Good morning, and welcome to Fairfax Financial Holding Limited's twenty twenty one Annual General Meeting. I'm Jennifer Allen, Vice President and Chief Financial Officer of Fairfax. Prem Watsa, our Chairman and CEO, will be hosting today's meeting. I'll now hand it over to Prem.
Good morning, ladies and gentlemen, and welcome to our thirty sixth Annual Meeting, thirty five years since we began in 1985. I'm Prem Watsa, chairman of Fairfax. This is the second time our AGM is conducted online, and hopefully, it'd be the last time. A warm welcome to all our shareholders and employees across the world and to all the people who support us. We will again miss seeing you in person this year.
Now, you know, I'm a little bit of an optimist, and we've all had a very difficult year with COVID nineteen. Reminds me of the story of a group of retirees meeting last year in Toronto in a coffee house to discuss the world's many problems, including COVID nineteen. One of them shocks his friends by announcing, I'm an optimist, he says. His friend asks, then why do you look so worried? He replies, you think it's easy to be an optimist?
Well, last year, was tough to be an optimist, but nowadays, but normalcy is returning, and we should all meet in person next year, and we look forward to meeting all of you in person. Over the last years, our company have adapted to these trying circumstances in the last year exceptionally well. It had been truly inspiring to see how our people have risen to the challenge created by the virus around the world. Our companies have looked out for our employees while continuing to care for the needs of our customers. A big thank you to all of our employees for the many untold adjustments and sacrifices necessary to keep our businesses operating and running smoothly in these unprecedented times.
In the midst of the pandemic, our fair and friendly culture shone brightly. We had no layoffs in our insurance and reinsurance companies due to COVID nineteen. All 50 15,000 of our employees work from home. We continue to provide outstanding service to our customers, and we made a special donation special donation of 4,000,000 to help with pandemic efforts in the community in the communities where we do business. We all must also remember those who have suffered from the virus and the many who have lost their lives or family members to the virus.
It's been a very difficult time. While Fairfax and all our companies have been a great place to work where we do not tolerate or condone any form of racism or discrimination, we still know that it's not been eradicated in society even in 2021. After many events that unfolded last summer, many injustices in our society came to light. I decided it was time to step up to the plate. I joined the Black North Initiative founded by Wes Hall, a Canadian businessman and a good friend in Toronto to end systemic racism in Canada.
I personally spoke to members of the black community at our own companies, Fairfax in Canada, The United States and The UK, the three countries, Canada, The United States, and The UK. And we created the black initiative action committee at Fairfax under the chairmanship of Craig Pinnoch, the chief financial officer of Northbridge. And the idea was to make our company even more attractive for people from the black community and other minorities. While there is much to be done, we are making headway, and Fairfax should be a leading example of how one company can make a difference. Since the inception of Fairfax, we've always been focused on a few things, the way we operate, the way we treat each other, and the way we help our communities.
Our management team and board ensure that honesty and integrity are never compromised and that full disclosure is provided to all our stakeholders. We now have 15,000 employees around the world working in our decentralized environment following these basic principles. I'm pleased to say we recently posted our first ESG environmental, social, and governance report on our website to summarize how we think about ESG. 2020, last year, completed thirty five years since we began in September 1985. Last year, I mentioned to you, if you look at all of the companies listed on the New York Stock Exchange, AMEX, and NASDAQ at the 1985, there were approximately 6,100 at the 1985.
At the 2020, there were only six sixty six still trading on these exchanges from that group of 6,100. That is to say only one tenth survived, I. E. Almost 90% have gone bankrupt, have been taken over, merged, whatever. So we are very pleased to be in the category that have survived.
If you could then ask how many have thrived? And we use 15 annual compounded return over that thirty five year period in stock price. Only 1% approximately or about 71 companies have survived, have made a return of 15% annually over that time period. Our 16.4% compounded return for our stock, less than our growth in book value, would put us in that 1%. So we so you can see we have been blessed mightily.
And I know many of you more recent shareholders have not benefited from these long term results, and we are working hard to remedy that. The the first quarter that we came out with a press release last, yesterday evening is only the beginning. I've also said, and I repeat, we are very blessed to have such a wonderful group of long term shareholders, all of you who have stood by us through the ups and downs of business life over a long period of time, and we're just coming out of a down period. We could have a great year in we would have had a great year in 2020, but COVID nineteen intervened. I've said this before to you, but I'll say it again.
Our culture is a very valuable asset, even though it's not shown on our balance sheet. And the creation and preservation of that culture is the biggest achievement for us over the past thirty five years and the continuing driver for our success. As you know, it is protected for all time. This fair and friendly culture, which is in our name, is why companies all over the world want to deal with us. And, it is our biggest advantage, and we got it fiercely.
I wanna take this opportunity to thank our directors, all 12 of them, for their strong support of our company. Over our thirty five year history, we have always operated at Fairfax with an outstanding small team with great integrity, team spirit, and no egos. Protects our company from unexpected downside risks. We're always looking at downside risks, and we try to take advantage of opportunities when they arise. This group, as you've noticed, has worked together for a long time with trust and a long term focus.
Now I wanna highlight the Fairfax Innovation Award. The Fairfax Innovation Award. It was created to recognize teams at Fairfax's operating companies whose innovations have had a transformative and positive impact on their organizations. In 2020, 27 initiatives from 13 Fairfax companies around the world was submitted with a diverse range of innovative product projects. After reviewing all the submissions, Key from Brit Insurance has been selected as a 2020 winner.
Quite an amazing, accomplishment. They're shown here on your screen. Key is the first fully digital and algorithmically driven Lloyd's of London Syndicate, a follow on syndicate. Offers instant capacity that can be accessed through an easy to use online platform providing unprecedented service to brokers and clients anywhere, anytime. Key was developed by Brit's innovative team in collaboration with Google Cloud and the University of London, and it's targeting gross written premiums first year in 2021 of 400,000,000, which would make Key the largest startup syndicate in the history of Lloyd's.
They're well on their way right now. And, congratulations to Brett and the Key team for a wonderful initiative and a very deserving winner of the 2020 Fairfax Innovation Award. If you if you were doing this live, we'd give you a big clap. Well done. Now every year, I introduce our management team to you at this time.
For the past two years, to save time, we've highlighted management team in pictures just before the meeting. It is it is these leaders who make Fairfax such a wonderful company. We are blessed with a very unusual group of smart, hardworking, and trustworthy people, our real strength. And the reason why I'm so confident that we will do well over the long term. I'm sure you would have noticed the long term tenure of most of these executives with Fairfax.
And, again, if we were there, they'd all be in front of us, and we'd give them a nice round of applause. Now so today, even though we're all coming together on the web, we will, as we have done for the past 35 annual meetings, quickly go to the formal meeting, give a short presentation with slides, have a Q and A, and then you can submit your questions in real time on this platform, which will be received by Jeff Stacy and Jeff Fenwick, who will moderate the q and a after the presentation. Before we go any further, I wanted to thank Vinod, who's the officer at Fairfax, and our team at Fairfax for setting this up so well. And, this is virtual and lots of work go goes into it, and we've got a terrific production team to help us produce this annual meeting. Just a reminder that at 2PM, we will have the sixth Fairfax India annual meeting, which will take place virtually also.
Now let's go to the formal part of the meeting, which so that we can finish some of the things we have to do in a formality. So I will call the formal meeting to order. I'm Prem Wahidze, chairman and CEO of Fairfax, act act as chairman of the meeting. I will ask Eric Salzberg, the secretary, to act as secretary of the meeting. I shall also appoint Shirley Tom and Lou Louise Waldenberry of Computershare Trust Company to act as scrutinist and to compute the votes of any polls taken at the meeting and to report thereof to me as chairman.
I can report that a result of reviewing an affidavit of mailing and a preliminary report of the scrutiners, I'm satisfied that notes of this meeting has been duly given, that a quorum is present, and that this meeting is therefore properly called and constituted. I propose to move quickly through the formal meeting as I mentioned previously, announce that the minutes of the previous annual shareholders meeting held on 04/16/2020 are available for inspection upon request of Fairfax's corporate secretary. As well, I now formally place before the meeting the annual report of the company ended December 20, which includes the company's financial statements for its fiscal years ended December '20 2019, and the report of our auditor PricewaterhouseCoopers on the 2020 statements. In addition, I declare that the total number of votes attached to shares represented at this meeting by proxy, which have been directed to be voted in favor of each matter to be considered, is in each case not less than 95% of all votes that may be cast on such matters. As mentioned earlier, voting today will be conducted by electronic ballot.
I will ask that the balloting be opened to registered holders and appointed proxy holders. The polls are now open, and at this point, all registered holders and proxy holders who have properly logged in will be able to see on the screen all motions to be brought forth at the meeting. Following the presentation of the motions, Jennifer Allen will confirm for us when the polls were closed. Once the electronic ballot thing closes, your votes will be submitted. So we move on to the election of directors.
I will now move directly to the election of directors and invite a nomination for directors.
I am Peter Clark and I nominate as directors of the corporation for the ensuing year Anthony Griffiths, Robert Gunn, David Johnston, Karen Jervich, William McFarland, Christine McLean, Timothy Price, Brandon Switzer, Lauren Templeton, Benjamin Watsa, Prem Watsa, and William Weldon.
Thank you, Peter. As no other nomination for directors have been received and as the number of directors nominated is exactly the number to be elected, I confirm that those 12 nominees have proposed for election of directors of the corporation. Given the virtual meeting requirements, we will have a vote on this together with the next resolution. Appointment of auditors. I will now invite a resolution regarding the appointment of an auditor.
I move that PricewaterhouseCoopers, LLP, be appointed as auditor of the corporation to hold office until the next annual meeting?
I second the motion.
Thank you, Peter. Thank you, Jen. We will now take a brief pause to allow registered holders and practice holders to complete the electronic voting on the motions brought forth at this meeting.
Mister chairman, the voting is now completed, and the polls are closed.
Thank you, Jen. I've been advised by the scrutiners that the ballots and proxies deposited for the meeting have now been voted. I can confirm that the nominated directors have now been appointed as directors of the corporation to hold office until the next annual meeting. In addition, I confirm that PricewaterhouseCoopers has been appointed as auditors of the company to hold office until the next annual meeting. We filed a report on CEDAR setting out the voting results following the meeting.
I propose now to terminate the meeting. After that, I'd like to talk to you about our operations. And then as I said to you with the moderators, we will have a question and answer session. I now invite a motion for termination.
I move that this meeting be terminated.
And I second Thank that
you, Peter. I declare the meeting terminated. So now we'll go to the presentation that we have for you and then a Q and A after that. So this is what we do for you every year. And, basically, what it is is to say that, you know, I've used this expression before that nothing here that's not in our annual meeting annual report other than the first quarter results that some of the numbers that we mentioned to you last evening.
So but a picture is worth a thousand words, and so I'm gonna go through this very quickly for you, highlighting some of the things that are important. Looking at first of all, I begin with our guiding principles. Then I go into how we've successfully navigated the pandemic. That was the hand that we were dealt with. I wanna talk about the long term strengths of Fairfax, the huge long term strengths we have, and I wanna make a few comments on the financial markets.
