Good morning, and welcome to Fairfax twenty twenty Year End Results Conference Call. Your lines have been placed in a listen only mode. After the presentation, we will conduct a question and answer session. Today's conference is being recorded. If you have any objection, you may disconnect at this time.
Your host for today's call is Prem Watsa with opening remarks from mister Derek Bielas. Mister Bielas, please begin.
Good morning, and welcome to our call to discuss Fairfax's twenty twenty year end results. This call may include forward looking statements. Actual results may differ perhaps materially from those contained in such forward looking statements as a result of a variety of uncertainties and risk factors, the most foreseeable of which are set out under risk factors in our base shelf prospectus, which has been filed with Canadian securities regulators and is available on SEDAR, and which now include the risk of adverse consequences to Fairfax's business, investments and personnel resulting from or related to the COVID-nineteen pandemic. Fairfax disclaims any intention or obligation to update or revise any forward looking statements except as required by applicable securities law. I'll now turn the call over to our Chairman and CEO, Prem Wanza.
Thank you, Derek. Good morning, ladies and gentlemen. Welcome to Fairfax's twenty twenty year end conference call. I plan to give you some of the highlights and then pass the call to Jen Allen, our chief financial officer, for additional financial and accounting details. 2020, as all of you know, was an unprecedented year.
I'm not sure many of us would believe when we left our offices last March and almost a year later, we would still be dealing with this pandemic to this degree. But we can see the light at the end of the tunnel as multiple vaccines now exist and testing has improved significantly. The majority of our employees worldwide have worked from home for most of 2020, not missing a beat. I wanted to again thank all our employees all over the world who have been fully committed over this period to provide outstanding service to our customers. I am very grateful to all of them.
The vaccine's being given now all over the world. We expect this to come to an end, and we expect to return to normalcy soon. Now coming to our results. FX's net earnings were 218,000,000 in 2020 versus 2,000,000,000 in 2019, which equates to net earnings per diluted share of $6.29 in 2020 versus $69.79 in 2019. Under the circumstances, we are very pleased about our performance in 2020, which was a real life stress test.
Fairfax's book value per share in 2020 increased by point 6%, basically flat, adjusted for the $10 per share common dividend paid in the 2020 to $478 per share. We had earnings in 2020 of 218,000,000, as I said, reflecting the effects of the pandemic on both our underwriting and investment results. And our net loss on investments of approximately $1,500,000,000 at the end of the first quarter completely reversed, and we finished 2020 with net gains of 313,000,000, an increase of 1.88. In thirty five years, we've never experienced swings in the stock prices like we did in 2020. Our float increased by 8% in 2020 to 24,300,000,000.0, and our float per share increased by 11% to $927 per share.
Insurance and reinsurance companies produced a consolidated combined ratio of 97.8% for the year. It included catastrophe losses of 644,000,000 or 4.7 combined ratio points and COVID nineteen losses of $669,000,000 or 4.8 combined ratio points. Excluding COVID nineteen losses, the consolidated combined ratio was 93%, with 12.5% growth in gross premiums written on the back of a strong pricing environment. In the fourth quarter, total gross premiums were up 16%. We had some significant growth in gross premiums as Allied World was up 22% for the year, 26% for the fourth quarter, 15% for the year, 24 for the fourth quarter, and Northbridge, 14% for the year, 22% for the fourth quarter.
All our all of our major insurance companies with the exception of Bridge generated combined ratios of less than 100%. That's despite unprecedented times and included a high frequency of catastrophes and a global pandemic. More on this from Jen Allen. In 2020, we booked net COVID losses, as I said, of $669,000,000 across all of our companies. Of this, approximately thirty five percent comes from business interruption exposures, primarily outside The United States.
And about 34% comes from event cancellation coverages. Balance comes from areas such as casualty, surety, and travel lines. On a gross basis, approximately 60% of our COVID provisions are in IBNR. Aid losses are about 20%, and case reserves make up the remaining 20%. As you can see, there's still considerable uncertainty as to the ultimate cost of the virus.
The IBNR estimates may prove excessive in some of our companies, and they may not be enough in others. In addition, as we are all well aware, pandemic is ongoing. As long as it persists and disrupts the economy, new losses may emerge. The size of the ultimate loss will also depend to some extent on various court outcomes as litigation has been filed in many jurisdictions. All in all, we remain comfortable with the provisions we have made to date in the context of the current market environment.
Our reserves, of course, remain strong with consolidated redundancies in our insurance and reinsurance operations in 2020 of 455,000,000 or 3.3% of the premiums. Our insurance businesses in many parts of the world have seen price increases anywhere from 10 to 30%, and terms are tightening. The prospects of our insurance business are excellent, and we think we are in a hard market and well positioned to expand significantly. Last quarter, I mentioned our excitement about Key, a stand alone business begun by Brit, the first fully digital follow on syndicate at Lloyd's. It is doing very well.
I should also mention that it's a fully digital insurance company in India run by Ramesh Goyal had another year of exceptional growth. In three years, it has grown from a start up, providing an excess of 400,000,000 and is expected to be profitable, including investment income for the year ended 03/31/2021. Digit raised 25,000,000 from private equity investors at 1,900,000,000.0 at year end '20. We've continuously valued on our books at 900,000,000.0, and we don't expect any changes. Of course, that's on a 100% basis.
