A very good morning to all of you. Lovely to see you here. This is our 39th annual meeting. 38 years since we began in 1985. I'm Prem Watsa, Chairman of Fairfax. It's really great to see all of you here and those of you joining us virtually through the internet. Welcome to all our shareholders and employees across the world, and all the people who support us. Now, you know that we've had the best year in our history, $4.4 billion net income after taxes. This is from a company that never made $1 million prior to 1985, when we got involved. $Billions.
It reminds me of this guy who said to God, "God, is it true that to you, a billion years is like a second?" God said, "Yes." The guy said, "God, is it true that to you, a billion dollars is like a penny?" God said, "Yes." The guy said, "God, can I have a penny?" And God said, "Sure, just a second." It took us less than a second, 38 years. It's now more than 2 years since Russia invaded Ukraine in February 2022. As I mentioned last year, our presidents are keeping our people safe, and they are our heroes working under extraordinary, difficult conditions, and our business is doing exceptionally well. And we have a group led by Jean Cloutier , who looks after them, provides all sorts of support. And to Jean Cloutier and his team, let's give them a nice round of applause.
Now, let's recognize our presidents in Ukraine. We got three companies, Andriy, Oleksiy, and Slava from ARX, Universalna, and Colonnade. We're the biggest company in Ukraine. We are fortunate to have Slava with us here. Slava, where are you hiding? You stand up and recognize them. As I mentioned to you, there's been tremendous support from our European companies, from Jean Cloutier , and we are treating them as we treat all our companies, one big family. Please keep our Ukrainian brothers and sisters in your thoughts and prayers as we stand beside them, united in our support. In the last four years, particularly, our fair and friendly culture has shone brightly. As you know, we had no layoffs in our insurance and reinsurance companies due to COVID-19.
All 21,000 of our employees, including about 3,700 and almost 4,000 employees at Gulf, worked from home. We continued to provide outstanding service to our customers. We treat our employees as one big family, and we don't want to have layoffs like you've seen recently in the tech industry or other industries, particularly when they are in such strong financial shape. We are very careful in adding employees because, as I said, we don't like layoffs. While Fairfax and all our companies have been a great place to work, where we do not tolerate or condone racism or discrimination, we still know that it's not been eradicated in our society, even in 2024.
As you know, in 2020, we created the Black Initiative Action Committee at Fairfax, under the chairmanship of Craig Pinnock, the Chief Financial Officer of Northbridge, to make our company even more attractive to people from the black community and other minorities. We are making headway, and Fairfax should be, as I said before, a leading example of how one company can make a difference. Throughout 2023, we continued to advance the committee's recommendations, and it's resulted in a framework built upon six key pillars, which includes expanding our talent pool, mentoring, and community alliances and partnerships in every field. Many of these are mentioned in our ESG report.
We're also grateful to say that we maintain a strong partnership with the BlackNorth Initiative, which is a program in Canada that is committed to eradicating anti-black systemic racism through collective efforts across corporate Canada. Want to move on now to the Fairfax Innovation Award. It was created in 2017 to recognize teams at Fairfax, a very decentralized company, recognize teams at Fairfax's operating companies whose innovations have had a transformative and positive impact on their organizations. This year, an impressive 45 initiatives from 15 Fairfax companies around the world were submitted. Diverse range of innovative projects. It is really fantastic to see that all Fairfax companies have continued to innovate within their markets. After reviewing all their submissions, Ki Digital Marketplace has been selected as the 2023 winner. There they are under Mark Allan.
The team is right in front and, the whole company behind them. One big team. Huge congratulations to Mark and his team. Really well done. And, they've done, they provide digital access to their partnership capacity. I think in a few years, they've almost gone to $1 billion in revenue with underwriting profitability. Phenomenal performance by Ki. Since the inception of Fairfax, we have always 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 full disclosure is provided to the people we deal with. Following the Golden Rule, treat people like you wanna be treated yourself. I have a few points on this in our presentation.
Now, we have 21,000+ employees, including Gulf, around the world, working in our decentralized environment, following these basic principles. I'm pleased to say we recently posted our third ESG, Environmental, Social, and Governance report. It's on our website, and while it's at the third report, we've begun following ESG principles, broadly speaking, since we began 38 years ago. We just didn't call it ESG. We just did it because it was the right thing to do. 2023 completed 30 years and 38 years since we began in September 1985. As I mentioned to you in the past, if you look at all the companies listed on the American Stock Exchange, Exchanges, New York Stock Exchange, American Stock Exchange, NASDAQ. At the end of 1985, there were a little more than 6,000.
At the end of 2023, there were about 600 still trading on these three exchanges. That is to say, only 1/10 survived. Almost 90% of either gone bankrupt, being taken over, merged, et cetera. They don't exist like they did in 1985. So we're very blessed to be in this category that have survived. If you then ask, how many have thrived? I, and we define thrive, as made more than 15% compounded over that 38-year period, only 1% or about 55 companies, and the number decreases every year. And our 18.2% compounded return in terms of stock price, including dividends, would put us in that 1%. In fact, it would rank us 17th. So we have been blessed mightily in terms of this 38 years.
So we have a terrific culture that we're very happy about, but needless to say, it's performance-oriented over the long term, though, not any quarter, not any year, but over time. And we particularly think, as I've said in our annual report, the next five years will be great years for Fairfax and its shareholders. Now, we have... I've said this before, we are very blessed to have such a wonderful group of long-term shareholders who have stood with us through the ups and downs of business life. Businesses, ups and downs, you know, things happen, COVID happens, different things happen and, but our shareholders, in the main, have stood with us.
Our culture is the most valuable asset, even though it's not shown on our balance sheet, and the creation and pre-preservation of that culture is the biggest achievement for us over the past 38 years. Very tough to do. It takes a long time to get that culture ingrained in our, in your companies, and and it's protected for all time because Fairfax is not for sale. I happen to have a few shares that helps me make that comment. The, this fair and friendly culture, which is in our name, is why companies all over the world want to deal with us. It's our biggest advantage, and we guard it fiercely. Now, just a few things. I wanted to mention a book by Amitabh Kant.
This is a book called Made in India: 75 Years of Economic History, from independence, socialism, to now, free enterprise and business-friendly policies that Mr. Modi is adopting. Well worth reading. I just thought I'd recommend that to you. I also wanna take this opportunity to thank our directors, all 12 of them, for their strong support of our company, our directors. As I said in our annual report, we were very saddened to report the passing of Tony Hamblin on October 2, 2023. Tony was our boss at Confederation Life during the 1970s and early 1980s, before he and I began Hamblin Watsa in September 1984. Tony was president of Hamblin Watsa until he retired in 2006. He's a great boss and then a great partner for Roger Lace, Brian Bradstreet, and myself, and for all those years, and we will miss him dearly.
All of us at Hamblin Watsa and Fairfax offer our sincere condolences to Tony's wife, Gail, and their two sons, Drew and Jeff. Now, this is the first time that Rick Salsberg is missing the AGM in 38 years because of some health issues. Please keep him in your prayers, and I know he's watching us on the internet. Brad Martin, our Vice President, Strategic Investments and officer at Fairfax, is retiring after 26 years with Fairfax. Brad has been an officer, been part of many of our major acquisitions and ventures since he started with us. It's a long time, 26 years, almost like the history of Fairfax. He has come from Torys, he's a lawyer. He will continue to sit on many of our boards, that we have significant interests, like Eurobank, Blue Ant.
We thank Brad for his hard work and many contributions to Fairfax for all these years, and wish him and his family a very happy retirement. Brad Martin. So over our 38-year history, we've always operated at a, at Fairfax with an outstanding small team. Our business is decentralized with great integrity, team spirit, no egos. It protects our company from unexpected downside risks, and we take advantage of opportunities when they arise. This group has worked together for a long time, and I'll show you that in our slides, with trust and a long-term focus. I'm very happy to report that Peter Clarke, our President, has just completed his second year as our President and has been outstanding. Peter has been with Fairfax for over 26 years and really represents our culture very well. Smart, hardworking, and with no ego.
Now, Peter will join me in the Q&A section. I need some help. So Peter, our President, will join me after the presentation in our Q&A section, and then in the future, Peter will run all our quarterly calls with Jen Allen, our Chief Financial Officer, and Wade Burton, our Chief Investment Officer. I'm not retiring, but I want you all to get a sense for these young people, and they're gonna do the conference calls, and I'll be watching them carefully. We have a very busy year, and let's recognize Peter with a nice round of applause. Peter Clarke. Now, a couple of new things that have happened. We've at our annual meeting come to an agreement to buy KIPCO 46% ownership in Gulf Insurance.
We are very happy to say that we were able to close that deal late last year. We're thrilled to have GIG. It's a company we've known for almost 14 years now. It's a talented group led by Khalid Al-Hassan and Paul Adamson, and so they're joining the Fairfax group. GIG has a very strong presence in the Middle East, probably the largest company, about $3 billion in premium, and operates in about 13 different countries. So we are very excited about that. Let's just welcome Khalid and Paul Adamson. Khalid and Paul Adamson. In 2023, we invested in a leading UK-based manufacturer of food ingredients, Meadow Foods, founded by the Chandler family.
Meadow Foods has a 30-year-plus history of partnering exclusively, as I mentioned in the annual report, with the world's leading food manufacturers such as Cadbury and others. A big welcome to Raj Tugnait and his team at Meadow Foods. Raj is with us today. Raj. He had a big chocolate bar with my name inscribed on it. Getting close to my heart. We have a new investment which is extremely exciting for us at Fairfax. It's going to help thousands of autistic children around the world. We've invested in the world's first algorithm that uses in-depth profile of each child to create a learning and development plan called Thrive Guide. The founder, Jonathan Alderson, has a master's degree from Harvard and is author of the book, Challenging the Myths of Autism.
Jonathan has worked for 25 years with over 3,000 children around the world with great success. I know this because he has helped 5 kids from Fairfax, Fairfax families, and with outstanding results. And Jonathan is here. Let's give him a nice round of applause. Jonathan Alderson. In this year's shareholders' letter, I'd mentioned that we are restarting our shareholders trip to India. The trip of a lifetime we call it. Trips will take--took place in 2019 to 2020, but the COVID, we had to stop it. Pleased to announce that thanks to Madhavan Menon from Thomas Cook and Deepak Deva, the dates for the next trip are from January eleventh-...
to January 18th, 2025, and Kasi Rao will be coordinating that, and he'll be outside of the Thomas Cook booth, ready to take your names and give you any questions that you have to answer. You'll get a good chance to see all our companies, and Thomas Cook will provide a trip of a lifetime. And, I can't recommend that more highly to you. Now, every year I introduce our management team to you. For the past few years, we've done it through photographs and pictures. It is these leaders who make Fairfax a very small holding company, so it's very much based on a decentralized approach, empowerment. And, these leaders who make Fairfax such a wonderful company, we're blessed with an unusual group of smart, hardworking, trustworthy people. That's our real strength.
That's the strength of Fairfax and the reason why I'm so confident that we will do well over the long term. Remember, we're building our company for the long term, long after I am gone. I'm sure that you have noticed the long tenure of these executives when you saw the pictures go, and I'll give you a quick rundown in our presentation. Please give them a nice round of applause, our leaders. Talking about long term and being with us for this for some time, I did wanna recognize that last year I celebrated 50 years in my with my wedding anniversary, 50th wedding anniversary with my wife, Melanie, and she's here. Melanie. So you know, we have many of our large subsidiaries. You saw all the booths there. We've got 37 booths. We've got our managers.
After this, you'll have the opportunity of a little meal and our KEG Restaurants, Mark McEwan, will be there. We have the Ivey Business School showcasing the Ben Graham Chair for Value Investing. George will be here. Many of our students from Waterloo. It's a terrific university. We've got some members from there. Maybe just before I go on to the slides, just make this point on donations. In the 33 years since we began our donations program, our annual donations have gone up approximately 155 times at a compound rate of 17%. We are now donating 2% of pre-tax profits, 1% to each of the companies to donate it as they see fit, and 1% to our foundation, and we call it doing good by doing well.