So with that with that with that as background, let's just go to the guiding principles. The guiding principles very simply is something that we've had all thirty five years, and it shows that we run our companies for the benefit of our customers, providing outstanding service to the customers, looking after the employees that we have, making a return for our shareholders, which we've still continue to define as 15%, and and then putting some money back into the communities, one to 2% of our pretax profits. The whole company when we began was worth $2,000,000. Last year, despite of a pandemic, 2020, we put 23,000,000 US back into the communities we did business. When you do all of those things, we think business is a good thing.
We think business is a force for good. I'll talk to you a little about that. And and we think this is how companies should be run for long term benefit to all of those different constituents. Our focus is long term growth and book value and not quarterly earnings. We go through friendly acquisitions.
We are always soundly financed, and we provide complete disclosure to our shareholders in our annual report, which you've seen. Next slide Our companies are decentralized. So this structure is so important for us about thirty five years. The fact that we are decentralized.
We empower our management. Big big plus. We'll talk a little more about it. So companies are decentralized except as you can see performance evaluation, of course, succession planning, things like that, which are corporate functions, complete and over open communication between Fairfax and the subs, share ownership incentives, large incentives based on underwriting profit. That's how what we have encouraged across our whole group, and we remind ourselves we're a small holding company and not an operating company.
We don't run anything in Fairfax. There's only the better part of 33 people in the holding company. We purposely keep it small so bureaucracy can build up, and empowerment works very well. Values, of course, are the key for us. Honesty and integrity essential in all our relationships, Never be compromised.
We're results oriented, team players. You see no egos. You've seen all of this before. And we remember that we are hardworking, but we have families, and and we wanna do everything we can to succeed, but not at the expense of our families. Next, you'll just say business is taking risk.
You make some mistakes. You learn from them. Try not to do them again and then continue forward. But we'll never bet the company on any acquisition or project. Finally, you're spending so much time in the office, you might as well have a few laughs.
So we believe in having fun at work. Those are our guiding principles. That's the reason we have a wonderful culture. The culture, there's a fair and friendly culture. It's based on the fact that the golden rule, treat people like you wanna be treated yourself, and and and we have a wonderful group of people that you will you many of you have met them before, and you'll these are our presidents and officers, directors, and and you'll meet them again next year.
So we were handed a tough deal. The whole world was handed a tough deal last year. Right out of the blue, I called it the blackest of black swans. A 180 countries were shut down. COVID nineteen closed down the economies of more than a 180 countries.
15,000 employees working from home across the world without missing a beat, as I told you before. We said no COVID nineteen layoffs at any of our insurance companies. I'm happy to say all our presidents fulfill that mandate. No layoffs. It's the worst thing we could do.
All our employees are family, but we think of them as family. We weren't gonna have any layoffs. And finally, we had the I as I mentioned earlier, I joined the Black North initiative. We set up set up a committee at Fairfax among all our companies, and we're well on our way to end as far as we can as one company discrimination in the workforce. So that's sort of the hand we were dealt with.
I wanna just show you what we have done very quickly. So the first, of course, is underwriting, and these yeah. The top these are, like, the seven companies there. You got Northbridge, Odyssey, Credit Suisse, Allied, Fairfax Asia. They are about 90% of our consolidated.
When you consolidate all our insurance companies, then this is about 90% of our business, about approximately $919,000,000,000 US. And and you can see the combined in spite of COVID losses of 660,000,000 plus, we had a 98% combined ratio. COVID costs us 5%. Excluding COVID losses, we have you can see that 93%, and our premiums grew by 12%. The only one that had a combined ratio above a 100% was Brent.
Brent has a terrific track record, but when you have COVID come in like it did and you had some business interruption and cancellation insurance. It's a big specialty product in Lloyd's. As you can see, it costs 16 percentage points for COVID losses. That's the loss that's how business is. You get these losses that was, totally, profitable in the past, but then, last year, it wasn't.
We expect BRET to come back strong and be very profitable in the years to come. But this is the group of companies that we have that 19,000,000,000 across the world and but it's consolidated. Now on the next slide. Next slide, please. I'm just showing you very quickly the underwriting.
Yeah. This is how our numbers work out. Underwriting profit, investment income, which is interest and dividend income. You add the two, you get about $900,000,000,000. That's our operating income.
Then from that, you take our runoff. Runoff is mainly asbestos. The incurred losses are coming down significantly, but we still have these expenses that are going through. One of these days, Peter Clark, our chief operating officer says it'll end, but right now, this is what's flowing through. Non insurance operating loss is like last year, a lot of non insurance companies, which are either equity accounted or consolidated like Recipe and Thomas Cook had losses and they flow in.
Interest expenses is consolidate. That 476,000,000 is not ours. We are responsible for about 280,000,000 of that. The rest is basically consolidation of all the other companies. When you have when we have an investment and we have more than 50% or we control it with 40%, then it's consolidated and interest expense comes into our statements.
The other we last year, about this time, we sent a press release saying that we had a the markets had come down dramatically in March. We had a $1,500,000,000 unrealized loss. We thought it was unrealized. We thought it would come back. We'll give you many examples of when that's happened.
Well, by the end of the year, that 1.5 became a positive 313,000,000. So it turned pretty dramatically. And in the first quarter, that 313,000,000 has big has big has gone up by another 875,000,000 approximately. And then I'll talk about the other billion, but the 875 is reported. There's a billion on top of that.
Pretax income, net earnings. That's just how our companies come. So it's basically underwriting profit, investment income, some ins and outs, and when your equity account are consolidated, you have to flow the business, but these are all investments, and I'll come back to that. Next slide, please. So we talked about monetization of of some of our private investments.
So we have a reverse acquisition of Horizon North by Dexterra. So Dexterra is now the new name of the company, and we own 49% of it. And we're expecting great things from Dexterra in the years to come. We sold Davos brands, as you know, to Diageo. Fairfax Africa has merged with Helios.
We've got terrific team in Topay and Baba, 15 track record, and they're gonna make Helios Fairfax partners, we call it, one of the most successful investor investors in Africa. And we think it's yeah. You should follow that with a lot of interest. We've got our shares. We're not selling a single share, and we're backing Topi and and BABA, and they're exceptional.
Peak Achievement sold its holdings in Eastern, as you know. We did an five years, we backed Farmers Edge. We nurtured it, and and the same with Boot Rocker. With the IPOs, both these companies today have more than a 100,000,000,000 in cash, no debt, and very, very sound businesses going forward. We expect a lot of good things from both of them.
We did that. And then we've got several IPOs in the works in India. We'll talk a little more about that in afternoon. So we continue to monetize. There's a few other things that we're looking at monetizing, but we're this is in spite of the pandemic.
In the midst of the pandemic, we were able to do all of this. Next slide, please. So when in March, stock prices went down, there was a crash, there was extreme uncertainty, creates a panic, Corporate spreads widened significantly. Our team led by Brian Bradstreet and Cleven Sava, who's a trader on the bond side, but formed and supported with all our investment teams, supported them because every day there was a new issue. We all worked together.
$4,000,000,000 in investment grade bonds, average yield 4.1%, term to maturity four years. We didn't go long term, and and net gains on corporate bonds of almost a half a billion, and we've sold about half of them now at less than a 1% yield. Less than a 1% yield. We bought them at a 4.1% yield. Next slide, please.
Then Wade Burton, you thought of Wade as an equity guy. Well, he's pivoted, and and he's responsible for these first mortgage bonds, and he's invested 1,500,000,000.0 with our long term partner, Kenny Wilson, which has been a fantastic partner. We've we've done really well with them, and with Bill McMorrow and and team secured by high quality real estate, Western United States. This is where Terry Wilson has tremendous expertise. The long term value, the loan to value ratio, that means the mortgage loan to the value of the of the property, less than 60%.
Average yield of almost 5% and a maturity of four years. Again, term, we're worried about interest rates going up, so we don't wanna go long. And so we're at 1,500,000,000.0 we put in there, and we'll likely put a lot more. Next slide, please. So this just shows you our financial position as it existed in 2020, and the important point to for you to know is that the way we the way the way you handle unexpected events like the pandemic is the way we handle it is to make sure we have cash in the holding company in excess of a billion.
No maturities in the three year. We we basically have bonds. We don't have bank debt. No maturities for the next three years. And then a credit line, a bank line of $2,000,000,000.
So in a very near future, with the Riverstone and Omer's deals being closed, we'll have a billion 3 in the in cash and marketable in our holding company. No bank debt. We have refinanced everything that matures in the next three years at lower interest rates than what they were maturing at, And we have a credit line that's unused of 2,000,000,000. That just makes us strong financially. This is something we've done right from the day we began because you don't know what will happen in the future.
You really don't know. Like, the pandemic just came right out of the blue. And so what you do is have a very strong financial position. And so so we'll be at a billion 3, and the that's after the the Riverstone UK transaction is subject to regulatory approval. And as soon as we get that, then our numbers will be like I mentioned to you.
Next slide, please. This is a very now I've gone to the long term strengths of Fairfax. What are the strengths? We're building we've built Fairfax over thirty five years. We're gonna build it over long after I'm gone for the next hundred years.
And what are the key strengths? I'm highlighting them to you very quickly. The first was decentralized operations. We're one of the most decentralized operations that 23 companies here that if you look at the six, eight companies here, and then if you look at Fairfax Asia, and you look at other insurance, there's about 23 of them. Presidents running them, groups that are working together, and and and tons of experience in Fairfax, all their own companies.
Huge. They're all empowered. Fairfax has got a very small holding company, very few people, got 15,000 people in all these companies. And and so they empowered, and the bureaucracy is very simple. It's very minimized.
So you can see if we want to if there's a problem, we can find that out pretty quickly. Andy Bernard, all of these companies report into Andy, as I'll show you soon. And if there's an opportunity in any of the companies, we can now take advantage of it. The focus right now from 19,000,000,000, we are we've already grown. The gross premium has grown by 17%.
If you work that out, that that that'll work out to more than 22,000,000,000. So more than $3,000,000,000 of gross premium at exactly the right time because these are very good times in terms of pricing for us. We've had times when the pricing wasn't good. Now the pricing is good, and we expand, and we're expanding significantly. Northbridge has expanded.
Odyssey is expanding huge. Criminal force is expanding. Zenith workers' compensation, is not expanding, and they shouldn't be expanding because prices are not going up, but it's it's flattening out, and they might expand in the next year or two. PRINT, of course, will expand, and Allied World, top thousand companies is expanding the most among all our companies. Fairfax Asia is expanding, and many of our companies in the other area are expanding.
Business is good. It's a hard market. We're expanding. Next slide, please. This just shows you in pictorial form, in a pie chart, how globally diversified our operations are.
That 19,000,000,000 in The United States, you can see is, you know, about two thirds of the business, and then you can see where else we are. It's all over the world, and and that's the left pie chart. The one on the right shows you all the different specialties that we have. All of this is to say we don't have to buy anything. We might have to fill a few gaps as I mentioned to you, but we've got tremendous specialties, and we've got empowered management groups who've been with us for a long time who love the the culture that Fairfax has built.