Also, the Indian budget allowed us to go to 74% from 49%. For the year, operating income was strong at 916,000,000. Net gains on investment for the year were 313,000,000, net losses on net equity exposures of $157,000,000, offset by net gains on bonds. The net losses on equities included losses on our last remaining short position, which is finally closed at the end of the year, partially offset by Netgames and Central, BlackBerry convertible, and the Asian value fund. As mentioned in our 2019 annual report, we will never short stock indices or individual companies against.
Net gains on our bond portfolio was 562,000,000, primarily on our corporate bonds that were purchased in the 2020. As we have mentioned at our annual meetings and our annual reports, quarterly reports with IFRS accounting, the stocks and bonds are recorded at market subject to mark to market gains or losses, quarterly and annual income will fluctuate, and investment results will only make sense over long longer term. In the 2020, we had a negative 3.6% return on our investment portfolio. By the end of the year, our investment returns more than reversed, and we ended the year with a positive return of 2.7%. I have previously highlighted this to you.
We'll do it once more. If you look at page one eighty eight of our 2019 annual report, last column, shows the annual total return on our investment portfolio for the last thirty four years. We updated, of course, for ninth for 2020. There were four years when we had a negative investment return. In each case, we rebounded significantly.
On that table, in 1990, we had a 4.4% negative return. 1991, the following year, up 14.6. 1999, negative return, 2.7%. February, the following year, up 12.2%. 02/2013, negative 4.3%.
02/2014, up 8.6%. 02/2016, negative 2.2%. 02/2017, 6.8. So that was only four times in thirty four years. Each time, investors worried about our investments.
Each time, investment results were much better than they expected. This time, my investments have rebounded more quickly. Our history has shown that our returns are very lumpy, and this has worked for us over the last thirty five years. We have never focused on steady quarterly earnings. As I have said previously, long term value investing has gone through a very difficult time for many years now.
Valuations of value oriented stocks versus good stocks, particularly technology, have never been so extreme, exceeding even the extremes of the .com era in February. As the economy normalizes, we expect a reversion to the vein with value oriented stocks coming to the fore. After the Pfizer vaccine was announced in early November twenty twenty, we started to see this taking place. Two examples very quickly may make it clear zero for you. AirPaks India was selling at $6.80 per share at the end of the third quarter when its book value was more than $16 per share.
Today, it's up to $12.40 per share. We think it's only a matter of time for Fairfax India. Exceeds its $20.20 high and does accept exceptionally well as the Indian economy recovers from COVID nineteen. The Indian government came out with an exceptionally it's a friendly budget recently. Atlas Corp is another one that I mentioned to you, run by David Sokol and Bing Chen, closed 2019 at $14 per share, went down to $6.30 per share in March.
Today, it's at $12.70 per share. Atlas is financially very strong, has great management, and we think it's only a matter of time before it exceeds its previous high. We expect a significant return on our stock portfolio as the economy continues to normalize. In November, Fairfax and Allied World entered into an agreement with Cornell Capital and Hudson's Structural Capital to sell its majority ownership interest in Volt Insurance. We continue to own a 10% stake in Vault following the sale.
Scott Carmelani was instrumental in creating and growing Vault and has pivoted from his role with Fairfax, the chairman of the board of Vault. Closing of this transaction is subject to various regulatory approvals expected to occur in the 2021. We are very grateful to Scott for all his contributions to Fairfax, especially at Allied World, a company which he led from being a startup, becoming an industry leading and highly successful worldwide insurance and reinsurance business. In December, Fairfax Africa completed its previously announced transaction with Helios Holdings, was renamed Helios Enterprise Partners, and continues to be listed at the Toronto Stock Exchange. Helios Holdings has been investing successfully in Africa for over fifteen years.
We're very excited about this transaction and look forward to our partnership with Tropi and Baba, the cofounders of Helios Holdings. Also in December, we entered into an agreement with CBC Capital Partners whereby CBC will acquire a 100% of Riversdale Barbados, our European one off operation. Orbis and partner will also sell its 40% interest as part of the transaction. On closing, we expect to receive proceeds of approximately 730,000,000 for our 60% interest in Riverstone Barbados and a contingent value note for potential future proceeds of up to 236,000,000 should certain returns be met. Part of the agreement, the company entered into an agreement with, Riverstone Barbados to purchase, unless sold earlier certain investments in the equity investments owned by Riverstone Barbados at a fixed price of approximately 1,200,000,000.0 prior to December 22.
So, so we have two years to to buy this. So we have this the transaction is subject to various regulatory approvals. We would like to thank Lufthansa and all the employees of at Riverstone Barbados and wish them the very best in the future. Subsequent to 2020, Fairfax entered into an agreement with Omerz, pursuant to which Omerz will acquire a 14% interest in Sprint Limited. Cash purchase price for this investment is approximately 375,000,000.
Transaction is, subject to customary closing conditions, and it's expected to close in the 2021. We have said for some time that we wanted to monetize many of our investments, including particularly many of our private investors. Here's what we've done in 2020. We merged Dexterra with Verizon North for a 49% ownership of the public company. We now have a company which we expect will have a billion in revenue and a 100,000,000 in EBITDA for a few years in a in a few years.
We sold DaVos for 59,000,000 with an additional run out over time, which should result in a 100% return on our capital investment. Peak Performance agreed to sell its eastern baseball operation to Rollins for shares and cash as a significant profit for us and our partner, our core. As Jeff mentioned, we completed the merger of Fairfax Africa with Helios Holdings for a 32% ownership in the combined entity. This is just the beginning. Various initiatives are underway, including taking some of our other private investments public.