Gotta do well first. And, this year, we've got this terrific annual report 'cause we have so many companies that are giving money to their causes, and it's all over the world. And, for the first time, we've put it all together. Jonathan Godown and team, he had a very good team with him, have put this together. It's well worth reading and, it'll make you very, very, inspired about our company in terms of the support that we provide communities in terms of money and time across our system. So, Jonathan Godown and, his team. Thank you. So now, as we've done for the 38th annual meetings that we've attended, quickly go through the formal meeting, give you a short presentation with slides, and then a Q&A.
Peter and I will be happy to have a Q&A with all of you and answer any questions as Mike's put in, and we're taking questions from the internet to Jeff Stacy, who's right there. You can submit your questions as you have in the past. With that, we'll move right into the formal meeting. I'll put this in here, and... So, the formal meeting. Ladies and gentlemen, welcome to the Fairfax Annual Shareholders Meeting. Prem Watsa, Chairman and CEO of Fairfax, acts as, I'll act as Chairman. Derek Bulas, the Vice President, Chief Legal Officer of Fairfax, will act as Secretary.
I shall also appoint Shelley Tom and Louise Waltenbury of Computershare to act as scrutineers and to compute the votes of any polls taken at this meeting, and to report thereon to me as Chairman. I can report that as a result of the review of an affidavit of mailing and preliminary report of scrutineers, I'm satisfied that notices have been duly given, quorum is present, and that this meeting is properly constituted. I propose to move quickly through the formal business, announce that the minutes of the previous annual meeting held last year, April twentieth, are available for inspection upon request to Fairfax's Corporate Secretary. As well, I can now formally place before the meeting our annual report with no pictures.
It's right there for you to read, and that's for December 2023, with the December 2022 statements and the report of the auditor, PricewaterhouseCoopers. 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 meeting, is 78% of the votes that may be cast at the meeting. So, voting today will be conducted, because we have people on the net, will be conducted by electronic ballot also for those attending virtually, show of hands for those attending in person. I will ask that the ballots be open to registered holders and appointed proxy holders.
The polls are now open on the platform, and at this point, all registered holders and proxy holders attending virtually, who are properly logged in, will be able to see the screen on all motions to be brought forth to this meeting. Following the presentation of this motion, Jennifer Allen will confirm for us when the polls have closed. Once the electronic balloting closes, your votes will be submitted. With your consent, I will now move directly to the election of directors. I now invite nominations for directors.
I am Peter Clarke, and I nominate as directors of the corporation for the ensuing year: Robert Gunn, David Johnston , Karen Jurjevich, Bill McFarland, Christine McLean, Brian Porter, Tim Price, Brandon Sweitzer, Lauren Templeton, Ben Watsa, Prem Watsa, and William Weldon.
Thank you, Peter. Are there any further nominations? As no further nominations for directors have been received, and as the number of directors nominated are exactly the number to be elected, I confirm that those 12 nominees are proposed for election as directors of the company. Given the hybrid meeting and the fact that we will also conduct a virtual vote, we will have a vote on this together with the next resolution. Let's give our board members a nice round of applause again. Thank you. 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.
Thank you, Peter.
I'll second that motion.
Thank you, Jen. For those attending in person, I would ask that you please vote by a show of hands. All in favor? Any against? We will now take a brief pause for 60 seconds to allow registered holders and proxy holders to complete their electronic voting on the motions brought forth at this meeting.
Mr. Chairman, the voting is now complete, and the polls are closed.
Thank you very much, Jen. I've now been advised by the scrutineers that the proxies deposited for the meeting have now been voted. I can confirm that the nominated directors have been appointed as directors of the company to hold office until the next annual meeting. In addition, I can confirm that PricewaterhouseCoopers has been appointed as auditor of the company to hold office until the next annual meeting. We will therefore file a report on SEDAR, setting out the voting results following the meeting. I propose now to terminate this meeting. After that, I'd like to talk to you about the operation, and then we'll have a Q&A session. Can I have a motion for termination?
I'll move that this meeting be terminated.
Thank you, Jen.
I'll second that motion.
Thank you, Peter. I declare the meeting terminated. Thank you very much, ladies and gentlemen. So now we go to our presentation, and after that, we have a Q&A, and I'll run through this very quickly. So first of all, our guiding principles, they haven't changed for 38 years. We expect to compound 15%. The key number is long term, not in any particular quarter and not in perhaps a few years, long term, because sometimes, as you've seen recently, it takes time for things to work out. And we've run our company for 38 years for the long term. We always want to be soundly financed, provide complete disclosure to our shareholders. Our company is a decentralized, huge, huge plus. Tough to do, and we have, you know, in our holding company, 35 people, but we could have 200 people.
If we're not careful, it can just go through the roof, and we're very, very sensitive about that and keep it small so that our companies are run unfettered by the precedents, except for performance evaluation, as you'd expect. Succession planning, acquisitions, financing, and investments are done by Fairfax. Investing will always be done with a long-term, value-oriented philosophy. And of course, we expect cooperation among our companies, and it is really good to see that it's going really increasing quite a bit. Complete and open communication, share ownership, you can see, always based on profitability, and Fairfax will be a small holding company. And this is the key for us, our values, which makes our company such a good company for people to join.
Honesty and integrity first, a relationship will, will not be compromised. First, value. Results-oriented, not political. Team players, no egos. Confrontational style is not appropriate. We value loyalty. Follow the golden rule. I'm gonna show you what we mean by that. Treat people as we wanna be treated. So fabulous rule. We have emphasized that right through. That's one we added. We didn't have that in our guiding principles; we've just added that. We've talked about it and actually use it in our companies, and we put it in. Not hardworking at the expense of our families. We always look at opportunities and look at downside protection, always. We make mistakes, learn from them, and, but we will never bet the company on any project or acquisition. We're very careful about that.
We're spending a lot of time in the office, we might as well have a few laughs. Believe in having fun at work. These are our guiding principles, ladies and gentlemen, have been with us for a long, long time, and it's what differentiates Fairfax from other companies and what's behind our culture. This is what we added, the Golden Rule. And so in Christianity, it says, "In everything, do to others as you would have them do to you, for this is the law and the prophets." Judaism: "What is hateful to you, do not do to your neighbor.
This is the whole Torah, all the rest is commentary." Hinduism, this is from the scriptures: "This is the sum of duty: Do not do to others what would cause pain if it is done to you." Islam: "Not one of you truly believes until you wish for others what you wish for yourself." Fascinating. All these big religions, and there's about 13 of them, have the same golden rule in their scriptures. So what we've done is we put this golden rule, this particular slide, in all our companies, in their offices, just to remind us all that we're the same. At the end of the day, we're all the same. It's been a great addition to our company. There's a few slides. The next few are the most important ones.
Fairfax, and I've said it in our report, said it last year, I'll say it again, Fairfax has been transformed since 2017. Even we couldn't see it. If you'd asked me three years ago, four years ago, I couldn't see this. Our premiums have gone up, as you can see, 109%, from $13.8 billion to $28.9 billion. The float's gone up, the investment portfolio, common shareholders' equity. Underwriting profit, because of this expansion in a hard market, wasn't expanded in, in a soft market, it was expanded in a hard market. And by the way, it was expanded by our decentralized presidents of our companies. Underwriting profit, interest and dividends, $2 billion. Very, 1.9 there. It's running at about $2 billion, as I said. Share of profits of associates and reinsurance operating income of $3.9 billion.
Operating income of $4 billion that we can see for the next four years. Components I'll talk about. But it's been transformed. The company has been transformed, and the company, because of this transformation, the intrinsic value of the company has gone up significantly, re-recognized in the stock market over time. Its book value went up 25% last year, went up 100% in three years. The stock price has tripled, but we're still selling a little above book value. So we think buying back our stock is a good thing, and we continue to do that. So not only has our company been transformed, but our shares outstanding during that time period have dropped by 17%. So then you look at gross premium and float and investment, you can see the everything is magnified.
So our float has increased by 80. It's almost 100% for float investment portfolio, and our reinsurance adjusted operating income is about $170 per share, and that's a base. We have $15 billion of common stock investments, which are either in mark to market, which means we've got small positions. We've got 20% and up, 20%, less than 50% we call associates, and then some we have more than 50%, we have to consolidate them. You add all three, it's in our annual report, they add up to about $15-$15.5 billion. And we expect over time to do very well. We'll make mistakes.
I told you about BlackBerry, reluctantly, but, we'll make mistakes again in the, in the future, but that's not gonna stop us making a good investment, and we'll talk about some of the ones that we've got now. So when you look at it, interest and dividend going into the future now, interest and dividend income, $2 billion. We think we've got that for four years, mainly through government bonds. Spreads are very narrow, so we haven't taken too much of a risk in it. And, and, it's government bonds, and it's only four years. So interest rates could go up, we don't know. It could go up. Jamie Dimon was quoted that it could go to 8%.
We're not going to get impacted very significantly, but on the other hand, he says it could go to 2%, that no one knows what will happen. But we've got this interest and dividend income for some time. We've got the underwriting profit of $1.25 billion, which we think, you know, there are hurricanes, and there are wildfires and all of that, but we think put all of it together, we think $1.25 billion is a conservative number. And our share of profit from associates. Which associates? Well, we've got David Sokol here. He runs the Poseidon, it's called Atlas Corp / Seaspan , and and we think that's gonna be a major contributor to us. And Eurobank has done extremely well.
We talked about it, and that's another major co-contributor. Then we, we've got a whole bunch of others that we talk in our annual report. But they're both, Fokion is here and David Sokol, and they'd be happy to answer any questions. So the... You add all of that, it comes to $4 billion in operating income, and that and from that, of course, you get fluctuations in interest and dividend and fluctuations in stock prices and bond prices that go up and down. Potential earnings, you take that $4 billion to about $125 a share, but that's a base. There's changes in realized gains and unrealized gains and which come in, and that component is only appropriate over the long term. Significantly long term.
This is our track record from inception, 18.9% our book value. Share price is a little less than that, 18.3 in US dollars, Canadian dollars, about 18.2, and the S&P much, much better than the S&P. But not in any one, any, year or two. You can see the red line is our stock price, gone up, it's gone down, and it fluctuates. That's just how stock prices react in the marketplace. Here's this is an interesting one. This is the one I told you about the one percent since 1985. So we're ranked 17. You can see Fairfax. This is the S&P 500. Obviously, we're not in the S&P 500, but if you compare our return, we are ranked 17 percent.
You can see some of the companies above us, and Kroger is the 56th one. It's really the 55th one because we're not there, and that's 15%. I used to get my start selling air conditioners and furnaces, and lo, my surprise, when I looked at this company called Watsco. It's air conditioning and furnaces, I should have stuck to that. 18.5%. And it's got a name like Watsco. Never heard of that. But this is just for your sense over that long period. Our approach is very simple: disciplined underwriting plus value investing, taken over the long term, can provide you a 15%. Now, we're big. We're much bigger.
Our shareholders' equity is about $22 billion, but we still think we can achieve that over time. Not in any time period, not in a year or two, and we've demonstrated that for you because we haven't achieved that, you know, three years ago, and if you go back four, five years, we haven't achieved that. So here's the executives. In red is all of the all of the executives who are, who've been in the holding company over 10 years. That's the reason it's in red. And, you know, I'm not gonna highlight anyone, anyone there, but you can see the number of reds that we've had, and of course, we've got very strong people come, come in. And, Peter Clarke is at 26 years. Andy Barnard is 28 years, and, he came with Brian Young.