Next slide, please. So this shows you the consolidated, you can see, is about 19,000,000,000 in premium. That's a 100%. But see the nonconsolidated, that's basically the Gulf Insurance Group, GIG, we call it. It's about a billion and a half, 500,000,000 in EuroLife, and there's another 400,000,000 in Digit, and Falcon Thailand makes up the rest.
And so that's 2 and a half billion in premium, pretty significant amount. We're just buying AXA Gulf, GIG partners are KIPCO. We're buying AXA Gulf. This is the Middle Eastern operations of AXA for almost a billion in premium, and GIG will become the third largest company in in that whole area. We started with GIG having about 500,000,000,000 in premium.
It's got a billion and a half. And now with this billion, which by the way will be internally financed in the main, will be about, you know, 2 and a half billion, which is very significant in that area. We got terrific management teams, so pretty decentralized also. There's the 2 and a half billion has a portfolio of about 5 and a half billion. So you can see we've got Fairfax is all about underwriting profit on the insurance side and managing the investment portfolios.
And so you can see there's a significant amount of scope and scale to our operations, and and we are growing in the future. One next slide, please. So this just shows you, again, in a in a in a map where we are, and there'll be places we'll buy things a little here and a little there, but basically, we are not looking to make any acquisitions, any significant acquisition, the property casualty side, and we're not looking to do any stock issues. That's over. We've built a tremendous business in excess of, you know, likely by 2021, in excess of 20,000,000,000.
If you add, if you add the, if you add our consolidated, non consolidated operations, you know, 20 operation, working together, and expanding. So next slide, please. So here's a really long term strength of Fairfax, the operating management team. This will be on our website, but just have a quick look at, you know, Andy Bernard who've been crucial for our business. Best thing we ever did was attract Andy about twenty five years ago, built Odyssey, passed it on to Brian Young.
Brian's done a fantastic job for the past ten, eleven years. But you look at Sylvia Wright and you look at all of the presidents who run this, you know, put your eyes to that, and you'll see them long service with Fairfax and or in the companies like Allied, for example. Lowe has been there for nine years, and we fought Allied about four years ago. So very strong management team, empowered, and why we're so excited about our companies. Next slide, please.
Another law so with the insurance business, what's the beauty of the insurance business? It's this float. The float that we had when we began, you could see $13,000,000, 2 and a half dollars a share. The float is $927, and the float has no cost. For the last five years, no cost, meaning a benefit of 1%, and in the last ten years, a benefit of 1.2%.
So what does that mean? So in the last five years, we had an underwriting profit cumulative of 1,000,000,000. Last ten years, 2,000,000,000. In 2020, about $300,000,000. And 95% combined on the business that we are writing approximately 15,000,000,000.
This is net of the 19, which is gross. That results in 750,000,000 each year. So we have a and we think the next few years because of a hot market, the 95% is very much there. We have catastrophes, and we have all sorts of things that can affect that. But the underlying ratio, we think, underlying underwriting profit.
So we get 750,000,000, and then we have the use of this 24,000,000,000 in the investment side. That's the magic of the property casualty business. That's why we got into the business thirty five years ago. Next next slide, please. So then that 24,000,000,000 in float plus about 19,000,000,000 in capital, which is our shareholders' equity, sub preferred, and some debt, that gives you a $43,000,000,000 of an investment portfolio.
And that's how it's structured. First thing is it's all long term value oriented. Second is the point to make is it's look at that 39, almost 40% in one to two year treasury bonds earning no income to speak of, but we think it's the right thing to do not to reach for yield to be very safe. Go into things like mortgages and the first mortgages, which by the way, if they default, Kerry Wilson can take it over and and look after it very simply because it's 60%. And they've got they put when when we put money, they they invest between 1020%.
So we're partners together and we don't any we don't expect any default, but if that happens, we've got a ton of protection. Our common stock position is 27%. Our common stock position, you know, it's all value oriented. I'll talk a little more about that. It hasn't done as well.
It's now in the fourth quarter. It began to do well with the vaccines normalcy returning. First quarter, it's coming back, and we really like everything we've got. The twenty seven percent is marketable stocks that we can sell, and and we have yet to see the first quarter is good, but we've but there's a long ways to go, and when you you ask me any question, and I'll be happy to answer it. Can we go on to the next slide?
This just shows you our you know, the IFRS accounting is tough. Very difficult to understand. I know that you many of you have told us this. Common stocks where you own 5%, 6%, something, you know, common stocks, positions, you know, then that's at mark to market. That's 4,600,000,000, four point that's mark to market, no difference.
Common stocks when you have 20% or in that area or a little more, it's equity accounted. That means you take the earnings less the dividends, any other adjustments, and they're that's what it's carried at, not at market. And common stocks consolidated, there are like Recipe or Toposcope, they're consolidated. Then that's like we own a 100% and then there's minority interests that take out the percentage that we don't own. And that is shown here.
These are all non insurance investments, and you can see them here and there's a ton of, there are all, you know, listed all of the management teams, they're exceptional management teams, and so that 4,600,000,000.0 at the December has gone up by $875,000,000,000. The 3,760,000,000.00 and the 1.3, the carrying value for equity accounted and consolidated, that's gone up by a billion. So in total, we've gone up by 1,870,000,000.00 $8.07 5. Only $8.75 will be shown. The other billion till we sell, you're not gonna see it, but you gotta understand how the value is being built up.
It's very, very significant in in our common stock. This is a huge long term strength. We've made a ton of money over thirty five years, and now we're so sizable that we are expecting we're gonna do really well over time. It's the same people that have been looking after the monies. We went through a time period with, you know, value investing not being so good.
In fact, at the 2019, it was ten years that value investing underperformed growth. Changed was about to change in 2020 and then the pandemic came in. We think it's about to we think it's changing already. And with the vaccines coming in, with pent up demand built up, we think we're just beginning a time when value investing is gonna be very, very profitable. More and the q and a.
Let's go on to the next slide. So you see our rate of return here over a long period of time. You could see it. First point I made it last year is that you see that time, negative return, the portfolio went down is you can see that one, two, three, four, four times. And if you just notice the first time and then look at the next year, we had a very good year.
And then the second time, you can see in in the nineties, and, again, the next year was very significant. You had third and fourth, the same thing. This year, you know, first quarter twenty twenty was a very significant negative year, but we made it it was the pandemic COVID nineteen, but we made all of that up in the As I said, 1,500,000,000.0 turned around, went up 300,000,000. And now we are seeing not only the $8.75, but also the investments that we've had, as I mentioned to you before, the consolidated associates up about a billion.
So that's 1,875,000,000.000. You're not going see the billion though in terms of profits. That'll just be in a note, but that's something we'll disclose to you on a regular basis. Next slide, please. So this is investments in India.
We're very excited about what's happening in India. Mister Modi's got his second term. He's really focused on, you know, being business friendly, and here it shows 2,000,000,000. The Fairfax India is 34%, $4.95 5,000,000. That's what we own of Fairfax India, but we control of about 3,000,000,000 in assets.
So the difference between 3,000,000,000 and $500,000,004.95 at the December, 2 and a half billion if you add that to the two that we have. We have about 4 and a half billion dollars in India, and we're excited about the possibilities. The stock is selling at 12 and a half dollars. The book value is over 16. You'll get the first quarter later on.
There's a lot and even that's very understated. It's conservative because we'll be taking a lot of companies public at at significant premiums of what they're carried in in our books. Fairfax India and India is going to be a tremendous place to put money, and we're expecting to put a lot more money over time. And there's a lot of good things happening there. More in person with Chadron, who's really the CEO and has done a fantastic job running this company with the fellows and Fumbay and Summit, and the management team of Fairbridge, and and Gopal, of course, working here who used to be at ICICI, lot of my investment guy.
Fantastic track record. We're really happy with him. Next slide. So here's our investment, another long term strength of Fairfax. This is a team that we have.
It's basically very flat, and we've got the next generation, which is Wade Burton and Lawrence Chin. You can see the experience. Wade's been with us for twelve years, and they're looking after the different areas that we've allocated. Money managers are empowered, like Yi Sang and and Jeff Ware, and you could see them there. Big, big strength and all based on a value oriented philosophy and a long term outlook.
It's a huge huge strength. Roger, Brian, Chandran, we've worked together for a long long time, and and we're having a ball working with these younger these younger people. Next slide, please. This is an interesting slide because it's our long term strength of Fairfax is our track record. We've had a terrific track record, you know, from the time we started, But you can see and you can see the white bar is the book value growth.
Book value growth went up to 478. We pay a dividend of $10, but the the stock price stopped. That's why I said it was ridiculously cheap. And I bought some. We made an investment of in that we disclosed about 500,000,000 in a total return swap.
And we think Fairfax is I use the word ridiculously cheap. It's less cheap now, but things have improved so significantly and will improve in the future that I think the the best is yet to come. Lots of opportunity for Fairfax. Next place. Next slide if you don't mind.
So then the last few slides I have for you is on the speculation in the financial markets. So I talked about this in the annual report. You can see it, the .com darlings, were like 10 of them. You can see them there and see what happened between February, like say March 2000 and December 2002 to, you know, like about three, I would say. And you can see the, you know, devastation in that time period.
The NASDAQ dropped about 80% and a whole ton of companies went bankrupt. These out of these 10 companies, take Microsoft, Oracle, and IBM were the only ones that today are selling at a higher price than they were selling in February. And Microsoft took sixteen years. That's one six. Sixteen years before it hit the price that it hit in February.
You can see the price earnings ratio 90 times on average, S and P 500 about, you know, 27. And if you go into the next slide, today, speculation in the financial markets today. So you got the FANG's plus Microsoft again, and Microsoft's got a fantastic record, I must say. And but it's selling at the you can see the price earnings ratios, particularly note the Amazon and Netflix. Terrific companies.
These are all very good companies, not unlike the ones that were there in February. These are all the big companies. And then the question see how well they've done in the last five years, 300% versus the S and P, which went up a 100%, and these are now accounting for 25, 26% of the standard employees. Five companies are accounting for a pay percentage. Really good companies.
Question is, can you continue to extrapolate that? And so this is from Tweedy Brown, who's a really you know, they've been doing value investing for a hundred and one years, and these tables are from them. We think it's not going to be pretty, particularly for the smaller companies, which don't have the financials like these ones have. So if you go on to the next slide. So here's Tesla, which has been a terrific company in terms of revolutionized electric vehicles and phenomenal success, but here's how the market cap is compared to how much unit sales they do.
Look at the unit sales in red on the right pie chart, supply chart that one of the investment counselors put out. You got Toyota next to them. You got, you know, General Motors on the other side. You got Volkswagen, and these guys are all producing electric vehicles. And so it's left to be seen, but this is the type.