Farmers Edge recently announced that it was going public in the 2021. We continue to have approximately 1,300,000,000.0 of the holding company predominantly in cash and short term securities. Please note that our cash in the holding company is to meet any and every contingency that Fairfax might face in this uncertain time period. We're not making any long term investments with this cash other than to support our insurance and reinsurance operations. The closing of the Riverstone Valles transaction, which is expected to be in the first quarter, we expect to have 1,000,000,000 of cash and investments at the holding company with our credit facility fully paid off.
In December 2020, the company's insurance and reinsurance company held approximately 16,000,000,000 in cash and short term securities representing approximately 38% of our portfolio investments comprising of 13,000,000,000 of subsidiary cash and short term investments and 2,900,000,000.0 of short dated US strategies. Investment portfolios will will be largely unimpacted by rising interest rates as we have not reached the yield. In fact, we would benefit from rising investment income. We have recently begun investing, as you know, with Kerry Wilson and First mortgages for the term less than five years. With a run rate at the 2020 of approximately 19,000,000,000 in gross premiums, and our insurance subsidiaries expected to grow significantly in the next few years, a huge focus on underwriting discipline, a portfolio of over 40,000,000,000, and HWIC operating in a stock with this market, all grounded on a fair and friendly culture built over thirty five years.
We expect to be borrowing on all cylinders in 2021 and beyond. The past thirty five years, we've had years when our book value has grown by 40 to 50%, and our stock price has increased by a 150%. We expect to reward you, our shareholders, for your patience. We feel the best is yet to come. I will now pass the call over to Jen Allen, our chief financial officer.
Jen?
Thank you, Prem. We wanted to let you know that in addition to the press release that was issued yesterday on our year end results, Fairfax's 2,020 annual report will be posted on the company's website on 03/05/2021. I wanted to also take a moment and thank all of our employees globally. We've been faced with many challenges throughout 02/2020, but each finance team showed their resilience and commitment to Fairfax. A huge thank you for all your efforts.
You should all be very proud of your accomplishments. Now looking to our results. In the 2020, the effects from the COVID nineteen pandemic on the global financial market started to reverse with significant improvements noted in the equity markets, which benefited Fairfax's fourth quarter results. Our core underwriting performance continued to be very strong despite higher catastrophe losses in 2020 and the reported COVID nineteen losses. I'll start with a few key highlights from our 2,020 results.
We reported strong underwriting performance with an underwriting profit of 309,000,000 that represented a combined ratio of 97.8, which was achieved despite COVID-nineteen losses and higher catastrophe losses. Our net gains on investments were $313,000,000 for twenty twenty with over $1,200,000,000 in net gains on investments being recorded in the fourth quarter. And finally, we ended the year with a consolidated balance sheet position for our investments and associates with fair value exceeding the carrying values by $712,000,000 That represented on a pretax and noncontrolling interest basis appreciation of approximately $1,100,000,000 since 03/31/2020, which is not reflected in our book value per share as these investments are equity accounted. Taking the above key highlights into account, Fairfax reported net earnings of 218,000,000 or $6.29 per share on a fully diluted basis in 2020 compared to 2019 when we reported net earnings of $2,000,000,000 or $69.79 per share on a fully diluted basis. Looking in more detail to the results of our underlying reporting segments, starting with our ongoing insurance and reinsurance operations.
As noted, our core underwriting performance continued to be very strong with underwriting profit at our insurance and reinsurance operations in 2020 of 309,000,000 and a combined ratio below a 100% at 97.8, which compared to an underwriting profit of $395,000,000 and a combined ratio of 96.9 in 2019. Underwriting performance in 2020 remained strong despite COVID-nineteen losses of $669,000,000 and catastrophe losses of 644,000,000, which were higher than 2019 by a 147,000,000. Despite those COVID nineteen losses and additional catastrophe losses in aggregate that were 815,000,000, Fairfax still achieved an underwriting profit of 309,000,000 and a combined ratio of 97.8 or 93 adjusted for those COVID nineteen losses. All of our insurance and reinsurance companies achieved combined ratios below a 100% in 2020 with the exception of Brit primarily as a result of the impact of COVID nineteen losses. Overview
of
our core underwriting results for 2020 are as follows. Northbridge reported a combined ratio of 92.4 and underwriting profits of 109,000,000, which was an underwriting improvement of 62,000,000 from 02/2019. Odyssey Group reported an underwriting profit of $190,000,000 with a combined ratio of 94.7, an underwriting improvement over 2019 of 100,000,000 Crum and Forster reported an underwriting profit of 60,000,000 and a combined ratio of 97.5, which was relatively consistent with their 2019 results. DNS National reported lower underwriting profits of 52,000,000 and a combined ratio of 91.9, which reflected price decreases and lower payroll exposure due to the economic impacts of COVID nineteen in their worker compensation business. This was partially offset by price increases and growth in other property and casualty lines.