You'll see the next slide. And, this is a very big plus for us. Huge service to the company and, been with us for a long, long time. That's how you get sustainable, earnings, sustainable performance, and how you build culture. Andy Barnard, Fairfax Insurance Group, he's the President, 28 years. You can see Jonathan Godown, who I've just mentioned, 23 years. Brian Young on your left there at 28 years. Silvy Wright, 30 years, and on and on and on. Khalid, who's just joining us, 46 years. Must have started when he was like 10 years old or something. 46 years. And, Paul Adamson is at 23 years, with the company, GIG Gulf, that we, that GIG acquired. And, this is the management team that we have, and-...
This is the investment team, and Roger Lace, 38 years, he's the Chairman. Wade Burton, taking us forward, President and CIO, 16 years, and then you've Brian Bradstreet. You know, Brian, Roger, and myself have worked together for the better part of, actually, counting the time we worked together at Confederation Life, more like closer to 50 years together, and it's been a terrific, terrific relationship. Chandran, who runs Fairfax India, 30 years, and then on, you can, look at it. Peter, 26 years. Peter's first job was Fairfax. So out of all of us there, he's got a 100% with Fairfax, nowhere else. Didn't have a chance to, get diluted by experience from another- with another company.
Then you can see the others, but this is the team that has performed for you and will continue to perform over time. I just thought I'd highlight that for you. So this, you know, just a couple of slides here. Unconsolidated balance sheet. So when you buy a share of Fairfax, you've got insurance and reinsurance operations. If you add all our companies, that adds about $24.6-$25 billion. You got non-insurance operations, you got holding company, cash, investments and other, and you got long-term debt, accounts payable. This is at the holding company level, and you've got shareholders' equity. Very simple way of looking at Fairfax. And if you look at what's this $24.6 billion, that's all our insurance companies create a float of $35 billion.
Their investments are $60 billion, and it shows you where the investments are. If you go into the non-insurance operations, what are they? Recipe, Fairfax India, Grivalia, which is a hospitality company in Greece, which is doing exceptionally well, Thomas Cook, and some others. That's where the $2.4 billion, that's the equity that we have. Holding company cash and investments. Cash and investment, $1.8 billion. That's what we show. There's another $1.6 billion that we don't highlight too much, but that's there, too, that can give protection for our companies. The fact that we have cash in the holding company and marketable, plus the associates and other, so if it's, Eurobank, for example, or Poseidon, we can always contribute that to our insurance companies for cash.
So it's pretty significant, $3.4 billion, but that's what we look at. Undrawn lines of $2 billion at all times, plus this cash and investments, plus associates. And then finally, long-term debt, no near-term maturities, and shareholders' equity of $22 billion. That's the way we look at our balance sheet. It's in the annual report, just highlighting for you. Picture sometimes is worth 1,000 words, so this might take you a long time to read, so I just highlight it for you here. Income statement. So we have gross premiums written of $28.9 billion. With GIG, it'll be more like $32 billion. Globally diversified. What does that mean? It means that if you have hurricanes, and if you have catastrophes and all of that, we can absorb that. Used to be, we couldn't absorb it.
Used to be, we'd get a cat, and our ratios would go above 100%, and it might still do that if we have a massive catastrophe. But barring you know you have a big catastrophe in Miami or Houston, we can absorb that within our combined ratio below 100%. So it's a big, big plus. Underwriting profit, $1.5 billion, 93% combined. In that is almost $1 billion of cat losses that we absorbed. 'Cause you'll see anything that happens in the world, we'll have a share of it. Any loss, any big hurricane, earthquake, whatever, we'll have our share of it.
So then the investment return is interest and dividends, share of profit of associates, gains on bonds, which is balanced by the discount on reserves being less. So it's gain on bonds and the discount sort of cancel out each other over time. Gains on equities, and so that's, that's we get a 8.4% return, and that's how we'd look at our return, and you get $5 billion of income. Net earnings, $4.4 billion. Growth in book value in 2023, 25%. So if you then look at we're an underwriting company, underwriting profitability, combined ratio for all our companies have done exceptionally well. These are all our big companies. International, all have done well.
There's one or two that haven't made a combined ratio of 100% for a variety of reasons. You'll always have that. We accept that, but they're focused on underwriting profit and strong reserving. We expanded very significantly, but in the as the hard market began, it started shifting in 2023, and you can see our growth was only 5% all in, and we're not unhappy with that. Here's the underwriting profit and the gross premiums. Just very quickly, this shows it to you. Underwriting profit's gone, significant cat losses. You can see we always have cat losses, on average, 5%-6% for the whole company, and the combined ratios are shown there. This is the. We benefited greatly from the hard insurance market.
When the market was hard, we took advantage of it, meaning we were being paid to write risks, write insurance. When you get paid, then you should act. So our growth of almost 15% over the last 5 years, Progressive in this list is the only one, and we're in the top 20 companies. We're 21, if you include Lloyd's. But Lloyd's is a syndicate, so if you remove that, we're in the top 20 companies, and these are the best companies, the biggest companies in the world. I've showed you that before, and it's highly unlikely. This hard insurance market, we'll talk about it, and he'll say a few words. Also, it's unlikely to grow like it did in the past 3 or 4 years.
In fact, if history is any guide, it'll go the other way. This is our company, decentralized. I've shown you that. I've shown this to you before. All decentralized, and in the international side, there's a whole bunch of companies. RiverStone is our runoff company, and nothing new to add, just to say, GIG is the new one, almost $3 billion in premium, but very decentralized. A huge plus of the property casualty business is the float that it generates. So we had no float when we began in 1985. We got $35 billion today, and that's about $1,500 a share. It's grown at 18%, and so you make an underwriting profit on the float, and you have the ability to invest it, and no one can...
It's not like a loan, and it's not got the ability for people to call. It's not like a life insurance company have the ability to have sometimes a loan that can be taken on by life insurance assets. In our case, you have to pay the claim when it's due. So it gives you a ton of money to invest for the long term, and we've benefited from that. Our operations are worldwide, as you can see, United States, Canada, Latin America, Europe, Australia. I think we operate in 100 countries now, which is amazing to think. We were just a small Canadian company. We're now 21,000 right through, and so it gives us the potential. A lot of countries have underpenetrated for insurance, so we can grow our international operations, particularly significantly.
This just shows, there's been—for the 40 years prior to 1982, interest rates were going up. Little up and down, but basically going up. Since that time, since Paul Volcker raised the rates as high as he did, it's been going down to the surprise of many, including us when we were there, 'cause we, our experience took that time period into account. Most people haven't lived through that. And now it looks like it's on its way up. You can't tell, but I'm just showing that to you in terms of what the... You know, we've come from a very high rate to a low rate. Inflation is very much in the air, and wages are going up across the United States and Canada, 4%, 5%, 5 years, 3 years.
The unions have got higher increases. So inflation's gonna be a problem for us, and perhaps we can't expect the rates to be at the levels that we experienced in the last 10 years. Just a slide to show you what happened. No one really knows what will happen. What we've done is we're not focused on short-term results, capital preservation, not to lose money, not notional value, meaning stocks go every year, stocks go up and down. So we don't really spend too much time on that. But actual losses, we try to mitigate, and we bought 5- to 7-year Treasuries. Brian Bradstreet has to be commended.
We bought US Treasuries, fourth quarter, 2023, and so we've locked in now for the whole portfolio about $2 billion in interest and dividend income. Fixed income duration at 3 years or a term of about 4 years, and there's limited credit risk, almost no credit risk. And we've got common stock of 24% there, as you can see. Interest and dividend income, the fact that we didn't... If you look at, we took advantage of the hard market, and the other side is, on the investment side, we did not invest in 2% bonds and 3% bonds, and we got no interest and dividend income. You see percentage of fixed income portfolio and cash and short-dated security, 60%, 50%.
And the yields were like 5 basis points, 6 basis points, so they never got any interest in dividend income. But we did not chase yield. We did not reach for yield. And so when in 2022 rates went up, we were one of the few, companies who could actually use our cash to buy these, and now our yield is about 4.6%, as you can see, nudging 5%.... India. Fairfax India yesterday, we think the opportunity is huge. You've got to think of it in almost decades, because here's a country that's going through the change. There's a third election for Mr. Modi that's just taking place in, May.
Likely, he'll get a huge majority, and the country is business friendly, and so we expect to. We've got about $7 billion, if you include Fairfax India and the investments there as a, yeah, in terms of gross as opposed to net here. And we are very excited about the possibilities there. We've been there for a long time, 30 years. Chandran has been responsible for Fairfax India, and you can see the rates of return. We expect a lot of good things from India, and we are expecting to put more money there. Finally, just one or two more slides, and this one just shows you the rate of return from since inception.
We've had about a 7.7-8% on average for all that time period, and once in a while, we've had negative returns. That's mark to market, not actual losses, but because, yeah, you had to mark. In 1990, bond prices, I think, went down, so our... We didn't sell any, but, that year it went down, but it bounces back up again, and, and you can see that then happened in, two thousand and, twenty. Didn't, go down m-- as much, but, it did in, March, April, it did go down then bounced back up. And, so the returns, are only can be looked at in the long term, 7.7.
To make a 15% return, we need, like, 5-5.5%, something like that, and as long as our combined ratios are good. Strong financial position, show that to you in our annual report. I'm not gonna spend too much time on it, just to say we got terrific interest coverage and our financial position very, very strong. And finally, this is that slide that I like. Business can be a force for good. I've seen the effects of socialism all over the world, and it's unbelievable how a business can be a huge force for good, and sometimes we forget that. 38 years, use us as an example, 38 years, we wrote cumulative premiums of $258 billion. That's premiums. We paid $180 million of claims.
We protected people from hurricanes and all sorts of risks that they had to take. Paid $180 billion out. That's over 38 years. Annual salary for employees at 21,000 employees, $2 billion to all our employees all over the world. We made cumulative donations of $315 million, and it's going higher, since we began our donations program. We pay taxes. Sometimes I forget. We pay taxes. Can't forget that, but $5.7 billion since inception to countries where we do business, then we grew our book value significantly. But behind it all, we have a strong, fair, and friendly culture, we call it, and that's our biggest strength. So ladies and gentlemen, thank you very much for listening, and we are ready. Thank you. We are happy to answer your questions now.
I will. Let's get Peter Clarke here, and you've got the mics there. So we'll go, like, one, two, three, four, and we'll go into Jeff for the Internet. And let's give Peter a first time. Give him a nice round of applause. So with that, why don't we go to number one?
Okay, my name is Paul Durnan from Burlington, Mr. Watsa. You mentioned. I'm interested in Greece. According to the popular business media, you have an additional commitment there. Now, you said one word associated with hospitality. Are you serving tourists on Mykonos Beach? What-
No, we so tourism for us is so we got a fellow by the name of George Chryssikos. He's among the best real estate people you'll ever meet, and he's built, most recently, something called One & Only, the best seven-star resort in Athens, like about 15-20 minutes from the center of Athens. And we went to inaugurate it, the Prime Minister was there, and it's just a fantastic property. And he was able to get it at a very good price because, of course, you make a return depending on what you pay. And so that's what we meant. He's got Amanzoe, all the high-end luxury resorts.
So it's pretty well all hotels that you're buying?
It's hotels, resorts, and some in Mykonos-
... McDonald's.
McDonald's, yeah, yeah, something there, too.
Okay, so that
Yeah.
But there's nothing else, just hotels?
Yeah, just resorts and hotels, yeah.
Yeah. How many in total are you?
I think about 8 or 9 or 10, something like that, yeah.
Anything looking forward in Greece that... Are you other expansions?
Well, Greece, we've got Eurobank, which has been a phenomenal success story. We've got an insurance company there run by a gentleman by the name of Alex, the second-largest company, terrific company, and we've got Grivalia. And we've got an interest in a company called Mytilineos, which is, like, about 10%. They make solar panels and very big, and so manufacturing solar panels and things like that. And we've just been, you know, we've been there for the better part of 10 years, and it's been phenomenal. Prime Minister of Greece, about 5 years ago, got elected with the majority. Business-friendly guy, got elected with a majority.
