now reporting as of Q3, so it's consolidated.
Okay, great. Okay. It moves over into that segment with the Recipe and the others. Is that right, Jen?
That's correct.
Okay. The last one, maybe just sorry, for Prem, is, you know, with $1.5 billion in proceeds coming in from the JAB sale, doesn't look like there's much to be spent for Recipe or much to be spent for Atlas. Can you talk about your appetite for buying back stock? I mean, it's, I mean, we had the big SIB before, but it's you've got a 10% NCIB in place. Stock's trading below books, so maybe share with us your thoughts.
Yeah. Sure.
With respect to that.
Sure, Tom. Like we're, you know, we bought 2 million shares last year, but at the end of the year. You know, we always look at being financially sound. For us, no significant maturities, as Jen said, for the next three years. We got a line of credit at $2 billion, which basically will be unused, and we'll have cash after the Pet sale of approximately $2 billion. So financially, we're very sound. That's the first test in terms of buying back any stock. The second is, we've got a very good insurance market, as Peter has explained. Business is $28 billion worldwide now, we expect for the year 2022. So it's $28 billion worldwide, and remind you, we started with $10 million 37 years ago.
We were able to absorb this hurricane and some other cat losses, $800 billion plus, and still had a combined ratio in one quarter of 100% for the year, for the year to date, 96%. More importantly, as Peter highlighted, our reserves looked at it in the fourth quarter, and then if history is any guide, we've had significant reserve redundancies. We wanna take advantage of the insurance market. The pricing is good and we'll be looking at that. Finally, number one after that is stock buyback. We'll certainly be looking at stock buybacks as we have in the past. That's the priority, Tom.
Okay. That's great, Prem. Thanks for the color.
Terrific. Thank you, Tom. Can we go on to the next question, Catherine?
Certainly. Once again, if you would like to ask a question, please press star one on your telephone keypad. The next question is coming from Mark Dwelle, RBC Capital Markets. Your line is open.
Yeah, good morning. One other follow-up question related to the Atlas transaction is, will the closing of that transaction allow you to mark to market your carrying value on that position, where you continue to carry that at, you know, the current book value plus whatever you pay into to buy the warrants and?
That's a very good question, Mark. Of course, accounting is odd, isn't it, where you have, you know, a significant transaction that is done from an outside party at $15.5, and it still has to be carried, like you said, I'll ask Jen to just highlight that.
Sure. Mark, because our ownership percentage still stays within a significant influence, we go from about a 41% ownership up to 45%, we'll still equity account and remain it as investment and associates, it's still at a carrying value concept. It's only if we, you know, crossed over in, into maybe a consolidated position or we drop down, would you then do a fair value increment at that time. There's no change in our carrying value, but the disclosure we always provide you with that fair value of what the investment in associate is. You can look at that fair value compared to the carrying value to get the unrealized or amount that's not in our book value per share yet.
Okay, that's helpful. I mean, I ask because it would have been a fairly tidy uptick if you're able to get that fair value accounting, but I guess that's not the case. The second question that I had, the holding company cash was less than $1 billion. That's probably only happened a couple times in the + 20 years I've followed the shares. So I thought I'd ask, you know, what the movements were there, and in particular, if there was any downstreaming of cash into operating subsidiaries during the quarter.
Yeah, I'm sure we'll Jen will be, it's all in the quarterly report, Mark. But remember, like, you know, it wasn't a month later that we had $1.4 billion sale of the pet sale, but we knew it was taking place. It was only a question of closing. I don't know when we announced that, Peter. Was it August sometime?
Yeah.
Sometime in August we announced it. You know, our cash basically is running, as I said, about $2 billion now. Jen, you want to answer Mark's question?
Yeah, sure. Mark, on page 53 in the interim report, we give you kind of disclosure within the significant movements of holdco cash. A lot of it, as Prem said, really is the timing of when we did the non-controlling interest buyback of Allied World. We did that right at the end of September, but we didn't receive the net proceeds until subsequent. It really is primarily a timing of those two instances that are reflecting a lower holdco cash at that time, but it gives you more details in the interim report.
I see. Okay, thank you. And then the only other question that I had related to the derivative contracts you have related to the Fairfax shares. Those I recall that it was about two years ago that those were initially entered. Is that a contract that is just now on a month-to-month or quarterly basis, or is that a contract that would be kind of up for renewal here on an annual basis when you know, when that comes due?
Yeah. Peter?
Yeah. No, it is. I think it's extended out a couple years now. Yeah, it doesn't, and then it can always be renewed going forward. It's ongoing, and we just look at it on a quarterly basis.