Brit reported underwriting losses of 240,000,000 and a combined ratio of a 114%, which principally reflected COVID nineteen losses of 270,000,000 or 15.8 combined ratio points and higher catastrophe losses. Allied World reported an underwriting profit of a 126,000,000, combined ratio of 95.4, and underwriting improvement over 2019 of 68,000,000. Fairfax Asia reported an underwriting profit of 7,000,000 and a combined ratio of 96.8, which is relatively consistent with their 2019 results. And finally, our insurance and reinsurance other segment produced an underwriting profit of 6,000,000 and a combined ratio of 99.5 in 2020, which compared to an underwriting loss of 18,000,000 and a combined ratio of one zero one point seven. Key components of our combined ratio in 2020 of 97.8 included the following.
COVID nineteen losses of 60 669,000,000 or 4.8 combined ratio points, increase in frequency of current period cat loss events that resulted in higher losses at $644,000,000 or 4.7 combined ratio points, primarily related to Hurricane Laura, Sally and the Midwest Directo. Benefit of strong reserving reflected continued net favorable prior year reserve development of $455,000,000 or 3.3 combined ratio points and improved underwriting expense ratios reflecting the growth in our net premiums earned relative to increases in the underlying expenses. Additional details on the catastrophe, COVID nineteen losses, net favorable prior year reserve development, and our combined ratios that impact each of the respective insurance and reinsurance segments will be disclosed in Fairfax's February, '20 annual report in the MD and A. As noted in 02/2020, we reported COVID nineteen losses of 669,000,000, which were comprised primarily of business interruption exposure approximately 35% primarily from our international businesses and event cancellation coverage of approximately 34%. The COVID nineteen losses principally comprised of incurred but not reported that represented 51% of the net loss.
And the net losses were prior to hundred seventy Odyssey Group, 140,000,000, and Allied World at 113,000,000. In 02/20 of July or four two points were primarily reported by the following segment. Northbridge reported Canadian 39,000,000 or two combined ratio points, primarily relating to Fort McMurray floods and the Calgary hailstorm. Odyssey Group, 190,000,000 or 5.3 combined points, primarily related to Hurricane Laura and the Midwest Derecho. Allied World, a 165,000,000 or 6.1 combined ratio points related to Hurricane Laura, The US Western wildfires, and Midwest Derecho.
Crum and Forester, 95,000,000 or 3.9 combined ratio points primarily related to Hurricanes Laura and Sally. And finally, Brit, a 157,000,000 or 9.2 combined ratio points primarily related to Hurricanes Laura and Sally. Our combined ratios benefited from net favorable prior year reserve development of $455,000,000 which translated into 3.3 combined ratio points compared to net favorable prior year reserve development of 480,000,000, which represented 3.8 combined ratio points in twenty nineteen. Looking at the growth in our net premiums written by the insurance and reinsurance operations in the fourth quarter and full year 2020. In our fourth quarter twenty twenty, the net premiums written increased by 16.1% to $3,700,000,000 from 3,200,000,000 in the 2019.
And for the full year 2020, it increased by 11% to $14,700,000,000 from $13,300,000,000 in 2019. That full year increase in 2020 of approximately $1,500,000,000 is almost equivalent to all of Northbridge's net premiums written in 2020. And a few comments on our runoff operations. As noted in prior quarters, subsequent to the contribution of European runoff to Riverstone Barbados on 03/31/2020, starting from 04/01/2020, the operating results of Runoff only include our US operations. Excluding the significant reinsurance transactions in part seven transfer at European Runoff in 02/2039, Runoff reported an operating loss of $2.00 $4,000,000 in 2020 compared to an operating loss of $219,000,000 in 2019, with Runoff reporting an operating loss of $147,000,000 in the 2020, principally reflecting net adverse prior year development on asbestos reserves of $126,000,000 Turning to the results of our non insurance companies reporting segment.
In 2020, the restaurant and retail reporting segment reported an operating loss of $70,000,000 But in the 2020, the company benefited from favorable results from this segment that reported operating income of $12,000,000 This segment's revenues benefited from expanded e commerce platforms and strong brand awareness that helped partially offset the decline in the in store revenues throughout 2020 as a result of the impact of COVID nineteen lockdown restrictions. The operating losses in the other non insurance reporting segment of 54,000,000 in 2020 principally reflected Fairfax Africa's operating losses of 110,000,000 pre deconsolidation on 12/08/2020, partially offset by operating income at Dexterra and AGT. On 12/08/2020, Fairfax Africa completed the transaction with Helios Holdings Limited and was renamed Helios Fairfax Partners or HFP. Fairfax deconsolidated Fairfax Africa and commenced accounting for its interest in HFP as an investment in associates, resulting in a net loss of 62,000,000 that included recycled foreign currency translation losses of 27,000,000. And those foreign currency translation losses have no impact on common shareholders' equity.
It's a reclassification in the financial statements. Also, that included the 62,000,000, a partial reversal of the initial impairment loss of $164,000,000 that was recorded in the 2020 related to an increase in the market traded share price of Fairfax Africa between then and closing. Now looking at our results, our investment results for Fairfax. Our consolidated interest and dividend income decreased year over year from 880,000,000 in 2019 to 769,000,000 in 02/2020. That primarily reflected lower interest income earned principally on the US treasury bonds and cash short term positions that was partially offset by higher interest income earned on our high quality US corporate bonds.