Got elected just recently with a bigger majority, this year for another four years, and Greece is changing in front of your eyes. In our estimation, best country to invest in Europe.
Yeah, and that prime minister just recently came to Canada for the first time in 40 years, and according to the press, he wants some liquefied natural gas from us.
He now wants to take some liquid. He's gonna pay for it, but yeah. Yeah, no, thank you very much.
Thank you.
Yeah. Number two.
Good morning. Congratulations on another great year. Your insurance team is making this look so routine, Andy, Brian, Silvy, it just... We know it's not easy, but they make it look easy.
It's phenomenal, isn't it?
Unbelievable. My question for you is, you mentioned inflation and maybe higher rates, and I'm wondering if there's a danger that we're gonna see claims inflation while we're not gonna see any inflation in the premiums, and what can your team do to protect against that and keep our combined ratio high?
No, that's a very good question, and, Peter, you want to give a little... Peter works on both the investment side and the insurance side. I'll ask Peter to add to that, and then after that, Peter, perhaps we'll get, Andy Barnard, our insurance. You know, you said that they're making it sound easy. Well, we gotta put them on the spot, and, they'll tell you. Andy Barnard, Brian Young, and Lou Iglesias. We'll ask them to give us a little update on what they see in the business, because that's—we've got $32 billion, but it's all insurance, right? So, Peter, you want to just, anything you would-
Sure. No, just to add, you know, the pricing is the most important thing, and today we're still seeing... You know, we came off the backs of three or four years of, you know, double-digit price increases, so we think that there's good margin in the business, generally speaking, worldwide. And we're still getting, you know, single digit, middle, you know, 5, 6% rate overall, and so we're thinking we're keeping up with claims inflation. And then the second piece to that is we want to ensure that all our companies reserve well, and so build a margin into the reserves so that if inflation is higher than expected, like they say on the investment side, we have a margin of safety.
Well said, Peter. Hey, Andy, let's give Andy Barnard a really big round of applause. Our insurance business has changed since Andy took over in 2011. I said in the annual report, we've written $200 billion cumulative under him, and we had about $5.3 billion in underwriting profit. It just changed dramatically, and the best decision we made was to make Andy Barnard in charge. Andy?
Well, thank you very much for that, Prem. I've obviously had a lot of help in what we've been able to accomplish over the last 13 years. You know, you've seen the results. You're familiar. You know, $1.5 billion of underwriting profit, the best ever. Really across the board, all of our companies are doing well, and you know, they've all contributed to that performance in 2023. The dynamics in the marketplace, though, are changing. You know, as Prem mentioned earlier, you know, the growth that we had at the beginning of this decade, we're not likely to repeat that in 2024 and in the near future. There's more capacity that's come back into the market. That brings more competition.
Some of the areas of business that fueled our growth have been suffering significant rate deterioration. At the same time, there are other bright spots. The property market after Hurricane Ian really took off, and we've been able to take advantage of that. Overall, you know, we look at the marketplace as still being quite favorable to us. We have very strong companies. They all have excellent positions within their markets, and that gives us opportunities. So we think that we'll be able to grow again. We may be able to hit the 5% that we did last year. Maybe we'll do more, maybe a little less. But it is important to understand, I mean, we went through a period at the beginning of this decade, when we had great opportunity.
You know, as we've talked in past meetings and as you've seen. We grew at virtually the best pace of any company around our size in the marketplace. And so that's given us a great advantage to continue to exercise cycle management, which in my experience, there's really, really nothing more important, you know, from the top, in managing insurance businesses, to exercise discipline and cycle management. Grow when capacity is shrinking, and be prepared to tone it down, you know, when, when, the competition, when the supply really begins to increase. So we're sort of in that kind of mode right now. As I say, I think we'll be able to grow in 2024.
But all in all, you know, we've just been going through a fantastic period, you know, something that we've not seen before in terms of how much we've been able to generate on the underwriting side. And, you know, so, you know, on balance, we're really quite pleased with where we sit today, recognizing that the challenges, you know, do exist. So, with that, let me turn it over to my colleague, Brian Young, and he can give you some perspective on the dynamics within Odyssey. And then we'll hear from Lou, who can likewise speak about what's going on in his marketplace. So Brian? Thanks.
Yeah, let's give it up. Brian's been with us for 28 years.
Thank you, everybody. It's been a pleasure for me. I've worked with Andy for 33 years, the last 28 at Odyssey. He's been, you know, a mentor and a friend. I owe you so much. Thank you for everything, and as well for you, Prem. It's been a pleasure working here for 28 years. You know, Prem talked a lot about culture, and culture is everything, you know, to Odyssey. I am blessed to work with a great group of individuals. I've had the same management team for the 13 years that I've worked at Odyssey, and many of those people I've worked with my entire career. It's a real strength for an organization like ours, which is a global business.
We have 37 profit centers in 30 countries. Sorry, in 30 principal offices in 13 countries. And so it's a diverse, it's a diffuse organization, and with that, it's really critical that people work together. You know, that we see, we see things the same way. And so hats off to my team. We announced last year at this time a transition. You know, I am moving up to Fairfax, which Prem mentioned in his annual report. I'm still the CEO of Odyssey, but you know, as this transition is ongoing, I appointed Carl Overy as CEO of Odyssey Re, our global reinsurance business. Carl and I have worked together directly for over 20 years.
Bob Pollack was appointed to replace Carl as the CEO of the London Market Division, which encompasses a branch of Odyssey Re, as well as Newline, our international insurance operation. Both Carl and Bob have done an outstanding job, you know, in this transition, and I thank all of my colleagues for helping them, you know, in this transition. We've got great business leaders besides Carl, you know, and Bob. You know, Chris Gallagher's run Hudson successfully, a key part of Odyssey, it's our US insurance business. Lucien Pietropoli in Asia Pac, Isabelle Dubois-Lafitte in EMEA. Bob, I mentioned in London, Brian Quinn running North America Reinsurance, and Philippe Mallier running Latin America.
These are the guys, the team that's driving our business, along with all of our, you know, corporate heads who've done an outstanding job. 2023 was an exceptional year. You know, for Odyssey, we made $365 million of underwriting profit, up 60% from the prior year. It was our second highest underwriting profit total since 2013. For 12 straight years, Odyssey has made an underwriting profit. Over those 12 years, the underwriting profits have totaled $2.7 billion. We've had a great run and during, you know, some difficult, challenging times, you know, in the markets.
CATs were painful from 2017 to 2021, but we weathered the storm, made profits in all those years, and now benefited from the rising rates that have happened as a result of all that CAT activity. Pre-tax income, $1.2 billion for Odyssey. Net income, $980 million. These are all-time highs for Odyssey, and the outlook is fantastic. You know, Andy mentioned the market is slowing down, and we saw it in 2023. We actually lost a little bit of volume in 2023. We had to make cuts. We lost a large quota share deal that resulted in $333 million walking out the door.
We cut back in our US crop business in Hudson, $200 million. These were necessary changes, and this only improves the profit profile of the company. Profit outlook is fantastic. I'm excited for 2024. Yes, we can have big CATs, but we've never been in a better position to weather them. In 2023, we had $615 million of investment income. That's triple the investment income we had in 2018. Obviously, we want that investment income to flow to the bottom line, but, you know, God forbid, we had big CATs. That $615 million, you know, provides a ballast, a buffer, you know, against those losses. And that investment income allows us to take more risk, you know, as well.
You know, risk which obviously is gonna generate margin, and so that is all good. I'll leave the, you know, comments about the insurance market to Lou and Mark, and Martin and Sylvie. Let me focus on the reinsurance market. The reinsurance market has had a very good run. You know, we see the market overall as positive. You recognize it's a global business, and every market is a little bit different at any given point in time. But property cat pricing has increased dramatically in recent years. Strongest in the U.S., but has grown in other parts of the world as well.
The property cat business, you know, we see as a highly profitable business today. US cat prices, you know, in my view, have never been better. Having said that, we are seeing competition, you know, in the market. There's more capacity available to support risk. It hasn't really resulted in much of a downturn in pricing yet, but it's to come. I mean, when you start to see placements oversubscribed significantly, that will lead down the road to price pressure. But prices are at very attractive levels, and even if prices came off a little bit, we would still lean into this market. As far as other lines of business goes, you know, where there are losses, you see increases in pricing.
I'd say the market overall is fairly disciplined. On casualty business, which is about 30% of Odyssey's portfolio, we continue to see rate in most lines of business. D&O and cyber, you know, would be notable exceptions. Reinsurance commissions and casualty have been coming down. There's been adverse development in the 14-18-year period, and reinsurers are pushing commission terms down to compensate, you know, for those prior year losses. So overall, I, you know, I think it's, you know, it is an attractive time to be in the business.
Whether we can grow in 2024, I think it will be a little bit of a challenge, but, you know, we've got a great network, a great group of people, and where we see opportunity, we'll take advantage of it. Thank you.
Thank you very much, Brian. Come on in, Lou. Lou runs Allied World, as you know, and we bought it in 2017, and since that time, they've doubled the premium, and it's gonna be a tremendous company for us. Lou?
Well, thank you, Prem. Congratulations to Brian, team at Odyssey. Great job. Good to see everyone. I saw many of you over at the trade show, and I picked up this great flashlight pen, thanks to RiverStone. So thank you, Nick. This will certainly come in handy. You saw some of the numbers earlier. We had a strong year at Allied in 2023. We posted a combined ratio of 89.5, which resulted in record underwriting profit for us of $480 million. Our net written premium actually grew about 7% last year, which we think was very positive for us as well. That was our second year in a row of record underwriting profit, and so the team is really, really hitting it on all cylinders.
Very, very proud of the team that we have. The earnings that we had as well was very well-diversified. So we're a global company. Each one of our major geographies around the world made a profit in 2023. Each one of our major product lines made a profit in 2023 as well. So we think that that is a very healthy way to have the earnings stream because it gives us a good opportunity to grow in, in many, many different areas. So we grew the company, as Prem mentioned, to $6.9 billion last year, and that's kind of well more than double now than when Fairfax acquired us, so we're happy about that. Andy talked a little bit about the opportunities in the hard market, and that's when we had most of our growth.
Growing during that time, you know, we're growing during better rate, better terms and conditions. Things are starting to moderate some now, but we come into that moderating type of market in a position of strength, and so we feel good about how we're moving into that market. In addition, during the growth phase that we had, we scaled our company, and we have a expense ratio that's in the low 20s, which gives us a very nice financial advantage when it comes to our combined ratio. Now, of course, none of this is possible at all without great people, and I'm really, really proud of our culture at Allied and at Fairfax, really proud of our people. We have dedicated professionals. Many have been with the company for a very long time.
So, you know, like many other of the companies in Fairfax, they work well together. They understand how to work in all of our different markets that we're in around the globe, and they understand how to work in all different segments of the underwriting cycle, which is important, especially when you have a little bit of a transitioning cycle, similar, similar to what we're seeing today. So thank you to all the people that are at Allied. We're very, very proud of everybody. We've talked about challenges. We're certainly not without our challenges. I would say, you know, interest rates are one for sure, but those are the general financial interest rates and general financial inflation, mostly on the inflation side.
But there's not only that inflation, there's also social inflation that we're seeing showing up in the claims and size of claims. There's a tort bar that is more aggressive than I've ever seen in my career. There's something called litigation funding, where you can now invest in lawsuits. So you could buy some stocks, you could buy some fixed income, Prem, and you could buy some lawsuits. And that unfortunately is growing in popularity. They've gotten so brazen that they even call us at Allied and ask if we want to invest in litigation funding, which you know, that's a very quick no. So we have that we have to deal with. In addition to that, you know, the climate change we are seeing.
We are seeing some unusual climate patterns, and they're causing some property losses that are unmodeled and, you know, unexpected, coming at us in some unusual ways. So we have to make sure that, you know, when we're looking at, at cat on the direct side or the reinsurance side, we're putting aside enough money to cover what we expect to have, as well as to cover what we know is coming that is not in those expectations, right? And that's one of the ways, you know, we get the question about how you're addressing climate change. That's one of the ways to address, to address climate change. So there are many challenges. There's no time to rest. We have to stay ahead of these.