And this is Tesla. Of course, you've got Zoom media and as I pointed out, you know, a 130,000,000,000 I think in market cap was a 3,000,000,000 in sales, 3,000,000,000 in revenues. We don't think not sure. First of all, we don't have any investments in them, but we don't think it'll be a pretty ending whenever it ends. The next slide, please.
This shows you the housing bubble. What happens? These this chart, just to say, bubbles burst. Economics is important. The fundamentals are important, and and you can't go for long without the fundamentals.
Next slide, please. So this just shows you in 2000 so there's a bifurcated market today. There's a market that's technology growth areas that are being valued at really high prices, and then there's the the run of the mill companies that are good companies, but are selling the value oriented stocks and are selling at reasonable prices. In 02/2002, see what happened, and Fairfax equity portfolios went up 25%, but in that three year time period, the markets all dropped. That's '99 to 02/2002.
Markets all dropped by 45 to 50% wherever you look. We went up a 100% because of value investing. And we think that's we look at the companies that we have. We look at Atlas and I'll be happy to answer any questions. Atlas and Stelco and others that we have, and we say, you know, they've got a long ways to go.
Eurobank, long ways to go. And so the markets might come down, but we think our investment portfolio is in very good shape. Next slide. This just shows you the treasury rates. Just wanted to show you the long term treasury rates.
Raj O'Brien, we remember the nineteen eighties. In 1981, '82, 15% interest rates, you couldn't most people thought inflation would never come down, and most people thought interest rates wouldn't come down. And forty years later, you have the opposite. Most people think inflation will never go up, and interest rates are highly unlikely to go up. And I'm pretty smart people making that point and we just think there's so much of demand, so much of fiscal stimulus and and monetary stimulus to that it perhaps is only a question of time before inflation picks up, begin it began to pick up a little and interest rates go up.
The big risk today is is bonds. Bonds have no margin of safety. It goes up a 100 basis points as I said in our annual report. You lose depending on your term, you lose anywhere between 15 to 30% for a 100 basis points only, and that's a long ways from where it used to be. Next slide, please.
So then just going to end with two slides. One that this is something that I really love showing you and I want to show others is business can be a force for good. Over thirty five years we wrote cumulative premiums of $175,000,000, that's gross premium. After reinsurance, we get net premiums and we paid $95,000,000,000 of claims. So our customers benefited by 95,000,000,000 over that time period.
That's providing service to your customers. We our employees, 1,800,000,000.0 to our employees all over the world. Donations since we began 230,000,000, and now we're making 23, $2,530,000,000 every year. Pretax, we have paid taxes to the government, government's benefit, $3,000,000,000 plus in taxes. And of course, for our shareholders, we grew book value by 18.7%, which is what we control since inception.
And so I just think all over the world when I see a country that's business friendly and India has become business friendly, Greece has become business friendly, that's why we think these countries are going to benefit greatly. North America, of course, has been business friendly. The United States being the being the star in spite of changes in government have been very, very business friendly. Next slide. And this is the second last slide just to show you that we continue.
This is the since we began, we started with 5,000,000. We issued 23. You can see 29 we issued. We bought six and a half. We have bought 1,800,000 recently.
We'll continue to buy our shares, not at the expense of our financial position, not at the expense of making sure our insurance companies can take advantage of the odd market. But excess capital would be going to buy buy stock. And final slide is the one that we've had. We always end our meetings like this, which is to say our guiding principles, we are building on financial strengths for the next decade. We think we're in great shape.
Our guiding principles have remained intact. Our performance is good, not recently, but long term. Our strengths are very, very good both in the operating companies and the investment management side, but it's buttressed. The foundation is a fair and friendly Fairfax culture. It's a wonderful culture.
People feel very comfortable with it, and it's the reason why we'll last for a long time. So with that, I would I'm gonna open it up now for questions, and we have Jeff Stacy and Jeff Fenwick, who have done this before for us. And we really appreciate both of them taking time out of their schedules to join us in this meeting. And if you have any questions, send it to them. And any question is fine and we'd be happy to answer it.
And I'll have Andy Barnard with us. We'll have Peter Clark with us also, chief operating officer, and Jed Allen, our chief financial Officer. So why don't we start with the first one? Over to you, Jeff.
Thank you, Prem, and good morning to everyone participating in today's virtual meeting. Before we get started, I just wanted to remind you about how to submit a question during the meeting. There's a question icon located on the left of the meeting home page. Simply select the question icon, type in your question, and then select the send icon. Jeff Fenwick and I will try to get to as many of your questions as we can in the time we have.
So with that, on to the questions. Prem, first and foremost, Fairfax is an insurance underwriter. Would you discuss the current environment for insurance and reinsurance markets?
Thank you very much, Jeff. That's a key question. We are in the insurance business, and I give you a sense for it. But when I pass it on to the fellow who's in charge of all our insurance businesses, Andy Barnard.
Thank you, Prem, and good morning, everyone. Our underwriting operations at Fairfax are in great shape. Last year, we produced an overall combined ratio of ninety seven point eight percent, as Prem showed you, and that included almost five points of COVID losses. Our gross premiums grew 12% in 2020, and that growth has accelerated into 2021. In our decentralized system, nothing matters so much as the quality of the people we have leading our companies.
And as we've said for many years now, we are blessed with an exceptionally talented group of CEOs. In times like these, with significant market hardening underway, the advantages of our decentralized approach shine through. While other large organizations manage from the center and often hamper their field operations' ability to react, our companies are nimble and ready to grow. This is a huge benefit. Because underwriting discipline has been a hallmark at Fairfax, our companies are less struggling to fix past problems and more focused on the opportunities in front of them.
Closing in on $20,000,000,000 of gross premiums worldwide, we enjoy a widely diversified portfolio with a strong presence in hundreds of market segments. The breadth of operations is especially useful when markets are tightening and opportunities are rising. Now, I'd like to ask several of our CEOs to comment more specifically on their companies and the market conditions that they're experiencing. And for that, let's start with Brian Young of Odyssey Group. Brian?
Thank you, Andy. 2020 was a terrific year for Odyssey. I've been running the company now for ten years and, you know, in many ways it was the most rewarding. I really have to thank, you know, my team, my managers, the employees that work for them, for doing a fantastic job, all the time, but especially in 2020, you know, as we navigated through, the pandemic. At Odyssey, we're all about underwriting profitability.
You know, we're in the business to make an underwriting profit, you know, not just, every now and then or most of the time, but always. Sometimes we won't. Reinsurance is a volatile business, but we've been hugely successful at it. Over the last nine years, we've made an underwriting profit in each of the last nine years. And over that period of time, we generated nearly just about $2,000,000,000 of underwriting profit at a combined ratio of 91% over the period.
In 2020, our combined ratio was just under 96% on a U. S. GAAP basis. On an IFRS basis, was a point less. And that generated $150,000,000 of underwriting profit.
I should mention in a year in which most of our peers generated underwriting losses, Our combined ratio in 2020 was eight points better than our industry peer group. And we're very proud about that. The market is hardening and has been for quite some time. I mean, rates started to change in the insurance markets, particularly in The U. S.
And London, Bermuda in late twenty seventeen, early twenty eighteen. Things speeded up in 2019 and they accelerated further in 2020. And we've taken advantage of those improving market conditions. In 2020, Odyssey wrote $4,400,000,000 in premium. That was up 16% on the prior year and 60% over the prior three years.
And the 2021, we've gotten off to a fantastic start. Our volume will be up more than 20% in 2021. As we look forward in terms of market conditions, while we have seen fantastic market conditions, particularly in insurance lines, less so in reinsurance the last three years, and we expect to continue to see excellent market conditions, the rate acceleration is slowing. Where we may have gotten 20% or 30% rate increases in a certain business segment, we're expecting rate increases more in the 10% to 20% range. Still attractive, still excess of loss cost trends, still expanding margins.
And so we feel good about the business. Our appetite has increased. Just a reminder, Odyssey, today, we're a global reinsurance business operating through Odyssey REIT, and we have a specialty insurance business in The U. S. Operating through Hudson, and internationally through NewLine.
Of the 4,400,000,000.0 we write today, 50% is in reinsurance and we operate through 19 profit centers, as Odyssey Re around the world. The combination of Hudson and NewLine is 2,200,000,000.0. Hudson has nine profit centers and Newline has seven. So we have 35 profit centers around the world. We have tremendous diversification.
Our network is extensive, both in terms of geography, but in terms of distribution. And so where we see opportunity in the market, we've really taken advantage of that and we'll continue to take advantage of that in a disciplined way. Where things aren't working, we're asking our underwriters to put their pens down, but where we see opportunity like we do today, we're looking to grow the business. If you ask me what was the biggest challenge we face during 2021, it's not really the business. Again, we remain very bullish on our business.
It really is getting people back to work as quickly as we can. While we have thrived in the pandemic, we are a business whose culture thrives in an office environment. We made it through 2020 because of our culture, and we're a team oriented business, and we want to carry that through. And we think it's important to get our people back to the office as soon as we can safely. And we're hoping we can do it in the months ahead.
Thanks, Andy.
And that's great. Now let's move to Lou Iglesias of Allied World. Lou?
Thank you, Andy. And I wish I could be with everybody personally right now talking to everyone together. Hopefully that time will come soon. Well, in contrast to Odyssey's mix, we're much heavier on the insurance side. We're 80% insurance and 20% reinsurance.
And while we faced, you know, many challenges in 2020 from the global pandemic, it was very important for us to stay extremely focused on the marketplace because we really do feel that this is our time in the marketplace and where we're positioned, how the market is running and the products and geographies that we have. So it's very important that we stay very focused. And we had a successful year in 2020. Just to give some metrics, our combined ratio came in at a 95.4, and we grew the company just slightly over 20%. And that's $800,000,000 of growth over 2019.
And it was very broad based growth. So if you look, you know, across our products and our geographies, we have 43 global divisions worldwide, and 80% of those divisions showed growth in 2020. And that's the type of growth that we like to see diversified across the market. And of course, the areas and the products that had the best market opportunities were the ones that grew the most. So our global professional lines business, our D and O, our E and O, our global casualty business, property business, and more locally, our U.
S. Environmental business, our healthcare business in Asia and Europe, our commercial business in Europe, all showed strong growth and very, very good market opportunities. So we finished the year in 2020 at $4,600,000,000 of top line. And to put that in perspective, that's 53% growth over the 2017, which is the year that Fairfax acquired Allied World. Now Andy and Brian and Prem all talked about market conditions being strong, and they are strong.
And that's really what gives us our desire to grow. The cycle continues to curve upwards into the hard market in the markets that we're in. So we're seeing that market curve upwards. And the other thing that we're seeing is, based on what we're seeing in the 2021, we're certainly not at the top of that market. So we feel like we have more room to run here.
And our growth that we've seen has been largely rate based growth as opposed to exposure based growth, in other words, as opposed to adding risk to the company. And of course, we've done some of that because we do like some of the markets that we're in, but our growth has been largely rate based. In 2020, as a company, we achieved rate increases over 25%, which consistently led our peer group. And so this type of growth we think is very healthy. It helps to limit the volatility in our company.