Our consolidated share of loss of associates of a 113 principally reflected impairment losses of 240,000,000 that were recorded primarily in the 2020 and were related to the company's investments in Quest, Resolute, Atlas Mar and Astarta. The share of losses, it had also included our share of losses at Sanmar of 49,000,000 and Bangalore Airport of 31,000,000, which was partially offset by profits at Atlas Corp of 116,000,000 and Riverstone Barbados of 113,000,000. At 12/31/2020, our investments in associate had an aggregate fair value that exceeded the carrying values by $712,000,000. And due to the equity method of accounting for these investments, this excess of fair value over the carrying value is not included in our book value per share. This is a significant positive change from the 03/31/2020 when the aggregate carrying value exceeded the fair values of the investments and associates by approximately 400,000,000.
That represents on a pretax and non controlling interest basis appreciation of approximately 1,100,000,000.0 in these investments. In terms of our net gains on investments, I'll highlight the fourth quarter and twenty twenty results. In the fourth quarter, our consolidated net gain on investments was over $1,200,000,000 compared to net gains on investments of $640,000,000 in the 2019. The 2020 principally reflected net gains on our long equity exposures just under $1,200,000,000 and net gains on our bonds of $112,000,000 That was partially offset by $138,000,000 on our short equity exposures, which resulted in the closing of the company's remaining short equity total return swap. Let me remind you that in the 2020, we reported net losses on investments of just over $1,500,000,000 And for fiscal year twenty twenty, Fairfax's consolidated net gains on investments was $3.13 $13,000,000 a $1,800,000,000 swing within a year.
Our consolidated net gains on investments was $313,000,000 reflecting our net gains on bonds of $5.62 primarily as a result of unrealized appreciation of high quality corporate bonds. And our net gains on long equity exposures was $372 which was partially offset by our short equity exposure of $529,000,000 that was fully closed out of the company's remaining short equity total return swap position. And in closing, a few comments on our financial position. Our total debt to total cap ratio, excluding the company's consolidated non insurance companies, increased to 29.7% at 12/31/2020 from 24.5% at 12/31/2019, primarily reflecting increased total debt and decreased common shareholders' equity, principally related to the common share dividend paid in Q1 and unrealized foreign currency translation losses, which was partially offset by net earnings. At 12/31/2020, our book value per share was $478 compared to 486 at 12/31/1929 in the first two thousand and twenty and an increase from the 2020 of 8.2%.
The increase in book value per share in the fourth of 8.2% in the 2020 reflected Fairfax's core underwriting performance continuing to be very strong with excellent investment returns. And now, Prem, I'll pass it back over to you.
Your name and your company name. I'll try to limit your questions to only one so that it's spread to everyone on the call. Okay, then. I'm ready for your quest questions.
Thank you so much. We will now begin the question and answer session. If you'd like to ask a question, you may press star followed by the number one. Please state your name and company name. It is required to deduce your question.
And if you want to cancel the request, you may press 2. One moment, please, as we wait for the question to Our first question comes from Jeff Van Wink from Com Clark Securities. Your line is now open. You may proceed.
Hi. Good morning, Fred.
Hey. Good morning, gentlemen.
So as you say, an interesting time in the markets and good opportunities for stock pickers. So my first question really is just around, your general thoughts on investment rotation. And are you being very active here and maybe selectively trending some positions and looking for some new opportunities? And I guess the one I certainly get a lot of questions on of rates, not surprisingly, is BlackBerry. So any any comments on on, I guess, the the allocation and and perhaps BlackBerry specifically?
Yeah. Just just, you know, on BlackBerry, berry, it's gone up and down. So just a couple of points. First of all, we don't comment on our securities purchase or sales. You know that.
I would just say two points. One, they're insiders and have insider obligations on Blackberry. And two, Blackberry closed on December 2020. Closed the year December 20 at six and five days. Having said that, in in 02/2019, the technology stocks were doing really well and have been doing very well for some time as you know, Jeff.
And the shift to value investing had begun, and then COVID came at us in 2020 in March. And it was significant. 180 countries closed down their economies. We didn't know what was gonna happen. And and stocks, particularly value added stocks.
So Stocks companies sensitive to the economy, you know, crashed. Since that time, they've come back. And now we've got vaccines coming in. We've got testing. We just think the shift to value investing will take place over time.
And that's already begun in November with the Pfizer with the announcement of the Pfizer vaccine. Many, many vaccines have come to play. Countries are getting back to normalization. You know, you don't don't know exactly when, but that's that will happen, and and the economies will come back. And so we, of course, start because We expect to make money on the things that we've invested in in the past, and we are constantly looking at better opportunities.
So so this is what we've done for thirty five years. We've got a tremendous track record. We've got a very good investment team led by Wade Burton and Lawrence Shin. And we're excited, Jeff, about, you know, what will happen in the next few years.
Okay. And and maybe my next question, I'd
like to just focus on on capital and uses of capital. Obviously, you you highlighted how the balance balance sheet has strengthened after your Riverstone sale. As we look into this year, with the insurance markets remaining hard, are we thinking about the first priority, I guess, is pushing more capital down into the operating units? Are we looking at a similar magnitude of investment down there? I think it was $1,400,000,000 Or maybe you might look more at doing something like share buybacks here if the stock's still trading below book value.
Yeah. So the first thing to say is that insurance is our business, core business. As you said, we put a ton of money in 2020 into the insurance companies. We don't think they need any more money now. Of course, our investment portfolio is coming back up as additional plus, but we've made them self financing at the end of the year.
And and we expect them to grow significantly, but they grow they grow over time. Right? So when you write premiums, it's it's kinda you you earn it over more than a year as as the year come back as the year comes forward. So the insurance business is is well grained. It reminds me of 2001 and what happened in 2002 after September 11.