And we stay ahead of these by underwriting discipline, and not only on price, but making sure we're, we're careful with limits deployed on an account-by-account basis, because managing your limits manages inflationary trends and claims. Okay, so we're very, very careful with that. So it's terms and conditions, it's, it's, it's pricing, it's limits management, it's claims expertise. The claims that are coming at us are more complex. We have to make sure we have very, very good claims experts and that our claims expertise is up to par and, of course, conservative reserving. We have to make sure that our, our reserves are very, very strong. Now, the market, I would say, you know, for our products globally, is generally stable, right? So we've had a run-up for the past couple of years. We've had, you know, pretty good market for a few years.
We got towards the top of that cycle curve, and for some products, we have come down the other side some professional lines products, but for the most part, we've kind of been rattling around, you know, the high part of the curve. Now, that may sound really good, but I think what's happened in the industry is the industry has adjusted for the increased cost of risk. And so you went up the curve, and we're kind of staying there because we have to, as an industry. Everybody knows we really can't get below that cost of risk, right? So the industry is staying up there without coming all the way down the other side.
So there is some stability, and I'll add to that, that while there are new competitors in the market, there hasn't been a great flow of new capital, right? Surplus has been generally stable for the past three years, so not a great, great flow of new capital. And on the reinsurance side, Brian mentioned, you know, the rates are up some in reinsurance, which it, it has been a bit of a lagger. The direct market was going higher before the reinsurance market started to catch up. So that reinsurance market should work to kind of buoy the direct market some. Okay, so going forward, you know, I'm very, very confident in how we're positioned at Allied, very confident in, in our products, in our geographies, especially our people. I continue to be optimistic.
There are places to be able to fight for profitable growth, and we're gonna be in those, in those spaces. So let me finish by, by thanking Prem and Peter, thanking Andy, everybody at Fairfax, for being such great partners. And, everybody, have a great day.
Thank you. As I was listening to Andy and Brian and Lou, it remind me, we celebrated our 35th anniversary as a company, Fairfax, at Banff Springs Hotel in two years late, last year. We went, took all our employees with spouses, had a great time. And I was reading about the Canadian Pacific Railroad to the really in 1881, John A. Macdonald decided to build that railroad, and it linked Canada and made it one country. But that railroad, the fellow behind it was a fellow, Scottish immigrant by the name of George Stephen, and raised the money. Terrific guy. But the person who built it, the Americans had railroad 10 years, 15 years ahead. So then a gentleman by the name of William Van Horne did a fantastic job building that railroad.
It struck me, Canada and the United States worked like this, and we have our own here. All three of the gentlemen who just spoke to you, all from the United States, and we've been very fortunate. The terrific partnership, U.S. and Canada. Give them a nice round of applause, our guys. We go to number three.
Hi, Prem. Trevor Scott, Tidefall Capital. You mentioned in 2023 and numerous times about being very conservative with your bond portfolio, given the spreads, and you talked about potentially going into corporates at the right time in the economic cycle. I'm just wondering for an update or I guess I'm asking, backhandedly, what's your view of a recession in the next 12-24 months?
So you know that no one knows that, but it's a very good point you raised. So we've got government bonds that will take us for the next 4 years. So that $2 billion in interest and dividend income for 4 years. Somewhere there, we're thinking the rates either stay here and cause a recession or go up further and cause a recession, somewhere they're gonna cause a recession. And the spreads historically, I can't predict them, but the spreads widened significantly. And people move into US Treasuries or government bonds, and corporate spreads widen, which means we can then investment grade, really good corporate bonds at good spreads. We can extend it for another 3, 4, 5 years. So we are quite excited about that possibility. You know, that's just how we're thinking. I'd mentioned that last year.
Still thinking about that, but you can't. We react, so we don't forecast that something's gonna happen. We see it, and then we react. We react pretty fast, like Dun & Bradstreet and our bond team is just outstanding. We just did a $1 billion 30-year bond issue. $1 billion. There was $4 billion in demand two or three weeks ago. You couldn't do it today because everyone thinks rates are going up. That time, rate, they thought rates were going down. We reacted very quickly and got it a very good rate. So, but that's the opportunity that we face. You can you'll know when the rates go up. Usually a recession causes the rates to go up, and our team will take advantage of that.
Thanks very much.
Thank you very much. Mic number four.
Hi, Prem. John Lu from Portland, Oregon. Shareholder for 22 years, so I wanted to thank you and your team for all the work and lessons you've given myself and my family and everyone else here.
See, this is the kind of shareholder we like. 22 years. Give him a nice hand.
My question regards Kennedy Wilson, which I'm pretty enthusiastic about, but I'd love to hear your updated thoughts on the company.
So Kennedy Wilson is a relationship we've had, you know, 13 years plus, and we're very fortunate Bill McMorrow is here. And we've got every real estate investment we made with Kennedy Wilson, separate from, you know, like, joint ventures. Every one of them has done exceptionally well, as I said in our annual report. And then more interesting, I thought for you all, the Pacific Western Construction loans would be quite interesting. It all came from Bill, and it... We've got about $4 billion now in that area. And Wade Burton is on the board of Kennedy Wilson and works very closely with Bill and Matt, Bill's number two. And so, Bill, it'd be fantastic if you give us a little update. Thank you very much.
Give Bill McMorrow a nice round of applause.
Well, thank you, Prem. And, really, just congratulations on your extraordinary year in 2023. And as he mentioned, you know, we've been partners now for almost 14 years. And, the partnership really was born out of the Great Recession of 2008 and 2009. And I think to give you a little bit of perspective, over the last 11 years, we've bought about $35 billion of assets, primarily in the United States, United Kingdom, Ireland, and Japan. And a third of that we've done as partners with Prem and his Fairfax team. It's been the most amazing partnership really, that as Prem and I talk about all the time, that's really built on trust and the ability to move with speed.
I would say that 75%-80% of the transactions we do are with financial institutions, primarily banks. The key to all of that is that you've got to be viewed as a very reliable counterparty. They have to know that you're gonna close the deal. In every one of these corrections, it presents opportunities. We've worked with banks, probably close to 100 banks, now over the last 10 or 11, 12 years in the markets that I mentioned. It seems like quite a while ago, Prem, but about a year ago, this time, as you all know, we had a dislocation, I'll call it, in the American financial system that was driven really by two banks, Silicon Valley Bank and First Republic.
Unlike any other period in history, we have the internet today, which can take money out of the financial system in a heartbeat. And so that's what happened in the United States: those two banks failed, along with Signature Bank. There are 4,500 banks in the United States, and of that, 4,000 of those are what we call regional banks that rely on their depositors to fund their balance sheet. So what happened in February and March of last year is that the people were taking their money out of the regional banks and putting it into US Treasuries or into the major banks like J.P. Morgan and Bank of America. And, so we, it was a... You know what? I was talking with Byron Trott last night.
It was a very precarious time in the U.S. banking system. Fortunately, our Treasury Secretary and the head of the Federal Reserve came out on a Sunday night and said that the U.S. banking system was safe, all the deposits were fine. But it didn't stop people from taking money out of the bank. And so in the case of Pacific Western Bank, in a 45-day period of time, this is a $45 billion, $45 billion dollar bank, they lost $13 billion in deposits that went someplace else. So they had to do something to shrink their balance sheet. And so we've been doing business with Pacific Western Bank for probably the better part of 25 years.
They called us up and said, "We'd like to sell our performing construction loan portfolio." So we, along with Fairfax, bought a $4 billion construction loan portfolio at a discount. But the other important part of the transaction was the team that originated all of those loans, that I've known for 20 years, came to Kennedy Wilson. So we've not only taken that construction loan portfolio that we bought, that's performed extremely well, but we've now grown that business. We've now closed another $1 billion of construction loans. We have another $1 billion in closing right now, and we took a, Prem, a very conservative approach to how we handled it. Most people that buy credit from banks tend to leverage their positions, sometimes 30%, 40%, and 50%.
And so we have that all in an unlevered vehicle. We don't have any loans against it. It's all performing extremely well. I should have said, too, that on the $13 billion that we've co-invested together, we've probably realized on about 8 of that, and the returns have been in excess of 20%. In the case of the credit business, these are unlevered returns, generally in the 9% range, which is a really great return for the kind of risk that we're taking. The last thing I would say is that these are typically... What's happened in the United States, these are all loans that we're making to build multifamily housing, either student housing or multifamily.
With these higher rates, the universe of people that can come up with our average loan is $80 million, and so the equity that's going into these loans is generally $70 million or $75 million. The equity, which generally goes in first. The number of companies that can put up $75 million worth of equity has shrunk. And so not only are these great loans, but the quality of the borrowers is probably the best I've ever seen. They're some of the biggest development companies that you could find in the United States. So we have very low leverage on the loans. We have no leverage against the portfolio, and we've got some of the best borrowers that, as I said, I've ever seen.
So I would say the last thing too, Prem, that has been really the key to our success, I mentioned trust. Prem's talked about the culture, but we're—it's our ability to make decisions in a very quick period of time. And this is something that Prem and Wade Burton and the entire team over this 14 years, we've built up just a tremendous relationship where we can move quickly. The Pacific Western transaction had to—we had to do that in 30 days, and so we had to put 100 people on that transaction to, you know, analyze every piece of collateral, look at every construction management agreement, look at the insurance, all of these kinds of things.
And so when you're doing something like that, and the bank is really relying on you, you know, you just can't fail. And so, I thank you so much for everything that we've been able to do together over this 14 years.
Thank you very much, Bill. It really is a wonderful, wonderful partnership. Really, really, terrific partnership. Jeff?
The first question is about another one of your large investments, Poseidon Corporation. In 2023, Atlas was taken private, and Fairfax maintained its 43.4% ownership in the company. The company is now renamed Poseidon. Can you provide an update on the plans for this company?
Well, first of all, we've, this has been a hugely successful investment, and, the fellow behind it is David Sokol. He's the executive chair. He's the, the person who's, the prime mover. He's got a terrific guy, who works with him, a CEO, Bing Chan, and they've done a tremendous job. He's gonna give you an update, but in the, in the times when the opportunity was there, he doubled the number of ships that they have, it's container ships, from 100 to 200, which is quite amazing. Again, opportunity there, he reacted and, took advantage of it. Give David a nice round of applause. David. Thank you for coming, David.
Thank you, Prem. It's a pleasure to be here, and as the other folks have commented, Fairfax is a phenomenal partner, and our whole team appreciates the relationship. Even when you have to work through difficult issues, they work through them professionally, and you move on. Seaspan, essentially the shipping company. In 2020 and 2021, our management team, led by Bing Chan, by the way, our CFO, Will Kostlevy, is here with me today. We recognized, and particularly led by Bing and his development team, that our customers needed refreshing of their vessels. And it was an interesting time because the market wasn't in great shape in 2018 and 2019.
But with the new requirements for reduction of CO2, the age of the fleet that was out there, it became apparent that there was real opportunity. So working with the customers, we're building 70 new ships today. We've delivered 42. What I think is impressive about that for our team is that we designed these ships in cooperation with our customers. $8 billion construction program that we initiated in 2020 and 2021, simultaneously financed all the vessels to be coterminous with the long-term charters, averaging 12-18 years. So we've delivered 42 of those ships. Every one of them has been delivered early or on time, under budget. The management of the shipyards has been really something fun to watch.
We will deliver another 20, six yet this year, and then two of the, of the final 70 will be delivered in January of 2025. So the team has done a remarkable job. One of the really remarkable things that we didn't see coming is that those same ships today, 'cause we locked in fixed pricing in 2020 and 2021, would be 30% more expensive. So the ships we're delivering this year, if you wanted to duplicate them, A, it would take you two years, but also you'd pay a 30% premium. So we have a built-in margin that, that, is purely good fortune from our perspective, but nonetheless, you take it when it comes along. So that's where we are. Now, that's gonna show some pretty dramatic improvement in economics this year.