It helps to improve our overall risk profile. And we also feel like we're putting on good quality IBNR reserves in this type of marketplace. And the market's been, you know, Brian's mentioned, the market's been moving in this direction for some time. Again, I would say shortly after 2017 was over, shortly after Fairfax we became part of the Fairfax family, we started seeing the market moving up in several of our products. In 2020, we saw material strengthening.
Of course, some of that due to COVID and the uncertainties around COVID, but not only that. There are many factors in the market right now that are pushing it upwards. And so some of those include, you know, we're coming off a drawn out soft market, and so there's a need for rate in many products. There's been claims inflation. There's low interest rates.
There's been a number of large cat losses. But a couple of things have been a little bit different, and one of those is, you know, we've had many unexpected losses, unmodeled losses, you know, such as COVID, such as wildfires, such as convective storms, the Texas winter storm, right? So these unmodeled, unexpected losses into the marketplace help to drive the market upward, I think, even more than some of the other things that I mentioned. And the key to be able to handle these is to be ready. Have a strong balance sheet, a strong underwriting, strong IBNR, and then you could handle the unexpected types of losses when they come along.
But I'd say one of the characteristics of this market that has been especially important to us has been what we've seen a global contraction of capacity in the marketplace. So in other words, many carriers in the soft market have found themselves over lined in areas, and there's for the past year and a half, there's been a big supply crunch. And when you bring supply out of a marketplace, any marketplace, generally prices go up. And so an example of this would be, you know, a company may have had $100,000,000 line out on a client and they pull it back to 10,000,000 Well, that opens up a big gap, and we've been going in and filling those needs for our clients in what is a hard marketplace for that type of activity. So let me finish up the market discussion by just saying this is a different type of hard market.
Traditionally, what we're more used to is a market hardening based on the reinsurance industry tightening up, pulling the direct market along, or a lack of capital pulling the direct market along. Well, there is capital, and this market has not been led by the reinsurance industry. It's really led by the direct marketplace. It's a grassroots market hardening. And I think when that happens, in my view anyway, I would feel like it's a less fickle market.
And I think that there's likely a little bit more time for this market to run. Well, let me finish by just saying how proud I am of all the people at Allied World. You know, we faced 2020. It was a global crisis. The team was very professional, very committed.
You know, we all went remote, and we didn't skip a beat. And we have a wonderful team at Allied World. And, you know, one of the key things was during the crisis, we also had all this opportunity. And the team recognized that. And so we didn't lose the opportunity because of the crisis.
And we're not going to. And we're committed to moving forward with all that focus. So Andy, I'll stop there, and I'll turn it back over to you. Thank you.
Fantastic, Lou. Now let's ask Matthew Wilson or Brett to offer some of his thoughts. Matthew?
Well, Andy, and good morning from The UK. Well, underwriting conditions in the Lloyd's market are currently very strong indeed and certainly the best that they've been in over a decade. We've seen compound rate increases in excess of 30% since 2018 and we've also seen a fall in our attritional loss ratio for the fourth consecutive year. That said, we must recognise as Prem mentioned at the start that 2020 was a challenging year for Lloyd's and for Brit, principally driven by the COVID loss activity. Lloyd's ultimate gross COVID loss is estimated at over $8,000,000,000 and as 5% of the Lloyd's market, Brit therefore was not immune from those losses.
We had net COVID losses of $270,000,000 which was the equivalent of 16 points on our combined ratio. And the greatest proportion of those by far emanated from contingency insurance and reinsurance. And for those of you not familiar with that, that's the cancellation and abandonment of sporting events and conferences globally. And as a specialty market in particular, Lloyd's does have a disproportionate share of that class of business. The underlying result, however, was much more encouraging and the attritional loss ratio, as I said, fell for the fourth consecutive year to a respectable 52% and our ex COVID combined ratio was 2% better than Lloyd's and actually that's the fifth consecutive year of outperformance of the Lloyd's market.
We grew our premium to $2,400,000,000 from 2,200,000,000.0 growing our net earned premium by over 8% in 2019. Through that period, to put it in context, from 2018 to 2020, the Lloyd's market has remained flat as it has addressed its global underperformance. That means that with our 20% growth over that period, we actually became the second largest managed agency in Lloyd's, showing that we are taking advantage of this hardening market. Rates, as I said, continue to strengthen and we saw 10.6% of rate increase in 2020. And for the 2021, that's continued with a further 8.6% of rate and our attritional actually for the first quarter hit 48%, which equals the lowest attritional loss ratio that Brits had in the last decade.
Undoubtedly for us, the most exciting development in 2020 was the creation of KEY. As Prem said, KEY is the first fully digital and algorithmically underwritten syndicate in Lloyd's. We developed it as a collaboration between Brit, Google Cloud and the University College London. And we worked with Google Cloud engineers to build a front end web based platform so that the brokers could actually access our business. And UCL are one of the world's preeminent academics in the design, of algorithms for, use in the financial markets.
And those algorithms we're using within the system to select risk. I think it's important to say that whilst it was a collaboration, Brit and Key own all of the IP, going forward in this system. We became operational on the January 1 for 2021 and pleased to say that we've already written $180,000,000 of gross written premium as at the April 1. Now Blackstone have invested alongside Key, sorry, alongside Fairfax and Key, and that's the first time that Blackstone have ever invested in the Lloyd's market. At scale, we think that Key will have an operating expense ratio of one third of that of the average Lloyd's syndicate, and that equates to a 10% combined ratio advantage over our peers, and that's before any outperformance potential of the algorithm.
So we really believe that Key can disrupt the £50,000,000,000 Lloyd's marketplace and it was the largest tech startup in The UK in 2020, which we believe can therefore take a significant market share, coupled with a significant outperformance as we move forward. In finishing, I'd just like to say that, I mean, my view is that any culture is exhibited not in the best of times, but under extreme pressure. Our people at Brit work in one of the last face to face trading environments globally, but since working from home within a twenty four hour period, it's worked seamlessly since March 2020, and we've been singled out by multiple brokers for our service excellence to clients. So I'd like to thank everyone at Brit for remaining focused and despite the pressures, diverting from our overall ambitions. Thanks, Andy.
Thank you very much, Matthew. And now let's turn it over to Sylvie Wright, the CEO of Northbridge. Sylvie?
Thank you, Andy, and hello, everyone. I'm very happy to provide you a Canadian perspective into our market as well as Northbridge. Although we do have some common messages. I'll start with the market conditions. 2020 market conditions were very firm in Canada and the reasons for that were one, prior year underwriting results were not great.
We had inadequate pricing in some segments. We've had increased weather catastrophes over the last five years in particular. Some markets have pulled out of unprofitable lines. And in addition, there has been a low interest yield environment, which puts pressure on improving the underwriting profits. Although the commercial lines market was very firm, it was a really different picture for personal lines in particularly the auto.
With the lockdowns here in Canada, we started to experience a decrease in auto claims and because of that, the personal auto rates were not increased and in fact insurance companies provided premium relief and rebates. From a Northbridge perspective, we had a very good 2020. We're the third largest commercial lines insurer in Canada and we write we wrote $2,300,000,000 in premium in 2020, a 15% increase over 2019. And that compares to the industry that grew 7% for the same period. We had a 92% combined ratio, which is a very strong year.
And we're very proud of our customer retention ratio, which was 91%. Like all our sister companies, we've been operating remotely since March 2020 and as Prem said, we haven't missed a beat. We have successfully supported our customers and I want to extend a huge thank you to all our employees that made that happen. Looking at 2021, we expect the commercial lines market to continue to be firm and the personal lines auto will of course be impacted by the continued lockdowns here in Canada. We're very optimistic about 2021 and our focus on delivering exemplary customer service and our underwriting discipline, we have started 2021 with a very strong first quarter.
So with that, Prem, I'll hand it back over to you. Thank you.
Hey, thank you very much. So we now we'll pass it on. Thank you, Andy. You can see we've got very strong management. We selected a few just to give you a sense for the stability in our management team and the the hardened veterans.
They know how to take advantage of our hard market and and grow significantly. And we're delighted to show that to you. Thanks, Sandy, for setting all that up. We'll go on to Jeff Fenwick for the next question. Jeff?
Hi, Prem. Thank you and good morning, everybody. Prem, the first question from the investor one of the investors is with respect to Fairfax's investments in total return swaps. He's hoping that you could comment on the performance over the last year, some of the gains and losses and perhaps comment on the decision to build a large notional value position in Fairfax's own stock and what the plan is for that investment?
Thank you, Jeff. Yes. So we have some small exposure to total return swaps when we see some special opportunities, very marketable and mostly we buy it in our insurance companies, the liquidity is very, very significant there. And we bought some in March and we've reduced it quite significantly, but it's a very small portion of our investment portfolio. We used some of that in the holding company.
We did buy some of it, as I said earlier, because we thought Fairfax was exceptionally cheap. And so we took the opportunity to buy some Fairfax shares, which I think have gone up by about $100 since we bought it in U. S. Dollars, and we're quite happy with that, with those shares that we bought. We think it'll be a really good investment over the next four or five years.
Thank you, Jeff. Can I pass it on to Jeff Stacy?
Prem, a question Fairfax current ownership stake in Digit is 49% as of the end of the year, but the company has indicated that it can increase this to 74% upon conversion of a convertible preferred security when permitted by the recent Indian budget. There was a recent funding round for Digit earlier this year where the valuation was reported to be $1,900,000,000 So the question that came in is if Fairfax's ownership increases to 74% and we use this recent valuation, it would suggest that the fair market value of Digit would be closer to $1,400,000,000 versus the current carrying value of $517,000,000 at the end of the year. Is that a reasonable inference to make? And would Fairfax consider an IPO for Digit in 2021 that could potentially monetize these significant unrealized gains?
So Jeff, that's a very good question. First of all, Digit is an outstanding company that Kamesh is the entrepreneur. He built the second largest company. We built the first one, which is ICICI Lombard. He built it with a terrific competitor building Allianz Bajaj.
He was the guy who built that. And then he spent, you know, another seventeen years in total with Allianz, the last six, seven, eight years in Munich. And then, but then he wanted to do something entrepreneurial and he came to us and about four years ago and from scratch, built a company with about 2,000 employees, 400,000,000 plus in premiums at the March 2021, the year ending. He's profitable Underwriting, as I told you, his combined ratio at the annual report was 113%, but he's profitable. Just before I answer your question, here's how Kamish looks at it and I think it's right on.
India's insurance business, property casualty, they call it non life is about 25,000,000,000. In the next ten years, he thinks 15% growth, it'll grow to about a 100,000,000,000, which is not unreasonable. And his aim from 400,000,000 is to have 5% of that 100,000,000,000, so it's about $5,000,000,000. So that's the growth opportunity that's facing the property casualty business in India and that's facing DIGIT in particular, and that's one of the reasons we went into the business because we saw this opportunity, huge opportunity. Now digit is, we are fortunate that the government has changed the rules and allow us to go to 74%, which we can do to the convertible as you mentioned.