Some differences, of course, at all times. But as we said, price are going up. They're going up over all over the world, and and the terms are going up. We have capital. We purposely get the 14% on bridge so that we have another $375,000,000,000 in case we need it.
But at the moment, we don't expect the to need any money from the holding company or insurance companies. They're both capitalized and financed and and ready and most importantly, many companies are pulling back, Jeff, where our management team who run the companies are ready to expand and are expanding significantly as you saw in Allied and Outbridge and Odyssey already.
And I guess, maybe a comment on on share buybacks then, if you have some capital available for that.
Yeah. Yeah. So share buybacks is always our first financial soundness, first, at a a good opportunity to, you know, to support our insurance companies. Second is share buybacks, and that's what we always look at. We had this opportunity as we mentioned on the total return swap.
It's an investment that we made. I've said before many a time that our stock prices are incredibly cheap for the record that we've had. We go through phases, though. We're not looking at every three months. Every quarter, we're up 10% or 5%.
That's not how we run our company. But our long term record is perhaps one of the better ones you'll see. And so so we are we we think our stock is cheap. So we've had a total when we looked at the potential investments that were available to Fairfax, You know, a in a investment portfolios, we thought Fairfax was perhaps among the best, if not the best. And so we bought 1,440,000.00 shares that we send in a total return swap and as an investment.
We got that as an investment. So we look at all possibilities, Jeff, and and and and see what the future will bring.
Okay. Thank you for that color. I'll requeue.
Thank you, Jeff. And next question, Dale.
The next question comes from the line of Junior Ra, private investor.
Good morning, Prem.
Hey. Good morning. Good morning.
Good morning. On the wonderful quarter. I have two questions. So for the total credit swaps, when is the expiry date for that? And during the Reddit fiesta, did you guys take advantage by hedging any of your investments?
Sorry. When you say the credit swaps, mean these total returns The Fairfax credit
yeah. Yeah. Total total ones. Yeah.
Sorry. Yeah. Total return total return swaps. Yeah. Yeah.
They they have one year swaps, and we've we've historically been able to extend it for as long as we like.
Okay. Thanks. And then on
the Reddit question, did you were you guys able to lock in any of the gains by taking any kind of hedging or there's no opportunity because it's just a short period of time? So
so as I said, right, I made the point that on BlackBerry, we are insiders, and we have insider obligations, and we never talk about this is with the sales of our securities. Thanks. Thank you very much. Next question, Dale?
Our next question comes from the line of Tom MacKinnon from BMO Capital. Your line is now open. You may proceed.
Yeah. Thanks very much. Morning, Prem.
My question is about
the selling off 14% of BRIC to owners. I mean, in k and and I think you're quite your reasoning was, you know, we we got 375,000,000 as a result of that, and that's just in case we need it. Remember earlier in 02/2020, you went to the debt market sort of in case you need it. Why are you selling off a 14% of Brit, like, the height of some good hard markets here? Why wouldn't you use Dashwood?
Yeah. So very good question, John. We just wanna be financially sound, and we've got a very good relationship with Brit. You know, with the almost, You know that we had, you know, 40% on Revestone UK that we sold to Omos for 600,000,000. And so they're taking 225,000,000, and they're reinvesting $375,000,000 in in Brit.
And we just think we've got a very good relationship. We've we bought back Tom. I think we had about 89% almost helped us in the past, and and we bought we had 89% before we left the floor of 14%. Oh, we bought all of it, I think, back in 2020, and so we sold this 14% back.
You know, it's it's to
keep $375,000,000 possible, you know, potential. We're gonna refinance sometime of which we've always done on debt issues that are coming in the next three years. We think it's just a good mix.
And so if anybody said you're selling off an insurance part of an insurance company in in what would appear to be pretty good insurance markets in order to improve liquidity versus going to the debt market. How how would you answer that question?
I'd answer that by saying that we've done this before, and we will have the ability to buy back that 14% from almost you know, we've got many targets that we can buy it in a year, in two years, in three years. So so it gives us a lot of flexibility, Tom. And and the debt markets are there. We understand that. Yeah.
Okay. Thanks for that.
Thank you very much, Tom. And next question, Bill.
The next question comes from the line of Mark Dwell from RBC Capital Markets. Sir, your line is now open. You may proceed.
Yeah. Good morning. A couple of questions. Good morning, Mark. On the good morning.
On the Barbados, the sale of the Barbados business, you'd mentioned briefly and it was mentioned in the press release about a plan to buy back or part of the agreement requires the buyback of $1,200,000,000 of investment assets. Can you just elaborate on that a little bit? Why is that being left out there? It seems like $1,000,000,000 is not an insignificant amount that presumably, the holding company will need to come up with, you know, within the next couple of years in order to fund that purchase.
So so, Tom, basically, we had a stock book for you in the Western UK, and we could have sold it in December or whatever in 2020. Our feeling was that it was very undervalued. So we have the ability. 1,200,000,000 is based on 2019 prices, year end prices. For 2022, we've got the ability to sell it or buy it back.
It's just we think it'll be right now, the 1,200,000,000.0 is very very much what it's worth in the stock markets, meaning the stocks in that portfolio are very much worth 1,200,000,000.0. And we expect it to do very well, and so we can sell it if we want or we can hold it. And and, you know, we we just think value investing is coming to the core. The companies that we own are gonna be are are exceptionally undervalued in our minds. So I take that to the into salt.