We'll probably see revenues up around 25%, EBITDA north of 35%, and net income above 20% growth from 2023 through 2024. But that's just a function of these ships coming on. They go on to charter immediately when they're delivered. We operate the ships. We do not take any fuel risk in the vessels. We just manage and operate the ships. And then we'll have another significant growth step in 2026, because the rest of those ships will be on for the full year entirely. So we'll be at 196 ships operating, four that we have in a partnership, and then we have six extremely large car-carrying vessels that we're under contract to build.
They'll go into construction later this year, deliver in 2026 and 2027, and each of those will carry about 10,000 vehicles. So they're actually the largest car carriers ever constructed. So that's, that's the business. It will be a step function type of business. It's not one that our revenues... We don't take short-term risk, we don't get the reward in the short-term markets. We do everything on a long-term basis, tie our financings to those charters, but it's, it's, it's a great business, and, and I'm pleased to say your-- if on the same basis that we went private, your investment should go up about 50% this year, just based on the increased cash flow of the business. So it's been a pleasure, and we hope- hopefully, the market will keep providing this opportunity in the future.
I would suggest that the next two or three years, we're gonna see fewer opportunities because the amount of new building, including our own, of the last two years, is adding 30% to the existing market. The market only grows about 2% a year in the container shipping business. And so there's gonna be a huge amount of scrapping of older vessels, predominantly driven by fuel choice. But it's gonna... There's gonna be a couple of years of digestion of that much. And fortunately, all of our contracts... And I should mention, one of our things we focus on is contracted backlog, and we have, eight... Last year, we used up about $1.5 billion of our contracted backlog.
We've already replaced it so far this year, so we have about 18, a little over $18 billion of contracted backlog of operational revenue. So, so basically trying to keep 5 or 7 years constantly ahead of ourselves before we need to recontract anything.
David, thank you very much. $18 billion of contracted revenue, David said, and fixed price financing. They make the spread. Ships have gone up by 30% from when they bought it. This is the type of a very, very risk-conscious, unbelievably risk-conscious. Just an astounding performance. Thank you very much, David. Oh, my goodness! Who's that at number two?
Hi. My question is, out of all of the companies in Fairfax, how many women are CEOs?
That is my granddaughter. How many? Three? And my grandson's old. I'm cycling here, but my grandson's also there. Logan is right here, too. Give him a nice round of applause.
Two.
Two? Two.
I'd say not enough.
So you'll be happy to know our Canadian company is run by Silvy Wright, and she's right here. We have one of the best workers' compensation companies in the United States, run by Kari Van Gundy, and she's right there. So 2 terrific CEOs, and a lot more to come, and hopefully, you'll be one of them. Oh, nice. That's good. We'll go into 3.
I believe this gentleman-
Oh... We'll, okay, sorry. Go back into one, if you don't mind.
Good morning. Prem, Peter, thank you for taking the question. My name is Salman Khan. If you notice closely, you would have seen that I'm not the Bollywood actor. Sorry to disappoint the people who are reading the transcript.
You could give him a run for his money.
My question is for Peter, but small comment for you, Prem. You said that BlackBerry was a mistake. As a shareholder, I don't think it was a mistake. It was an asymmetric risk. Sometimes it works out, many times it doesn't. I'm happy we took the chance. I hope we take more of those in the future. So it was a good deal. Thank you so much for that.
Oh, yeah, yeah. Very, yeah, yeah. We want you to attend every meeting.
Question for Peter. I think we are all fans of this idea of marrying insurance with value investing, and both of those things are pretty hard to get right. Most companies don't, and Fairfax is one of the few that I can see that gets it right. But it's good in the sense that it's globally diversified. We've got so many companies around the world, so that's good. Help me reconcile this thought: We are decentralized, we've got all these operations around the world. We've got one in Gulf now. How do you make sure that the culture of Fairfax, the underwriting discipline... I'm not so concerned about investing side, but the underwriting discipline, particularly. How do you make that pass through to these companies that you acquire?
Because I'm assuming that when you acquire them, they come in a good shape, but they are not exactly Fairfax kind. So how do you do that being decentralized? How do you push the culture forward to 21,000 employees?
Peter?
Sure. Just on the underwriting side, though, you know, over time, sort of when we acquired companies, our focus changed somewhat. You know, in the late 1990s, early 2000s, we bought turnaround companies. But if you look at, you know, in most recent, you know, starting with Zenith and Brit and Allied, we bought companies with strong track records, strong management teams. So it's really what we started with, is been, hugely successful for us. And then just having and keeping, people for the long term. You know, like Prem has said, Brian Young's been with us 28 years. He knows the culture, he knows the company, he knows, he knows Fairfax as well as any of us.
So, you know, the management teams we have in place right now have been with us so long that, you know, the culture is just ingrained within the company. Gulf, for example, we've been invested in Gulf for about 12 years, and an outstanding track record, a 94 combined ratio, for the better part of that whole time period, with very strong reserving. So, it's. I would say it's really the companies, when we're acquiring them now, are much higher quality than they might have been in the past.
Small follow-up. Just a small follow-up to that. Do you have an influence on the way they invest, the float that they get, or is that managed by them?
Yeah, go on.
Yeah, the float is always managed by us. It wasn't managed when we were the junior partner. We had you know, 44%, they had 46%, but it was their company. We didn't manage. We helped them, but we didn't manage it. Now, we manage the portfolio. We own 90%, and I think we made an offer for the 10% and 7% came in, so we got, like, 97%. That has the 7% closed. But the float is always... When we have control, we manage the float, so we'll be managing the float going forward.
Thank you so much.
Hey, thank you very much for your question, and then we'll go to number three.
Vishal Patel, 1832 Asset Management. Prem, Charlie Munger, Warren Buffett's business partner, passed late last year. Are there any principles you learned from Charlie that's been applied to Fairfax's success over the years?
The big one was just, Charlie made this point years ago. Two points. One was that, earlier on, like us, they depended on stock gains, bond gains. I'm talking back when they began years ago. And then they got the ability to the railroad company, Burlington Northern, to get operating income. But one of the biggest pluses, biggest questions that answers that he suggested was that you have to have patience, and when you see an opportunity, you go in big when you understand it. And till when you don't understand it, just stay away. So all our insurance people, of course, when they saw that opportunity, we doubled our premium, right? Our interest rates, when we saw the opportunity, went four years. But going forward, you know, it's a very good question.
We're big now, and the idea of buying good businesses at fair prices, big positions, compounding, for a long period of time, we're focused on that, looking at that. We've got good investments like we've had with Kennedy Wilson and with Seaspan Poseidon. But we'd be looking at, and this is not an environment right now that you can find them because the prices are high. But we're looking at getting positions in companies where we can compound for a lot, without any tax, as they say. But we learned a lot from Berkshire and Charlie. I mean, we followed them for a long, long time.
When I first went to the Berkshire meeting, there was, like, less than 200 people at the annual meeting, and we used to have a dinner on Sunday night. Mike Goldberg used to be there those days with Ajit Jain. Dinner on Sunday night, and the annual meeting was on a Monday morning before it shifted to the weekend. So through long history, we learned a ton now from them. Yeah. So thank you for your question. Any follow-up there?
Well, maybe a different person, but, you know, I think you knew Ned Goodman as well, and I think Ned passed. So is there anything from Ned? I think there's the pet insurance business maybe that came from Dundee Corp.
Yeah. Like, I knew Ned, too. Didn't know him as well, but I did know him. Yeah. Thank you very much for your question. Number four.
Good morning, everyone. Ravi Sodi from Mississauga, individual investor, 25 years with Fairfax as shareholder.
Twenty-five years.
Five years.
Now, see, another. Terrific. I said. Hey, I should ask every shareholder to say how many years they've been with it. By the way, before you ask the question, it's amazing what compounding does. So when we started, you'll remember this, but when we started, our stock price was $3.25, say, $3, and if we doubled it, it went to $6, or our book value in US dollars was $1.50, and if we doubled it, it went to $3. Three or four years ago, our book value was $450, and if you doubled it, it went to $940, which is what it is now. Now, say, $1,000, you double that, it goes from $1,000 to $2,000. I mean, the effect of compounding is unbelievable.
I was just thinking about that the other day as we were going through the, you know, our, our statements, where you come from. But the key is to be long-term. Now, as an investor, as a controlling shareholder, I had no choice but to own the stock right from the beginning for 38 years, and I don't think I've ever owned anything else for that long. And that's, you know, it was forced, handcuffs, and the best thing that happened to me. Sorry, go right ahead with your question.
Mr. Watsa, thanks for sharing $1.6 billion with at associate level. But my question is for Mr. Clarke, if he can answer. As a layman investor, I believe that if hurricane five or catastrophic event happens to direct hit to Miami, that might be a $500 billion event. I wonder if you agree with me, and Fairfax cost will be 1%. That's what I believe as a layman investor. And if this event happens twice in a row in two years, how Fairfax can see their balance sheet?
So, before Peter answers, that's exactly right. We look at stuff like that, and if it happens, well, how are we gonna survive that? So, the big plus of these events is their limits, right? And so we really focus on the worst-case events from mainly Odyssey and Allied. But, Peter, Peter does all the modeling and looking at it all the time. Peter?
Sure. Yeah, no, as Prem said, you know, we're focused on our catastrophe exposure, of course, and it starts with our insurance operations. The number one thing is they have to, you know, manage their risk appetite within their capital base. But, on top of that, we do a lot of work at the Fairfax level, aggregating the exposures, and we really look at PMLs. So this is your probable maximum losses. And, you know, over the last three or four years, from our premium growth, we've benefited greatly from the diversification we now have within that $30 billion of premium that we write. And, we can really absorb, you know, you know, we could absorb significant catastrophes and still show an underwriting profit.
Like the last couple of years, this past year, you know, cat losses were marginally down, so we had a fairly good year. But the year before that, we had, probably, I think we had $1.3 billion of losses and over $1 billion the year before, and still posted underwriting profit. So as our premium base got bigger, we have more margin in the business for catastrophe losses, but our exposure has stayed relatively flat. So we do look at it. Northeast wind is one of our largest exposures. Southeast hurricane wind, again, is another one. So we're all, you know, we're on top of that. We look at it all the time, and, you know, starts with our companies.
We have a team at the head office, that we look at it, and of course, he's all over into the details as well, so.
That's the one risk that can destroy our company, so we're all focused on it all the time. You mentioned Miami, of course, Houston, California earthquake, right? Those are all big item. But the one that you worry about, there's a windstorm coming along, what he was saying, northeast wind coming along the coast and hitting New York. Rarely happened. It's happened once or maybe twice. Coming along, doesn't come into the- doesn't come inland, comes along and then comes into New York, which would be the... we think the worst one. But we look at all of that all the time. So your question is a good one. That's something you have to do. You have to survive stuff like that.
On the lighter side, I just came back from India yesterday to attend a meeting, and a lot of Indians there, too.
Very good.
Last year, I visited Bangalore Airport, loved it. This year I went to Bangalore just to pay my respect to Watsa family for giving us good life. Thank you.
Thank you very much. You mentioned the Bangalore International Airport. Please pick up this lovely book on the Bangalore International Airport on their booth. It just shows you what a magnificent airport that Hari Marar and his team have built. It's called T2: Some Destinations You Remember, Some You Never Forget. The Bangalore International Airport. This book is available there. Next, and the number one. Tell me.
Yes, thank you. My name is George Teichman . I live in Toronto, and I'm a very happy investor in Fairfax. Thank you. Thank you for your culture, your financials, and of course, compounding, which I truly believe in. I really understand that. I'm very interested in one of your investments that you've had for quite a while, and I used to go to Waterloo to the annual meetings of BlackBerry, and I saw you there, Mr. Watsa. I've been very loyal to BlackBerry. I still use my Key2, believe it or not.