It's valued at, in our books on a 100% level at 900,000,000. There was 28,000,000 that was done at, Jeff, 28,000,000 was done at, I think 1,900,000,000.0, as you said, and so that's a significant increase, but we haven't reflected that and it's not going to be reflected there because it was a small amount of money, some private equity guys wanted to do it, put the money in. In terms of an IPO and possibilities, of course, we look at that and there's a significant amount of growth opportunity at Digit and our own companies are going to benefit from that as that tech digit as you some of you may know is it's totally digital. There's no paper at all. They started that totally digital and so, the possibilities are huge in a growing underpenetrated market in India that digital grow significantly, but we always look at possibilities and you know the Indian government has taken out restrictions, Jeff, on Indian companies accessing The U.
S. Markets, so you can list in U. S. Markets, but they haven't worked out all the details yet and the throes of working out the details. But we've got a wonderful story in Digit as we have in all our companies.
I mean, I told you, Jeff, that in our annual report that Odyssey started with about $250,000,000 and you heard Brian Young, you know, 4,500,000,000.0 and growing over twenty five years and they're coming out with a book and that'll be in the summer. And then we'll share with all our shareholders a copy of that book next year when we all meet together. But we've got tremendous talent like Kamesh across all our insurance companies. Got, as I said, 23 in the consolidated area and another five in the, which is not consolidated. But Kamish is a great example of what a wonderful leader can do.
The opportunity is huge and we'll keep our options nice and open. So Jeff Fenwick, next question.
Thanks, Prem. The next question comes from a long term shareholder who's asking about balance sheet leverage. He notes that there are often comparisons between Fairfax and firms like Berkshire Hathaway and Markel. These firms tend to run with lower relative leverage levels. His thinking is that perhaps that would make the stocks less volatile through challenging periods.
And the question is whether Fairfax might look in time to lower its leverage level.
Yes. So Jeff, in terms of leverage, our leverage is on the high side. Once we do this at the Riverstone sale, once that takes place and the Oversdale, our leverage will start coming down quite significantly. And then of course, all of these increases, the $8.75, the 1,000,000,000 that's not reflected in our balance sheet because of the accounting, that will all have an impact. But over time, we see our leverage ratio coming down significantly.
Last few years, we haven't our profitability hasn't been high. So that's impacted our leverage too. But having said all of that, our financial position is rock solid. I'm very comfortable with our financial position. The fact that we have no maturities in three years, we access the Canadian bond market, as you know, Jack, we access The U.
S. Bond market. We've never had such support in Canada or The United States, wide range of bond managers in both those institutions in both countries have supported us. And so we just see over time our leverage coming down and we're very much focused on that, over time. Next question, Jeff Stacy.
Prem, we've had some questions come in about
A little louder, Jeff.
We've had some questions come in about Farmers Edge and Boat Rocker Media. As you alluded to in your presentation, both of those companies completed IPOs during the first quarter. I'm just wondering if you could comment on the accounting treatment for these two positions and whether Fairfax will be booking an accounting adjustment in its first quarter results?
Yeah, so first of all, on Farmers Edge and Boat Rocker, we nurtured both those companies for four, five years. In the case of Farmers Edge, there were quite a few losses and the way when you consolidate it, when you consolidate these companies, the losses flow into our income statement balance sheets and our carrying values go down. And today in both cases, as I said before, the companies have gone public, raised money in the public markets and financially they're, and they've got a 100,000,000 in cash, they've got no debt and they're highly unlikely to need any support from Fairfax, both companies, and the opportunities are very significant. In terms of the carrying values in Pharma's Edge will be down and market price, the IPO will be quite significantly higher and so there'll be some gain, but on both those companies will, in two weeks you'll find out when our quarter comes out. As soon as that quarter comes out, you'll find the details on it, but there will be some gains given that we've taken them public.
But the important thing, Jeff, is we've nurtured two companies. We take the cost for four, five years, and now we're seeing the benefits, and you're going to see the benefits over time because both companies are really in good financial shape, great management team and we think the opportunity is very significant in the long term in both those companies. Jeff Fenwick.
Thank you. The next question is with respect to Atlas and Eurobank and Fairfax's investment in those firms. Those are very large positions for Fairfax. Are you concerned about the exposure there? And is there any intention in time to take those positions?
Just with respect to Atlas and Eurobank, would Fairfax ever look to reduce its exposures there given how large those investments are?
Yes. So they have two very large positions, as you point out, that's why I'm quite excited. Now you look at Atlas, Atlas was at $14 a share in '19, in March, it goes down to 6.57, closes the year at 11 and it's back to 14. But what does this company do? And they, of course, are in the, container ship business.
In, February, '20, they have reduced their costs. They're the best on time delivery, safety is fantastic, and then late in the year, they get the opportunity because the shipping yards have no orders, so they go into these shipping yards in Korea, in Japan, in Shanghai, China, and they give them they got a great cost to build new ships, the latest container ships that you could see, large container ships. Container ship leasing prices are through the roof, so they go and lock them up for 5 they lock them up for five years, ten years, and in some cases, eighteen years. And so if you take a 100,000,000, the cash on cash yields about 8%. So if you take a 100,000,000 ship, one ship, and they get a cash on cash at 8% leasing less the cost, that's about 8,000,000, and then they're able to finance it at about 80%.
And the way you, and when you take after financing costs on their own equity, it works out to about 15, maybe 20% and maybe higher. And what they've done is they have expanded in the last few months, their capacity by 45%. I talked about that. And what that means is that earnings per share instead of a dollar, the next few years can be $2 a share and that free cash flow can be even more significant. So this is run by a fellow by the name of David Sokol.
He's got a tremendous track record at Berkshire Hathaway and his CEO, Ben Chen. So we expect that to be a very significant, it's marketable, a very significant performer for us. Eurobank is a bank, you know, there's another company that started at 90¢ at the end of somewhere in about 90¢ at the end of 'nineteen, went down to the low, might be 26, 20 below 30¢ in 2020. It's back to about 80¢ today. Its book value is about a dollar 35 this year.
Next year, $1.50, dollar 50. They're making 10¢ this year and 15¢ next year. And and Greece has got the best government in Europe. We've said that for some time. Very business friendly government, transforming how Greece is governed.
And I think Eurobank run by Forkion and George Krzykos will benefit greatly. Forqueon is the CEO and they've already reduced their non performing loans to below 10% and next year to about 6% I think. And so you can and they're big positions for us. So at 80¢ is interesting, but if you think it'll go to book value and perhaps higher, then you can see how much gain we could get. We have, I think, a billion 2 shares of because it's below a dollar, so there are lots of shares, billion 2 shares in Eurobank.
So both those are big positions, but great management team and I can go into CELCO and all the CIB bank in Egypt, outstanding bank in Egypt and on and on and on, but we have wonderful positions and we've been in the investment business for a long time, you know, forty five years, Roger, Brian, Sandra, myself, we've all worked together for a long time and now Wade, Burton, and Lawrence, they're managing a billion and a half. They've done so well that as I said in the annual report, we're giving them another billion and a half and that'll continue over time so that Wade and Lawrence can manage a large amount of money and of course a lot of our Asian money is managed by Yi Sang and on and on and on. So I'm diverting a little, but yeah, those large positions we like, but they're marketable and saleable at any time. Jeff Stacy?
Prem, we've also had a number of questions come in about BlackBerry. Could you tell us about your BlackBerry position? Did you sell when the share price went up? And if you did not sell, why not?
Well, thank you, Jeff. I think many, many people have asked that question and we weren't in a position as an insider to respond, but now I can respond by saying that the convertible that we had, which is convertible at $10 a share, in September was the conversion price went down to $6 a share, to extend the term for another three years, and the, SEC rules, short swing rule it's called, is that once you do that, it's considered to be a new security. And so for six months, you're forbidden to transact in the shares of the company. And if you do, all the profit goes to the company and we looked at it hard, we checked all the rules, but it was very specific. And so basically we were locked out as a company till March 1.
This doesn't restrict individuals, it restricts the company because we had a convertible that was a new security and and so so it was after March 1 that we were allowed to sell. The stock was down to below 10 by that time, and so we basically didn't sell. Our stock cost, all in cost, everything included is about that price, 10 a share. So to date, BlackBerry hasn't been a great investment for us. We still back John Chen.
We think he's an exceptional executive and, his track record speaks for itself. And we think over time, we'll see what he can achieve. He's got two big pieces that I talked about, the, you know, connected cars joint venture with Amazon in as one piece and the second is cybersecurity and silence. So he's focused on both those pieces, they're both growth opportunities and, but we could, we did not sell, we were not allowed to sell after we've allowed to sell the stock price had come down. Jeff Fenwick?
Okay. Our next question is with respect to Fairfax's large cash position at the HoldCo. And Prem, the investor is asking, why not take some of that cash and buy back Fairfax's shares?
So that Jeff, as you know, that's cash in the insurance companies and we've got a large amount of cash. The only way you can buy back stock is if you could dividend that stock back to the holding company. So you move the stock positions to the holding company and you move the cash to the holding company and then dividend and then you can use that. And we want to keep the cash at cost of the insurance companies right now. We don't want to reduce capital.
If you're dividended out, you have reduced capital and the opportunity as CEOs and Brian and Lou and Sylvie and Matthew made the point to you, the opportunity is in the insurance business. It's a hard market, doesn't last for long and it comes once in a, you know, once in a long time. And so we're taking advantage of that building, building our business. And then we'll always look at buying back our stock with keeping our financial position solid, making sure we support our insurance companies as I said before, and then using excess cash to buy back our stock. But that's certainly in our minds and we don't see a lot of opportunity in terms of buying insurance companies because we've done that.
We've got a very large scale business now. Jeff Stacy?
Prem, you alluded in your presentation to Riverstone Europe, the pending transaction. Can you provide an update when you expect the Riverstone Europe transaction to close?
Yeah, thank you, Jeff. Riverstone Europe was basically subject to regulatory approval. So it goes to anytime you do an insurance deal, any place in the world, because it's regulated, change of ownership goes to in The UK and London, it's a PRA, it goes to the regulatory body and they do all of that checking and make sure it's acceptable. So it's in that process. We think somewhere before the end of the second quarter, I can never predict these things, Jeff, but we think before the end of the second quarter, it should be done.
Jeff Fenwick?
The next question is with respect to COVID, Fairfax's COVID exposures. Prem, do you believe that Fairfax is now well reserved against any future claims? Is there anything here that could hold back performance going forward with respect to COVID?
Yeah, Jeff, there's it's light cat, you know what that means, that means there's still exposures there, but we've got about $669,000,000, I think, that we put in at the 2020 in all our companies, 50% is IBNR, which means it's incurred but not reported. So it's like a reserve that we put in and we've taken in the case of Brett, a lot of cancellation insurance for 2021. So if anything comes along in 2021, we don't think it'll be significant because we've provided for it, but we could have some movement here or there. But it is, you know, the business interruption is continuing in some parts of the world. It's not in The United States.
Contracts are very clear there, but in other parts of the world they continue. So we feel comfortable, but you know, you always have to be careful with reserving, but our record's good and we're conservative, so we feel good. Jeff Stacy?