But we think they're exceptionally valued. So it's actually undervalued, and we think they're gonna do very well. So we didn't want to sell it at these prices. That's that's basically it.
But these are primarily these are these are I'm sorry. These are common equities, these are our private equity holdings?
No. These are the these are predominantly common stock positions that we have. Okay. Thanks. We can we can do that if like.
Okay. My my second question relates to executing the the total return swap with respect to Fairfax shares. I guess I was just curious why you pursue that structure rather than just buying back the stock if you felt like that was a good opportunity. I mean, is this a is this a capital constraint that you couldn't really buy back that much?
We we'd have to be careful. Right? So not so much yeah. We we had to be very careful in terms of how much we could buy back. When we looked looked at Fairfax as a stock price and looked at everything else that we could buy, we just got total return swap in Fairfax.
But right now, we paid $344 per share, as you know, US dollars. Our book value is $4.78. I mean, if you look the matches on our book value basis, we'd have about a $200,000,000 gain if that stock price is going for value, it's worth another 200,000,000. We just think it's a terrific investment, and our total return swap structure was a very good way for us to do it. And so we so we did it.
I don't disagree with you that it was a good a good strike price. I guess it was really, the the the form of the transaction rather than just actually buying the shares, you know, using a derivative instead is just a little bit unusual. I haven't usually seen that with most of the
companies that I've I've followed. So that that was really my main question. So so so so so, Mark, our point is just that, you know, we wanted to keep up you know, we could we we have more than a billion dollars in cash, and the only company, once it's done, we'll have 370 375,000,000. We just wanted to be financially sound and in all in all ways as opposed to use that cash at this point in time.
Okay. Thanks for the answers, and good luck for 02/2021.
Perfect. Thank you, Mark. Next question, please. Bill?
Thank you. The next question comes from Jamie Gloyn from National Bank Financial. Your line is now open. You may proceed.
Hey, Jamie.
Oh, I'm so sorry. He he was has disappeared. Would you like to entertain other questions? Or, Jamie, please press star one again.
Dale, you wanna go on to the next person, please?
Oh, sure. The next question comes from Mikhail Prokop from Prokop Holdings. Your line is now open. You may proceed.
Hello, friend.
Hi. Yeah. I'm Mikhail. Can I tell you, Mikhail?
McCall lines got disconnected or it is the he this line has disappeared. Would you like to entertain Jamie Gloyn?
Yeah. Dale, if if if you can get them, go on to the next person, please.
Sure. Jamie Gloyn, your line is now open. You may proceed.
Yeah. Good morning. Am I coming through?
Hey. Good morning, Jamie. Yeah. Could hear you well.
Alright. Okay. So first question is just around the Farmers Edge IPO. That seems to be that'll be coming out pretty soon here. Can you maybe talk about some of the other industries or companies that that you're looking to maybe tap into this pretty robust IPO market as a way to realize on value in in some of those holdings?
You know what? Jamie, they're not allowed to say too much till they file and till they are done. So Farmers Edge, as you know, has filed. We'll be filing some more. You'll be able to test them.
And and we'll be filing them in India, in Fairfax, India. Many of them there. And, you know, we've got some really good companies, and and we've developed them over time. And Dextellar is a classic where, you know, the old Horizon Nord is called Dextellar. We have 49%, and we expect that to be a very successful company over time.
So so we we have many of them. And when you look at our non insurance companies, some of you analysts are worried about the fact that we don't make any money. We reflect the losses, but we don't show the gains. I mean, the gains come over time. So when you look at our investment portfolio, you know this, Jamie.
You've got common shares. We have more than 20% that become associates. If you have a 40% interest on numbers like that, in the case of Thomas Cook, 65%, then you have to consolidate it. So now any report in 2020 for the 02/2020 annual report that will come out in a few weeks, we're gonna show it to you so that you can we're take another attempt to show you our common stock positions. And and they some of them are just common stock, some are associates, some are consolidated.
Gets a little confusing, but that's the accounting IFRS. We have to follow the accounting rules, but we're gonna show that to you in a in a way that I think will be easier to understand. And and over time, all of these investments, some some do very well in a short period of time, and some take longer. And we just we're patient long term investors.
Okay. Great. Thanks. And then just following up looking into the insurance sector as we think about COVID-nineteen risks and losses and reserving there. Yes, I would expect that loss reserves would diminish as the vaccine rollout unfolds.
But can you
talk about maybe some of
the exposures in event cancellation and business interruption?
So event so event cancel yeah. Event cancellation, Jamie, we've taken the next six months. You know, these event cancellation policies have been very few, if any, have been written after March 2020. And so we looked at you know, Britain's looked forward and Allied were the two, and we've basically written off the first six months, whatever where do you think they'll be written on. So so we don't expect that it to be of any significance.
But as I've said in my comments that, you know, there is that uncertainty, but we don't expect it to be very significant.
Okay. And and then on BI as well, do you have a quick comment to sort of frame that that risk like you just did with event cancellation?
Which risk again, Jim? Sorry. Business interruption. Oh, business interruption. Yeah.
Business interruption is is an international risk that you that you have. So it's outside North America. We've taken most of the hit. You'll see that, you know, like, 60% of the gross numbers that we've set up are right now. Right?