Oh, my goodness! Wow.
It is a G4, and it is better than a Samsung I threw away in Florida two weeks ago when I was there. It is much better. Anyway, it's a different company now, we know that. They're into software, they're into cybersecurity, and into AI. Cylance. What is your current thought about BlackBerry? The stock is down now to about $4. It is at its absolute low. I'm thinking I do not want to sell. I think that there could be a second coming. Do you feel the same way?
I've been looking for the second coming for ten years, but you know, first of all, the guy running it, you've seen him many times in Waterloo, John Chen-
Yes.
is a fantastic person. Gave it its all, and no one worked harder, as I said in the annual report. But unfortunately, he wasn't able to grow the company. So the company's at... You know, when we went in, it might have been $15 billion, maybe even higher in revenue, and as you know, now it's about $600 million. And John did a terrific job in terms of combining and making sure the company could survive, but couldn't make it grow. And so the question is: can it grow? It's got all the possibilities of growth. I backed John, so when John retired, I stepped off the board, as you know. And I think, you know, it... I'm hoping the second coming comes. It's a terrific company.
It's got fabulous technology and people, and but I'm no longer on the board, and I only wish BlackBerry nothing but best wishes as they go forward. So thank you for that question. Thank you very much.
Thank you.
Thank you. Jeff, can I come to you?
So we've had a few questions about Eurobank, so I'm going to attempt to put a general question and a specific question together about Eurobank. So, the first, the general question is: 2023 was an excellent year for Eurobank, and they're going to begin paying a dividend in 2024. What are your thoughts on the long-run prospects for Eurobank? And then specifically, we had a question: What are the plans for the expansion of Eurobank in India? Only wealth management, or do you have a long-term plan for Eurobank to operate there? So two questions put together.
So we are very fortunate. We have Fokion, who's been with Eurobank in excess of 20 years, but likely 25 years and maybe longer, and he's done a fantastic job, and we backed him. We own a third of Eurobank. I have to tell you, though, it's been a little bit of an up and down, nothing to do with Fokion, but Greece went through some problems. We bought. I said it last night, we bought the first, first slug of stock at EUR 31. And someone said about Charlie Munger's thing. The second one was at EUR 1, and we're thinking, "This is the bottom. It can't go further down." Well, it went to EUR 0.45, and we bought perhaps the biggest slug at EUR 0.45, on average about EUR 0.92.
Because of Fokion's exceptional performance, it's trading at EUR 1.90 today, and it's still dirt cheap, and we think over time, it'll be a terrific investment from the time we bought it. So with that, Fokion, give him a nice round of applause. Fokion!
... So, Prem, it was quite a journey, eh? So, 2023 was, maybe the best year for Fairfax, but it was also a record year for, Eurobank, with a bottom line of, EUR 1.1 billion. So what were the drivers of this performance? First, we operate in a region with a quite solid, macro outlook. We discussed already about, Greece. I think that was the first question. Greece is doing quite well, very well, I would say, versus the rest of the Eurozone. Last year, growth was, at 2%. We expect more, this year. We have a stable, government, a prime minister who is very much pro-growth, pro-business.
In our second core market in Cyprus, growth was at 2.5% in 2023, and in our third core market, in Bulgaria, growth was close to 2%. This compares with a growth for the Eurozone last year of about 0%, 0% plus. That was one thing. The second was the monetary policy shift driving rates higher. That boosted our income, mainly our net interest income. But the third point, maybe the most important, is our business model that is allowing us to capture all the opportunities in the region. We had a very strong year, with earnings per shares at $0.31, return on equity at 18%.
The tangible book value per share over the period of 2022 and 2023, over a 2-year period, increased by close to 50%, and our core equity increased by 180 basis points to 17%. You may recall, Prem, that several years ago we had a problem with equity. Still, we have a problem with equity. Before we had a shortage of equity, nowadays we have excess capital. Having excess capital is a nice problem to have, but still a problem. So, as Jeff mentioned, we are planning to relaunch the dividend payment plan for the first time since 2008. We're going to pay a dividend this year of the financial results of 2023. We envisage a payout ratio between 25%-30%.
That should be around $0.09 per share or about a 5% dividend yield. Now, going forward, in 2024 and for the three-year period, 2024 to 2026, we are committing to keep delivering resilient returns in the area of 15%, despite the fact that in Europe, we expect to enter a declining interest rate cycle. I believe that by June, the ECB will start cutting rates, and this will continue in the second half of the year. Europe is maybe in a different cycle than the U.S. So the challenge for us is to keep delivering resilient returns in this new environment. Second, in terms of the shareholder reward, we want to enhance that further.
We have a payout ratio of up to 40% next year in 2025, and hopefully, close to 50% in 2026. Last but not least, we need to fully integrate some recent acquisitions that we have done outside Greece, namely in Bulgaria and in Cyprus, especially in Cyprus. The acquisition of Hellenic Bank, the second-largest bank of Cyprus, is a very important one. We have done a great transaction at a very attractive price, and this transaction is going to add significant value in our group. Now, about India. I had the opportunity to visit India last February for the first time. I was really impressed by what I saw. I want to thank Sanjay for making all the nice introductions.
We signed an MOU with NPCI about enabling UPI in Greece. It was a transaction that found its place in the joint statement between the prime ministers of India and Greece. Obviously, we're not planning to establish a banking presence in India. However, we would like to make Greece and Cyprus the gateway for Indian companies that want to do business in Europe, in the EU. Especially Cyprus has a number of advantages. Both India and Cyprus are Commonwealth countries. Being ex-UK colonists, they have the same legal system. In Cyprus, there is the English law, and actually, the corporate law is exactly the same like the one in India. Business languages in both countries is English, and therefore there are good prospects for that.
This is our main objective.... Overall, we feel very excited about the prospects of the bank going forward. I think we have a strong track record, a really dedicated management team. We work together with the people in the management team for the last 15 years or so. And more importantly, we have a business plan, a business model, that should allow us to deliver this 15% target in terms of return on equity.
Fokion, thank you very much. Very well done. So, where are we now? We're number two. Next question from number two.
Hello, my name is Jignasha. I'm from Toronto. I've been a shareholder for, drum roll, two years.
Perfect. Very good.
My question's about Orla Mining. The Cobre Panama situation is quite a concerning precedent. I'm wondering why Orla Mining is still lucrative at this point.
Yeah. Okay, Orla Mining is a gold company, and it's got terrific sponsorship. Pierre Lassonde is behind that company. The guy running it is Jason Simpson, and it's one of the low-cost companies in gold and the lowest cost, like, you know, $800-$900 an ounce, and the price of gold, of course, has passed $2,000. And it's got many interesting prospects. And so we back very smart people, right? So all of these people that you're seeing. And so Jason Simpson and Pierre are very, very, you know, Pierre ran Franco-Nevada, built a very good company and so that's the reason we're backing them. And we think over time, that'll do well.
Thank you.
Thank you very much for your question, and look forward to hearing from you in the years to come. We go on to number 3.
Thank you very much, Prem. And just obviously, this year's results just showed how what a quality insurance businesses you've really built across the business and really lent into the hard market. And my question is that I think cyber has contributed, you know, quite significantly to that growth. So it'd be interesting to hear a little bit more about, you know, the areas of the market that you've seen opportunity across your companies. And then secondly to that, at group level, you know, how you think about the aggregate on that. Obviously, the PMLs are more difficult to measure and model than with hurricane and earthquake risks. So it's just helpful to know how you think about that as a group. Thank you.
No, that's good. Then, Peter, you can take a crack at this, but so catastrophe is all over the place. You know, we had this fire in Maui, and I think we lost $70 million or something like that. And so you have to be... We had an earthquake in Greece. I think it was an earthquake or rains and, you know, some cat, and and you have losses. And so we have to keep on looking where the unexpected can happen. We know about the windstorms and Miami and all that, but it's the unusual that gets you. And, Peter, what would you say for that?
Yeah, just, your question on cyber, you're right. During the, sorry, 2019-2022 period, we were getting significant rate. We basically started out with a very small book. We had teams in place, but they took advantage of the hard market. You know, rates were in excess of 50% in many of those years, and so a lot of the growth you've seen in cyber was more rate than exposure. But, you're exactly right. Cyber is much like, you know, like our cat exposure on the property side, in that you can have accumulation of risk. And, so that's another area that we're focused on at the holding company level. So we aggregate that. And it being, you know, a new risk per se, we look at limits as well.
So the focus on limits, there's modeling companies out there that we look at similar PMLs to the catastrophe side, but again, we wanna make sure we're comfortable with the limits that we write.
Thank you very much. Thank you for your question. We'll go on to mic number four.
Hello, Matthew Cullen, American Capital Advisory, Richmond, Virginia. I've been a Fairfax shareholder for four years. One quick comment or anecdote and then a question. First of all, I'm a little bit late to the party. This was my first meeting. I didn't quite know what to expect, but when I came through customs control, someone from Dexterra greeted me and took me nicely through that, so that was a wonderful experience. It kind of told me this was gonna be a good sign, so thank you for-
That doesn't happen to me, but I'm happy that...
But thank you for a lovely, lovely meeting. I guess my question is around float. You know, it seems like float per share and growing float are extremely important, but it also seems like all float is not created equal during periods of lower interest rates, rising interest rates. And I'm just curious, you know, when you think guys, think about float going forward, and especially if the market is slowing down a little bit, is it about growth rate in float? Is it float per share? Is it yield on float? I assume it's a little bit of both, but as you're thinking... It just seems like nobody cared about or people cared less about float businesses when rates were low, and this is an even more valuable asset now that rates are not low.
Float is a hugely valuable asset. Most insurance companies don't use it well because you've got this, for us, it's about $35 billion. That contributes to the $60-$65 billion investment portfolio we have. So which other company, if you have a steel company, or you have, you know, the assets are in the steel business or when we like the Stelco that we have and Poseidon, it's, you know, container ships, and here we've got liquid assets. We got $65 billion that we can, you know, sell, buy, do whatever we want, and there's no claim on it. You can't ask that you want your money back. You know, some of the claims will be paid in six months, some of them in two years, some of them in ten years, and we have the use of the money.
It's a very, very valuable asset, not recognized as much by most of the insurance industry because they just stick with matching liabilities and assets. And you know, we've got 20% plus in common shares, and over time, as our capital, the denominator becomes bigger, then we'll have a bigger percentage. But Peter, you want to add to that?
I think. No, I think you summed that up pretty well. You know, over time, as we grow, we don't focus on top line or on growth, so, you know, as we continue to grow, float will continue, and we'll invest it over the long term.
Thank you.
Thank you very much for that question. Number one.
Hello, my name is Kira Taylor. I'm with Investors for Paris Compliance. So as you mentioned, climate change is a pretty significant risk for the company and the insurance industry in general. So I think what we've seen in response to this is financial institutions publish their strategies for achieving net zero emissions. So my question is: when could investors expect to see Fairfax publish a net zero strategy?
So we'd, we're looking at all of that. Most of these companies that publish it that way in the future. Climate change does have an impact, but also the price that you pay. So we're very sensitive to providing cat insurance at a fair price, and that goes up and down. Right now it's very good, but that it can change, of course. Peter, you want to add to that, in terms of what we have done in the past and what we plan to do?
Sure. So one of the things we are working on today is, you know, we've put together at the group level a proprietary model to measure our carbon footprint and our greenhouse gases. And really, that's Scope 1 and Scope 2. And so we're putting that together. We want to really understand it, make sure, you know, we're getting the consistent answer across the group. And you know, that will be put in our ESG report, essentially, that we publish each year. In the next couple of years, there's a number of disclosure items that are coming out, both in the United States and Canada, and we're preparing for that, and we'll make sure, ensure all our companies in Fairfax will be in compliance with all those obligations.
So thank you very much for your question. We'll go on to number two.