Okay. I think those are all my questions. Thank you.
Thank you very much, Mark. Next question, Catherine.
The last question is coming from Howard Flinker of Flinker & Co. Your line is open.
Hi, Prem. I don't think I heard something.
Hey, hello, Howard.
Hi. I don't think I heard something correctly. Weren't the operational profits of the industrial businesses up $186 million and not $86 million, as I seem to hear?
Yeah, in our non-insurance businesses-
Yeah
Had a very good quarter. Jen, you remember what the numbers were? We won't disclose it, of course, but what is it?
No, it was $86 million . Yeah, we're just talking about the quarter only. It's inclusive of the share of profits of associates as well. We give the disclosure on the non-insurance in the back of the MD&A.
Oh, I see. The quarter was $86 million , but $186 million , was that the nine months? Or did I just hear incorrectly?
The change for the nine months was $210 million .
Oh, I see. Okay.
That was adjusted for the non-cash goodwill impairment charge that we took in Q2. There was a couple of adjustments in that number.
Okay. I'd like to correct a conjecture I made in the previous conference call. I wondered if stock and bond prices would rise if property and casualty companies would develop looser underwriting standards. Well, of course, stock and bond prices have fallen. Now with the catastrophe losses, couldn't we have a period, Prem, like the early seventies, when rates really took off?
Yeah. You know, this is a very good question, Howard, and no one knows the answer to that. I do remember. I do think that Mr. Sam Zell had a very good interview yesterday or day before on CNBC where he said that you can't flood the system with liquidity...
Yep.
And not have consequences.
Yep.
Inflation is the big problem. The economy is still strong. The numbers came out today. You saw the payrolls, very strong. We just have to be careful. The bonds that we buy are three years. Our duration is 1.6 years. Term is about, you know, a little less than two years. Our interest and dividend income go up, and we don't take a hit. A lot of our competitors have reached for yield in the past and then thought of it as matching Howard in their liabilities. The net-net is that book values have dropped from 25%,20%- 50%.
You know, that book value, unless interest rates drop, those book values are gonna be there for quite some time.
I meant P&C rates like the early 1970s when AIG broke into the front of the business. Rates really took off in the early 1970s, P&C rates, that is. That was the beginning of like the hard period.
Yeah, P&C rates could go up significantly. CAT rates could go up. You know, you have to be very careful with CAT, of course. Because of the exposure that you know Ian could have hit Tampa and you know it might have been two or three times what Ian is. You have to be very careful. But having said that, the insurance markets are looking good for people who are careful.
So long as you avoid another Northridge as some people experienced 30 years ago.
Yeah, no, that's right. That's right.
That was very large. Thanks.
Thank you, Howard. Next question, Catherine.
The next question is coming from Junior Reit. He is a private investor. Your line is open.
Good morning, Prem. Two quick questions. Pretty good, thanks to you. How does your buyback change with the 2% buyback rule that the Liberals are trying to introduce? Any plans on Fairfax India to basically get more market visibility by either IPOing it into India market or doing some sort of marketing? Because it seems like the volume on Fairfax India is very low, and there's not really as many buyers, which is affecting the actual shareholder value.
Yeah, which was your first question again?
The first question was on how does the Liberals' 2% buyback tax.
The 2% tax, we don't know the details yet, but it looks like it's coming for 2024. You know, that's some time away. We'll just have to wait and see. It's not a huge tax, but it's perhaps not the best allocation. Having said that, we'll just have to wait to see the details. As for Fairfax India is concerned, you know, Fairfax India, the stock price is ridiculously low. The book value, the net asset value is about $19. We bought 2.5 million shares. What can you do when the stock price is low? What you can do is only, you know, we can't control stock prices, but what we can do is buy stock.
We have retired a lot of shares of Fairfax India. We think it's unbelievably attractive, like, by the way, many, many companies in North America and also outside non-North American stocks are very attractive. We're taking advantage of it by retiring the stock. We bought 2.5 million shares in the year 2022. We've already in nine months bought 2.5 million shares, and we're buying it at significantly below net asset value. In our minds, net asset value of Bangalore International Airport, I mean, as one example, is significantly undervalued. Stock prices reflect that. We never know how long it'll take, but we expect it to reflect the underlying values.
Okay, thanks a lot.
Thank you, Junior. Next question, Catherine.
At this time, we have no further questions.
No more questions, Catherine? Well, there are no more questions, so thank you very much for all of you for joining us on this call. Thank you, Catherine. The conference call is over.
This will conclude today's conference. Thank you so much for joining. You may disconnect at this time.