So that's a result that are not allocated. Incurred but not reported. That's the expected to come. We've been conservative. Actually.
All through our history, we've been conservative. And so we expect that even in the case of business interruption, another had some lawsuits and there's regulatory bodies making decisions. So you have to watch how how they they come through. But but we think all in all, right now, we'll work this out.
Okay. That's great. Thank you.
Thank you, Jamie. Yes. Dan, next question, please.
The next question comes from the line of Michaela Porto, a private investor. Your line is now open. One moment.
Long time, and I followed you guys for a long time. And I I believe that, you know, it is time that you you step down from having primary investment responsibilities. I know that Jamie manages some capital. Wade manages some capital. We all know that those are very small portions of the capital base.
And, I think you are always quoting your long term track record, but I can I know when the man is out of tune with the markets, and I also think that, it was a huge mistake if you did not take the BlackBerry gift that was given to you by the market? And I also don't think that you're doing deep analysis on your holdings. I suspect that you probably don't do a lot of diving into the the financials, the statements. You probably don't understand the microeconomics of the businesses you're buying. You probably are not talking to, customers, suppliers, competitors, former employees.
The competitive the investment business is a very competitive business. It's not like, it used to be. And I'm not saying that, you know, you should go out and buy technology stocks, but a sense from a man is not competitive in the field and is not working hard. And I think it's time that you step down, from primary investing. I'm sure many of your associates agree with you, but because they're Canadian and tend to be nicer than Americans, they, they just don't say anything.
And the banks won't ask you any difficult questions because there's so few good companies in Canada, and they get financing fees from you. So they ask cowardly questions. Thank you.
Oh, good, good points. You're you're entitled to your opinion, and we'll let time decide that. Okay? So thank you very much for your comment. Next question, Dale.
The next question comes from the line of Ranheng, Sang, private investor. Your line is now open.
Hi, Brian. Thanks for taking my question. My question is regarding Fairfax India. Could you please provide an update on your investment in Bangalore Airport? Are you still bullish about the prospects of that investment given the situation with COVID and how it's going to evolve in the next two, three years?
And also, could you provide an update regarding the deal you had with Omerz to sell a stake at 2.7 bill billion valuation? And can we expect to like, you know, has it closed or, like, you know, could you provide an update there? And, also, could you tell us, like, whether we are still looking to do the IPO as it was written in the last annual report by the end of this year.
Yeah. So Bangalore International Airport, the world class airport went very well. The it was stopped, of course, during COVID. The business the is coming back significantly. Passengers are it's running at about 60% of capacity.
And so the the terminal is delayed, but then the in 2022, the second terminal will be built. The second runway is already built. And and we expected to we're actually excited about Bangalore International Airport as we always were. And we got a terrific guy running it, as you know, Harry Maran. And and so this company will be on its way.
In terms of its in terms of Fairfax India itself, there's a tremendous opportunity. India is a land of opportunity. It's become very business friendly, and the somebody has come up with a very good budget. And we expect that Anchorage, over time, we'll take it public. We think, you know, two point seven, two point eight billion for Bangalore and the national level for a 100 basis now.
It's a very reasonable price, and and so so that's very, very possible. In terms of the Anchorage approval, they're still, you know, in the end, there's a lot of approvals. There's a little of one more approval that is necessary, and and we think it'll come soon. And so so as it's a excited customer on on terms of FFX India, it has got lots of possibilities. With that, Dale, let me take the last question, if you don't mind.
Thank you.
Sure. The next question comes from the line of Alan Parzal from Alcorn Partners.
Thank you very much for taking the call. Just need a little bit of clarification, if I can, on the questions regarding BlackBerry. I understand that you don't discuss changes in portfolio, etcetera, regarding any of your positions. But there were filings made, and and this goes with regard to your insight comments, insider comments and directorship. There were some filings made in January where six of the Hamblin Watsup, Fairfax team sold their entire positions in BlackBerry.
I understand that's a subsequent event to the end of the quarter. But can you explain how they're able to sell their shares and Fairfax may not be able to sell theirs? Or in the past, you've had you have two different positions in BlackBerry. One convertible bonds and and common stock. Are you saying you have restrictions on both of those for clarification for me, please?
Yeah. So, yeah, the the securities SEC doesn't distinguish between convertibles and common shares. And and and the case here, we are an insider. I'm an insider, and Fairfax is an insider. Some of the people, you know, may not be insiders, and and I don't know who you're referring to, Alan, but some of them may not be insiders, and so they can do Well,
as an example, Wade Bert Wade Burton, Roger Lace. I mean, there there there were significant, and those are people.
Yeah. No. No. That's right. But but the company is is an insider.
So so we follow all these rules very carefully, and no one can sell anything unless they go through our legal department. And so we're very, very careful, Alan, in in this type of situation. And and we just, you know, we don't talk about individual security still till we're done. That is how how we run our affairs for 35 jobs, you know. And so you have to bear with us, Alan.
And I thank you for your question. I thank all of you. Dale, I think we're ready to go on to to end the call. And as we've as we've announced previously for your safety and the safety of all our employees on the global pandemic, our annual meeting will once again be held virtually on April 15. At which time, I look forward to answering again all your questions.
Instructions on how to join that webcast will be published on our website soon. So, Dale, thank you very much. This will terminate the call. Thank you.
And that concludes today's conference. Thank you all for participating. You may now disconnect.