Thank you very much, Mr. Watsa. So this is David Dive. I'm a certified financial planner in Toronto. Okay, very good job. Congratulations.
Thank you.
Yeah. My question is that, does Fairfax have any exposure in China? So the secondary largest economic group in the world. So what do you think about the economic future in China, and what's your strategy and plan? Thank you.
China, you said?
You said for China?
Yeah.
Yeah. So our exposure to China is very minimal, and we have a company called Alltrust that we've had for some time, and it's about 15%. And how much money would that be?
Seventy-five million.
$75 million that we have in that company, and we've had it for some time. But our interest is not expanding in China. We think, you know, it's difficult. China's done extremely well over a long period of time, but our preference is for a democratic country, like India, big population, same type of population, and we think the opportunity is huge in that in that country, and that's where our interest and financial assets are focused on. But thank you for your question.
Thank you.
Thank you. Number 3.
Hello, I'm Rob Bellamy. I haven't been to a meeting since 1996, and since then, I've lost my hair and gained about 40 pounds, so I don't expect anyone to recognize me here. But I really wanted to come here with my wife today, Prim, and congratulate and thank you and your team.
Wow, thank you very much.
It's been remarkable-
Thank you.
- and the transformation, fabulous. Part of that transformation is the TRS, which I know nothing about, so I wanted to ask two questions. Number one, could the counterparty just say, "No mass, I've had enough," and somehow get out? And number two, what is the exit strategy? Because I would be afraid that if you come out and announce you're finished with the TRS, that that might scare a lot of investors.
Yeah, no, that's a very good point. No, we never get into something where they say, "Hey, but thank you very much, everyone." So we have terms with them. It's all our Canadian banks, and we can extend it... and we've extended it, I think, 25, 26 now, something like that. And so we just extend it, and they have a hedging mechanism that they do. And we like it. I mean, you know, our company today, we've got 2 million shares there, and our company today, we think it's extremely inexpensive. And we will never get into a situation where someone says, "Hey, I want your money back." We'd never do that.
You know, so we just think there's a huge amount of potential for those shares, our shares, and so we'll continue to extend it. We can, you know, we can extend it. There's no gun to our head on it. Thank you very much. Thank you for your question. Number four.
Hi, Prem. Alan, Alan Chen from Toronto.
Terrific, Alan. Alan, how long have you been our investor?
Only 26 years.
Twenty-six years.
Thank you. Thank you.
For all 26 years, Alan comes and takes a little photograph of me. And he keeps buying, and he's got a... I won't, if he wants to say how many shares he's got, you tell them, Alan, but it's a phenomenal story where he bought them and held them. Not a single share has he sold for 26 years. Alan?
Yeah. So my question is, it's such a painful 26 years.
Hey, I thought you were a good supporter.
Yeah, the outcome is very satisfactory, but the journey is certainly with a lot of pain and suffering. So as I'm getting older I don't think I can suffer as much as before. So how can you ensure I will suffer less from now on? Thank you.
Alan, I used to have a full head of hair. But no, so the – when I say the company's transformation, one is size. The fact that we've got $32 billion in premium, the fact that if you have a big catastrophe, we can absorb it. Big, big plus. The other thing is we've never had $2 billion or $500 million that we could look for four years from really good credit, I mean, like the government, government of Canada, government of the United States, government of all over the place, and we've never had that. We got $2 billion there, and that's like a base, and then you've got the underwriting profit, you've got the associate income, and then you've got the fluctuations in stock prices, which we can't, you know, we can't do anything about.
I can tell you that our company, as the largest shareholder, like, we've never been in a position like this. That's why I meant transformation, so that your pain will be minimal. Give him a nice round of applause. Good question. Number one.
Prem, Doug Visk from RBC Vancouver. I've been a shareholder for over 15 years, for myself and clients. Thank you.
Terrific. Give him a nice... Very nice to see you. I think you went on that Indian trip, right? You went on the trip to India?
One of my colleagues did and told me I have to be on the next one, so I'm going to see the travel agent.
Good. Terrific.
I'm a big fan of corporate culture. I believe the way you treat people is the big reason for your success-
No question.
I'm interested in understanding a little bit more of how you assess that at the margin. So it's easy to say a company fits or it doesn't fit, but if you find a company you're going to acquire, right industry, right price, and it's, you're not sure on culture, it's close. Can you give an example of how you decide yes or no? Yes, and we bring it in the fold, or maybe it's close, and we decided no. I'd love to, if you, what you could tell us about that.
So here's my experience on that. So we bought some companies in Latin America from one of the big insurance companies, and we went and saw them, and the fellow who manages them from Miami, these are companies in Latin America. He manages them. His name is Fabricio. He's here. And so I traveled with Fabricio. We saw all these companies. And then Fabricio, at the end, says to me, "You know, we were owned by this big company, and they wanted you to be ruthless, forget about treating people well and all that. Just fire them if they don't perform, and just really bad." Whereas he says, "My own family, my friends, my relatives, I treated them well. So I had to be a, like a split personality." Whereas in our—he's telling me this, right?
In your case, in Fairfax," he says, "you there's no difference whether the way you treat your family and friends and relatives and your customers and employees and stuff." I think there's a... Most people wanna do that. Like, you do you really wanna fire people left, right, and center? All of those kind of companies are just like, you know, they're so happy to be part of Fairfax, and it's this culture that we we emphasize. I emphasize it all the time, but all of you heard Brian Young, and you heard Andy Barnard, and you heard all of our people, they believe in it. They wanna treat people well, right? So when you have COVID come in... Right? So what do people do?
They fire people, they no bonuses, salary cut by—you've heard of that, right? People lost their jobs. We said one thing. I said to all our people right off the bat, called them. We couldn't meet, but on our telephone call, we said, "Listen, you can't fire anyone because they can't get even if you don't like them." Because they can't go for an interview, they can't get a job. You know, COVID, there's no interviews. So you have to stay put and wait. And that's—and no cutting salary, no cutting bonuses, none of that. And those type of, you know, everyone can talk about what you do to look after employees and stuff. The other thing I told our guys is we really. You know, companies lay off 5%, 10% of the staff.
If you've got to know some of them, you'd never do that. How can you lay off? You, you are at RBC, you have people there, smaller group. You know, just laying off people, 10% of your staff, 5%. We-- We, we don't wanna do that, and if we, our business slows down, we'll keep the people. We had that in Zenith years ago, when the, you know, the company revenues dropped, and Kari Van Gundy and others, we, we managed. We never told them to lay off staff. Our expense ratio then was greater than the loss ratio. The loss ratio was terrific. So, so I think that is something that people like, people want, and so we've never had a problem.
I mean, some company that, like this big company was firing people, and we wouldn't want to do business with them. But if it's like, you know, mediocre, they change pretty quick. They change very quick because they like the culture. They wanna be in a culture like that, and a business, as I say, is a force for good. You know, look at all the stuff that we've done, right? And we started with nothing. And you treat people well, and you look after them, and we're looking at, you know, where I mentioned that, we found out more recently that you can do a stress test, which you probably do, but that's not good enough to see if you've got any blockage.
You have to get something called a calcium score, and you have to get some more testing of your heart, a scan of your heart, and that can show you whether you have a blockage, like 90% blockage. One of our guys had that, and so we've done—we're doing that for anyone who's 45 or 50 all across our companies. We're paying for it, and all over the world and for their spouses. And I think we've already had four, four or five incidents where they didn't know they had a—they needed a stent. That means you can, you can—you can die anytime. And so it's just we have a tremendous concern for the people that we work with, and the fact is, we're all equal, you know.
We have enough, you know, presidents or myself or whatever, but we treat people, and it comes, and we always wanted, I, at least I always wanted to build a good company, a good company. Performance-oriented, but a good company, and, and I'm happy to say we've done. We don't rest on our laurels, but we've done that. It's a great culture. But thank you for your question.
Thank you.
Thank you. Number 2.
Good morning, Prem Watsa.
Hey, Peter.
Ian, Ian Sanderson, shareholder from Vancouver, B.C. Congratulations on a great year and on the transformation of the company.
Thank you.
There's been a lot of fuss lately around the company's stated book value and, whether it's overstated or understated, whatever the case may be. I think you've done a great job at addressing it. As shareholders, how do you recommend we use the book value that you publish each year in making decisions, and, how do you use it yourself?
Yeah, that's a good, a very good question. So I've said that previously, book value is just of, your first estimate of intrinsic value. What is the intrinsic value? And what's intrinsic value means, how much earnings can you get from the companies that you have over time, right? And, book value is in one indication. You gotta look at return on equity over time, and, our book values are, in our minds, very conservatively stated. Very conservatively stated. And so, our return, our combined, our book value grew by 25% last year. And, you know, because of this $4 billion, our returns on equity are gonna be exceptional.
Book value is the first measure, and any of our companies, pretty well, all of them, with some exceptions, and property casualty companies, any of them, we could sell them at multiples of what we have it in our books. It's multiples of what we have it in our books. But you know, we're anyone who reads it and understands our. And we give a tremendous disclosure in our annual report. Anyone who reads it is totally comfortable with our statements, but that's the way we look at it. Book value, first estimate of intrinsic value. Intrinsic value, when you have compounded over a long period of time at 18%, same management team, it's not different, usually means that the company is worth a lot more than book value.
We've sold at multiples of book value in the past, and if history is any guide, that'll happen again. So thank you very much for your question.
Thank you.
Thank you. Number four.
Hi, good morning, Mr. Prem. This is Srini Meka from Lakeland Wealth Management, Memphis, Tennessee. I wanted to extend to the question about the intrinsic value. I'm, like most of the people here, I'm a value investor, and value investing for almost a decade. There's quite a few value managers, they're not as good as they're performing. I'm from Memphis, you know what I'm talking. But other than that, I... You know, the intrinsic value, people look into the discounted future cash flows and use it appropriate discount value, and you come up with the price. Pretty much everybody look into the same way. And on another end, you see the assets with no cash flow, like Bitcoin, some crazy coins, and all these gold, silver, whatever. So they have this value, perceived value.
Somebody is betting against somebody else, and that you come up with the value. But nowadays, the question I am asking as an experienced investor, as an equity holder, equity investor: how do you value, other than this cookie-cutter approach, like Ben Graham says, like, a price to book, price to earning, you know, below this? Looks like it's not really working as it is, but... So how do I, how do I judge when I'm picking a company?
Yeah. So, when you say it hasn't been working, it hasn't been working for the last 7, 8 years, prior to the last 2 or 3, right? And, it's changed in the last couple of years. Last couple of years, for the longest time, it was technology, Magnificent Seven, and now the 493 stocks out of the S&P 500 are having their turn. And, but if you look at 100 years, value stocks have outperformed growth or, anything else. You know, we had, something called the Nifty Fifty in the, 1970s, long before your time, and, in 1973, 1972, they were record levels. And this is, Johnson & Johnson, McDonald's, very good companies. Sold at very high price earnings ratios. And then 1974 came along.
Most of them dropped 60%-75%. But the important point is, these companies never saw their stock price at those levels for 15, 16 years. After 2000, Microsoft hit $60 in 2000. Hadn't seen $60. For 16 years, it didn't see $60 a share. Cisco was $80 a share at that time, dot-com, and it still selling at $45, even though the earnings have gone up 9 times. Earnings have gone up 9 times, still selling at $45, 50% of the stock price. So you know, this stock market history is riddled with it, and but you have to always be concerned of what you pay.
You know, there's lots of things you can do, but what you pay for something is very, very important, and that's what we are careful about. In our annual report, I say two things: One, this guy, Phil Carret, says that management, very tough to figure out good management. We've given you some examples here. Very tough to identify great management. We've been blessed with these, this management. And the second thing, what Templeton said is, you "If you can buy something in the future, the earnings are much higher than what you expect, that becomes a good investment." But thank you very much for your question, and thank you all. I think we've pretty well answered it. It's 12:00 P.M. Over to the reception. Thank you very much.