Prem, question about the bond portfolio. Long term interest rates have moved higher recently. Is this move enough to tempt you to increase the duration of the overall bond portfolio?
Unfortunately, no, Jeff, I showed you the chart, it's just, you know, the bottom for the ten year rate in The United States, like all time, even in the depression of the 1920s, it never went there was a half a percent sometime in August, think of 2020. It's now come down to 1.6, 1.65, but it still hasn't really come back to the pre COVID levels and 2% for ten year bonds is very low. Inflation that was reported yesterday or a couple of days ago was 2.5%, something like that. And that number might go up. Price of commodities are high, steel prices are high, any type of price that you see is high, they usually get passed on to in terms of consumer prices.
So we, as I say, the big risk we think is in the bond market, there's no margin of safety and so we think that's the, you know, you could have a variant of COVID-nineteen, which shuts down the economies again, which will get these rates could go down because of that, or, you know, there might be people might not spend. There's a lot of money on the sidelines. People have the high savings rates in The United States and Canada. They may not spend when you open it up. They might, as the economy opens up, they might use it to pay down debt.
So you got that possibility, we think the smaller likely hoods, most likely as people will spend and as it, as the economy comes back, there'll be pent up demand to go to restaurants to fly anywhere on holidays and once you feel comfortable that you've got the vaccine and you're well protected, but there are risks in it. We just don't think you're getting paid enough money and so we keep it five years or less. Anything that we're doing is five years or less in the main. Jeff Fenwick?
The next question is related to Fairfax's dividend. Prem, the investor notes that the dividend hasn't been increased in many years now. Is there any thought to potentially increasing it in the future?
Not likely, Jeff. We've got it at $10 which is, you know, quite that's about $260,000,000 We got 26,000,000 shares, that's $260,000,000 each year that goes out for the dividend. We like to keep it there and not and not cut it. And so we don't think it'll we don't think it'll it's unlikely to increase. We'd rather buy back our stock when we have excess capital.
I think that's the best way to return capital to our shareholders. And so that's that's what we plan to do. Jeff Stacie?
Prem, in the last year, Fairfax has been quite active with its strategic monetization program. When you look many years into the future, do you foresee the company continuing to make controlling purchases in non insurance businesses or is the strategy changing?
So we bought some companies, Jeff, that were private companies and so, you know, where they were private companies and they were, they weren't as successful as, we're all about having great management running our companies and in the insurance business, you see how what a wonderful team we have. So is the case with our non insurance investments and we might have deviated from that a little, they're coming back nicely we think and will we have controlling investments that, you know, reminds me of, you know, we had a block of some of you long term shareholders will remember Ridley, Ridley foods feed business and 80% in 02/2009, I think it was, 80% of the shares came up from Australia, the Australian controlling shareholder had to sell. And so they sold 80% at something like 8 or $9 and per share. And six, seven years, we got, I don't know, $67 of dividends cumulative. And then someone came and bought it for $45 a share and the rate of return was exceptional.
So we're more focused on, and they had a terrific CEO running that business. We're focused on good companies, well financed and and available at good prices. But the I I quoted Phil Carrey who talked about management. Like, you know, I've been in the business now for forty five years. If there's one thing that's key, and I explained to you in terms of, Atlas, Stelco, I mean, company like Stelco is steel.
Right? Steel company of Canada. It's run by a fellow by the name of Alan Cashenbaum and steel prices are down and a tough pandemic. What does he do? He reduces the cost even further.
He buys a a equity interest in one of the best iron ore mines and improves his blast furnace and capacity, I think, by 10%. And the price of steel is at record levels and he's he's gonna make a ton of dough in the steel business. Got no debt. And just an exceptional guy running it, Alan Kassenbaum. And we bought it at $20 a share, something like that.
That went down to $4 and, in March, and it's now about $30 a share. And, and so these prices go up and down. They're not, you know, we might be excited like we are today when our stock prices have gone up and then in March we were disappointed, but it's always a long term that counts. But value investing is back, it's recognized and we think we're in for a long period of time. Value investing has worked for decades, but the decade ending 02/2019, decade value investing hasn't worked and most value investors are no longer there, very few of us are there.
And so we think the next ten years could be a really good period for value investing for some of the companies that we have and, but we're, you know, we don't have to buy, we want to buy good companies at good prices, financially sound, we don't have to buy control, know, we're about 10% or 5%, but we're getting bigger with 43,000,000,000, 22,000,000,000 and 20,000,000,000 plus in business. So with time, but we invest worldwide, 75% of it is in fixed income, only 25% max can be in common shares. So we think we still have an opportunity. A question that you might have is how can you make 15% in this world where there's very little very little interest income? And that's because of our common stock positions.
So in 2019, we basically made 15%. We grew our book value by 15%, and we had a 6.9, almost 7% return on our portfolios, but most of it came from some interest in dividend income, but a lot came from the equity positions that we have. We're trying to get 15% compounded rate of return on our equity investments. Haven't always done it. I made a few mistakes in the past, but we are patient and we take a long term view.
So we think, as I said before, the best is yet to come. Jeff Fenwick?
The next question is about Fairfax India. It continues to trade well below its book value, and the investor wants to know whether Fairfax might look to increase its stake in Fairfax India or perhaps Fairfax India might look to do more significant buybacks of its own shares?
Yes, Jeff, that's a very good question. That's another example, right? So the stock is about 12.5 and I think, know, that Fairfax India has bought a ton of stock, which we've disclosed, three or 4% of the company, so that increases our indirectly all existing shareholders have a bigger share of the company. And so they'll Fairfax India will continue to do that and retire the stock because it's it's too cheap, But that gives that's a reason why I expect for the next, you know, long term that Fairfax India's debt price will go up. It's staring you in the face.
You know, it's 12 and a half dollars. Our book value is through 16. We got we've got IPOs that are coming through. We'll talk a little about that this afternoon. And and the stock is at 12 and a half.
So why? Because, know, the COVID nineteen, India has come through a really tough time. We can see through it. We can see 11% economic growth this year in 2021 and perhaps significant economic growth in the years to come, but most people are not focused on it. There's a bank called CIB Bank, which is not any of you have a chance to look at that bank.
It's unbelievable track record over twenty five years, 20% type return on equity financially among the most sound banks in the world and and and, you know, very, very well managed, very risk conscious, non performing loans covered, I don't know, three or four times. And so but you can buy it at eight times earnings, seven or eight times earnings. So these things will change. This this is why we are bottom up investors. We look at all these things.
And we just think the prospects are very good for many of the investments we've got. Jeff, Stacy?
A question that just came in, Prem, is Fairfax officially out of the stock shorting business?
Thank you for asking. No. You know how to make a point there, Jeff. But yeah, officially out of it, shorting in terms of the S and P 500, shorting in terms of individual stocks, We are not going to do that at any time and we've put it into our investment policy documents, so there's just no way we can do it. The we had one stock that we had we had showed it earlier.
No. It wasn't a new one. It we just didn't cover it in '19 and let it run and it cost us as I told you. But but, yeah, that's over. That episode is over.
What we're looking at is like right now, larger cash and the equity component is focused on good companies available at reasonable prices and and all the time taking long term taking a long term view and backing the management. Always friendly, never unfriendly. But thank you for asking that question, Stacy, Jeff Fenwick.
Next question is about the way the management team works within Fairfax. The investor is wondering, Prem, if you're still active in the day to day decision making around investments and how are the responsibilities in that team evolving?
So like one of the fellows said, it's time for you to retire, Jeff, listen, I am active, I showed you the management teams that we have, right? So with the insurance business, we are very decentralized and all of our presidents, all of it comes to Andy Bernard and Peter Peter Clark, chief operating officer. So all of that comes in there and all the consolidation of course is Jen Allen, our chief financial officer and her team. And on the investment side, Wade Burton looks after, you know, all of the people managing their portfolios and Asia or in, you know, in Middle East or in Latin America, they come all come into Wade Burton and and Lawrence Chang and Lawrence Chen. And and Raj and myself, we we manage the portfolio, some of the big things.
So anything that goes up above 200, $250,000,000,000, we're all involved in, and we come together. But Wade and Lawrence can do what they want with the billion and a half they have, and we're gonna give them another billion and a half. They can manage it as they see fit. But as a company, if we have more than 250,000,000 that we all come together this as an investment committee, make sure we look at it. And I love the business.
I love the people that I'm working with. I like, you know, propagating our culture, which I tend to do whenever I can. And this system works out very well because we've done all our companies on on the on the Internet. And and I love investing. So so I'm very yeah.
I'm very much involved. I am very involved, I like it, but I've been a very flat structure, I work at a tape, Andy and I have worked together for twenty five years, as I told you, Andy has been instrumental in our success in the insurance side. On the investment side, Brian, Roger, we've worked together. We were frightened to tell you how long we've worked together. Forty three years, forty four years, maybe longer than that.
I'm not keeping count any longer, but, but we worked together and that's a that's a lovely relationship. So, we're really happy working together and it's a big plus. The fact that we've all worked together for such a long time is a major plus. If you look at our insurance company, there are not too many insurance companies that could have two CEOs, Odyssey, for twenty five years, only two CEOs. And the record is a stellar, tremendous record.
And so we haven't had you know, we're very fortunate. We haven't had turnover. We're very we've been able to keep our people and and empower them and and succession planning is all from that company. We don't really get someone from another company internally or externally. It's always from the the existing.
Always has been to date from the existing company. So so, yeah, I'm very involved, and I have no plans to retire. Jeff Fenwick, thank you. Jeff Feshie.
Prem, could you please provide an update about Dexterra and AGT?
Yeah, so it's funny you asked those two companies because Dexterra, they they have the similar chairman. Bill McFarland is our lead director, is also chairman of Dexterra and and AGT. Dexterra, the CEO is John McCoosh, and they've come out and said, it's a services business as you know, and Horizon North was with modular housing, And they've come out and said that in the next few years, there'd be a billion dollar company and a 100,000,000,000 in EBITDA over over the next few years. And and that's clear that we care in Canada. And then over time, it's a natural business to expand in The United States.
And so we're very, very optimistic about Dexterra. It's doing extremely well. I just reported that quarterly result. And AGT is a company, as I said before, built by Murad in Saskatchewan over the last twenty years from nothing to about $2,000,000,000. The company is worldwide, operates lentils basically, but all over the world.
And and the opportunity and for AGT is also very, very significant because of Burad, who was the founder and the CEO, and he's got a good partner in Turkey called Hussein, who's who they they work very well together. So tremendous opportunity we think in both those companies. Jeff Fenwick?
The next question focuses on ESG principles. ESG has become a much bigger factor for a lot of investors when they're assessing investing in businesses. Can you speak to how Fairfax is addressing these areas and intends to apply it to the way that it manages its businesses?
Yeah, so you know, I was a little surprised, we looked at ESG and Peter Clark spearheaded it with John Wernell and Jonathan Godown and others, and they came up with a really good report and I'm reading it and it's like that's how we operate. We never thought any other way to do it, in governance and, you know, doing well by society. We always thought about doing well and so you can do good. So the idea of 2% to our communities, which was not done by Fairfax, by the way. It's done at the insurance company level.
Each president does that and allocates it as they see fit with their employees. So it's and we give you every annual report. I highlight some of the charitable organizations that we've supported, and it's it's a big plus. We want to do that, and it's it's it's something that we just we've we began, I don't know, might have been in '91 or '92, so long time ago, we decided 2%. And then so we looked at ESG and we do all these things.
We never we don't like talking a lot about it, but we we've given all of the activities with ESG and we we put that document together, put it on our website, by the way, so you can read it. It gives you a nice long history of ESG. And we're focused, of course, on, I took I told you BNI, which is a black North initiative, making sure that there's no discrimination in our companies. Our companies I talked to people, as I've said, from the black community. They're all very, very happy with Fairfax and the individual subsidiaries.
They feel it's perhaps the best place they worked before. So and in terms of climate change, of course, we have to take that into account when we price for, you know, hurricanes and earthquakes and all of that. And I think the point's been made that pricing is very important there. Prices are low and you don't have any protection for climate change. Prices are high and maybe, you know, you get paid to take the risk of potentially having more hurricanes.
And so, so we've explained all that, Jeff, and in our website and but we'd love anyone to if you have any suggestions, please let us know. But it's a it's a live document, so as we go forward, we'll keep adding to it and change it, but but that's it's it's right there. Now, of course, it's also decentralized. That's Fairfax. So we put a policy in place, and then each of our companies will adopt it and adapt it as they see fit.
Next question, Jeff Stacy.
This just came in. Do you see any negative impact to Fairfax from the proposed corporate tax rate hike in The United States?
You know, Jeff, we'll pay, of course, there'll be some negative impact. We'll pay more taxes. They're talking about 21% going to potentially 28% or 25%. So that means you'll have more taxes to pay and, but you know, it's a level playing field, whatever the taxes are, we pay it. And it's, you know, The United States has had taxes go right up to, you know, much higher than even 35 percent.
So I think we'll manage whatever the taxes are, but we like the fact that it was at 21%, but whatever it is, we'll manage with that. We don't think it'll affect us in any significant way. Next question, Jeff Fenwick.
Next question is tied to your investment in CPI linked derivatives. Prem, the investor asks, giving your views on inflation, what do you plan to do with that portfolio of investments?
The deflation swaps basically, Jeff. Yeah. So those we had for protection, the worst case, we still keep them. We haven't sold any. They're not worth a lot, but in the unlikely situation that deflation rears its ugly head, we'll have something that protects us some, but we haven't sold any and it's like we bought insurance and the insurance wasn't needed.
Jeff Stacy?
Question about the insurance pricing cycle. And the investor asks, if the insurance pricing cycle remains hard, what level of premiums do you envision Fairfax could be writing on a consolidated basis in three years?
It's a really good question and I can tell you what happened the last time in February, I made a couple of points, first one is Odyssey was writing about a billion dollars in, February. 2001 happened and, after 02/2001, in the next three years, these are these are numbers that are in our annual report. 02/1934, Andy Bernard took it to 2 and a half billion, so a 150%, more than doubled it. And and if you ask him today, he said that that single decision perhaps was the key for how successful it's been. Because of course you had reserve development, negative development deficiency from what we acquired, but this amount of business was so redundant that it helped us for a long time.
And so he went up, so there would, you know, that's a virtuous cycle, so it goes up a 150%, the investment portfolio was 2,000,000,000. And without basically no additional money, we went up to $89,000,000,000, six, seven years later. So the increase and from a billion to 2,500,000,000.0, and it stayed underway and there we had some deficiencies for the past. Underwriting was good, but now it wasn't as good as today. Like now, today, all our companies are really well reserved.
It's all business we've written. We've reserved for it. And so when we go forward, you have what they call the virtuous cycle. So you have premiums going up, you have an underwriting profit, and the reserving will become even stronger because the pricing is going up so much. A lot of this increases rate increase, not, you know, not new business.
There's some very new business also, but so you have rates going up, you have underwriting profitability, and then the investment float starts increasing. So we're writing about, you know, just the 17%. If you take that 17%, that'll take the 19,000,000,000 to about 22,000,000,000 in year one. Can we grow, you know, in three years, 30%, 40%, 50%? We're big now.
We're not small, but we have very nimble management team. It's not we don't have 19,000,000,000 in 2020. What we have is 4 and a half billion with Odyssey with under Brian Young. We have about the same with Lou Iglesias. We have, you know, and you go on with Matthew, as you said, 2 and a half billion and then the Lloyd's market.
So you have all of these different, very nimble operations that could take advantage of the business and that specialties and that. So it's a very good structure and I can't predict and in the last hard market we doubled our business, but it was small. We doubled our business for, you know, Canada, United States, all over the place. Here, it'd be difficult to see how much we can go, but I'd love to see some very significant growth. I'm not going to say what the numbers are, but we put our pedal to the metal and we're ready as much business as we can.
Jeff Fenwick?
The next question is related to your runoff operations. This has been a source of consistent consistent drag on earnings tied to significant adverse development related to asbestos claims. What's the status of this portfolio today of claims? And do you expect them to continue to be problematic to Fairfax going forward?
Yeah, so the runoff, you know, is, we've got a terrific team there. You can't underestimate the plaintiffs' lawyers, they continue to find ways to get this get paid. The social inflation plaintiffs lawyers are looking for higher awards. So so that's a good that's we've got a terrific team under Nick Bentley. We're very happy with that, and and we monitor it very carefully.
We think it's well controlled, but we have to no substitute for just focusing on it because the plaintiff's lawyers are looking at every possibility to increase the awards that they get. We're comfortable with it and it's, and it's, you know, it's a dull role, but but we are careful with it. I must, you know, Jeff, Stacy, question on how much we can write, I wondered, Andy Bernard, if Andy will take a crack at that. Andy, any comments on what we would be able to write in this market in three years? You know, it's difficult, I know, but any comment on that, Andy?
Sure, Prem. Well, I would say that if the premise is that we have the same level of rate hardening over the next three years, then, you know, I think we could easily be growing 15% to 20% over that time. But that is an uncertain premise. I think we're going to see eventually some slackening of rate increase, in which case our growth levels would be down. But at the kind of price increases we've been seeing today, you know, as you've said, I mean, we're getting increased premium from our existing book, but there's also much more business that comes into the sweet spot and allows us to write more new business.
So I would be comfortable saying that if we continue with the same level of rate increase that we see today, 15% to 20%, you know, compounding over the next three years would be a realistic expectation.
I think that's, that's right. What we have, as Andy has shown you, the four presidents, what we have is veterans, you know, like they've been through many, many cycles. Brian Young said underwriting profit, underwriting profit, underwriting profit. They're focused on underwriting profit. And when they see it, they go for it.
So it's you know, they're very, very experienced. And so when Andy says if the if the rate increases, like, continue, so 20% each year, that could easily take place where Andy and I say to them, this is the time to expand and expand as much as you can. So Jeff, is that Jeff Fenwick or Jeff Shacey?
Go ahead. I guess a follow on question there Prem, the follow on question to that would be.
Go right ahead, Jeff Hendricks, sorry.
Sure. The follow on question to that answer would be the capitalization.
A little louder, Jeff. A little louder, if you don't mind.
I guess the follow on is how well capitalized are the insurance operations to continue to pursue that growth? Yeah. And can Fairfax
help So how well capitalized are the insurance company? They're very well capitalized and of course, Jeff Fenwick, as these you know, when you get an $875,000,000 in our stock portfolios and another billion and the consolidated because in the insurance companies quite often they're mark to market that flows into the capital base of our companies and the capital improves. While last year, of course, the opposite happened because it went down and we had to support the companies, which we did. But as these stock portfolios go up $875,000,000 and the mark to market and then another billion. So, you know, that's going to be, make our companies even more solid.
So our goal for each of our companies is expand as much as you can. We'll figure out how to make sure you have the right capital and we don't see any problem in that. Jeff Shacey?
Prem, we have time for about two more questions, I think. You alluded at different times about your optimism for the future for Fairfax. This investor is turning that around and saying, what is your biggest fear for the rest of 2021 from an economic company perspective?
That's a very good question, Jeff, and there's always fears, right? And the big fear, I think, today, and you've heard this from many CEOs and many people in the businesses, is that we'll have a variant that doesn't work with the vaccines that we have, or you have Johnson and Johnson having problems or AstraZeneca is causing problems. I think it's a small risk. I don't think it's significant from what I read and what I hear, but there is that risk that it doesn't work. New variant comes in, they find out Pfizer is not as effective as they thought.
So that's a major risk, but barring that, I think the economy is in, you know, lots of pent up demand for all sorts of products and all of us have saved a lot of money. We haven't had any place to go, no place to go out. And so I think the economy, I think the other risk is more significant, which is demand is so strong that it pulls up inflation expectations, inflationary increases and interest rates go up, but I don't think that'll be a problem because we've handled interest rates at much higher levels, Jeff, in the past as you know, and in a strong economy you can have rates. I don't think at least in the near future, it's unlikely to have an impact on the economy, but there are risks and we are conscious of them. Is that Jeff Fenwick, is that the last question or is that second last question?
I guess perhaps this can be the last question, Prem. Have an investor asking about cryptocurrency. Given how much bitcoin has increased and the space has gained in size
Sorry, Jeff. Need to increase the volume on that. Sorry about that.
Sure. The question is about cryptocurrency. And just given the expansion in that asset class, what's your view on the space? And do you view it as an investable area?
On what again, Jeff? Sorry, I didn't hear that.
Bitcoin and cryptocurrency.
Oh, sorry. Bitcoin and cryptocurrency. Yeah. Yeah. Bitcoin is, I talked about it, 1,000,000,000,000.
There's nothing in it. It's like gold. People are buying it. It's supply and demand. And I more recently, I just saw all of the Bitcoin companies that have gone public gone up five times, 10 times, six times.
You know, my instinct is, and not knowing too much about it, is that there'll be a lot of pain with this. Anything that goes up so fast tends to come down as fast. You don't know when that'll happen, but for us, we stay away from all of that just because we don't understand it. People who do understand it, then that might be a nice way to participate, but we don't understand it and we think you have to be very careful because they've gone up a lot. But with that, first of all, let me thank the two Jeffs, Jeff Fenwick and Jeff Stacy for being so kind to join us and they know our company.
Both of them know our company really well. And so the company, the questions come directly to them and then we can have this so that our shareholders benefit from this. And I want to thank each of you for joining us today. This is hopefully the last time we'll be doing a virtual annual meeting. I want to see all of you shake your hands and have a little, you know, something to eat like we do at lunchtime.
And but but we really appreciate all of you being with us. And and so next year, we'll see you in person and we'll end the meeting right here. I'll remind you that we have the Fairfax India meeting at 02:00 with Chandran and myself. We look forward to some of you joining there, but now I'll turn it back to the operator perhaps to formally conclude the call. Thank you very much.