Good morning, and welcome to Fairfax's Second Quarter Results Conference Call. Your lines have been placed in a listen only mode. After the presentation, we will conduct a question and answer session. Today's conference is being recorded. If you have any objections, you may disconnect at this time.
Your host for today's call is Prem Watsa with opening remarks from Mr. Derek Bulas. Mr. Bulas, please begin.
Good morning, and welcome to our call to discuss Fairfax's 2021 Second Quarter Results. This call may include forward looking statements. Actual results may differ perhaps materially from those contained in such forward looking statements as a result of a variety of uncertainties and risk factors, The most foreseeable of which are set out under risk factors in our base shelf prospectus, which has been filed with Canadian securities regulators and is available on SEDAR and which now include the risk of adverse consequences to Fairfax's business, investments and personnel resulting from or related to the COVID-nineteen pandemic. Fairfax disclaims any intention or obligation to update or revise any forward looking statements, except as required by applicable securities law. I'll now turn the call over to our Chairman and CEO, Prem Lotsa.
Thank you, Derek. Good morning, ladies and gentlemen. Welcome to Fairfax's 2021 Second Quarter Conference Call. I plan to give you some of the highlights and then pass it on to Peter Clark, our Chief Operating Officer To comment on our insurance and reinsurance operations and Jen Allen, our Chief Financial Officer to provide some additional financial details. Fairfax had an outstanding 2nd quarter with net earnings of $1,200,000,000 or an earnings per share of $43.25 And gross premiums were up 27% with a combined ratio of 94.3%.
Insurance and investments are working well together. Fairfax's book value per share in the 1st 6 months of 2021 increased by 15.2% adjusted for the $10 per share common dividend paid in the Q1 to $5.41 per share. Our net earnings of $1,200,000,000 Were a record for our quarter, but of course, they reflected significant unrealized gains. All of our major insurance companies generated combined ratios of less than 100%. More on this from Peter Clark.
In the second quarter, Operating income was strong at $398,000,000 Net gains on investments were 1,300,000,000 With gains on net equity exposures of approximately $900,000,000 and a $425,000,000 gain on our preferred shares In short, the net gains on equities included unrealized gains on BlackBerry, Stelco and BDT. Not included in the net gain numbers mark to market movements in our non insurance investments and associates and certain consolidated investments, Which we have described in our annual report, these investments increased in the Q2 by approximately 340,000,000 Any gains or losses in these securities will typically only be accounted for when sold. We have provided At the table on our MD and A on Page 73 that provides the unrealized gains and losses on these securities. As we mentioned at our annual meetings and in our annual reports and quarterly calls with IFRS accounting Where stocks and bonds are recorded at market and subject to mark to market gains or losses, quarterly and annual income will fluctuate And investment results will only make sense over the long term. As I've said previously, long term value investing has gone through a very difficult Time for many years now.
Valuations of value oriented stocks versus growth stocks, Particularly technology have never been so extreme in the recent past, exceeding even the extremes of the .com era in 2000. As the economy normalizes, we expect a reversion to the mean with value oriented starts coming to the fall. After the Pfizer vaccine was announced last November, we started to see this take place. In June, we increased our ownership interest Singapore reinsurance from 28.2% to 94% for about $103,000,000 to the completion of a public Cash offer and commenced consolidating the assets, liabilities and results of our operations of Singapore REIT. We expect to acquire the remaining 6% and delist the company from Singapore's from the Singapore Stock Exchange.
Singapore Re is a general property and casualty insurer that underwrites business primarily in Southeast Asia. Singapore REIT will join our Fairfax Asia operations and will facilitate our continued expansion in the region. On July 14, 2021, the company increased its interest in Euro Life to 80% By acquiring the interest of OMA's for cash consideration of approximately $143,000,000 The remaining 20% equity interest is And Euro Life continues to be owned by Eurobank. The company will commence consolidating the assets, liabilities, results of operations of Euro Life And it's consolidated financial reporting in the Q3 of 2021. Euro Life is a Greek insurer which distributes its life And non life insurance products and services through Eurobank's network.
Since our initial investment in EuroLife, the Company has increased its book value by 22% annually. Thanks to exceptional underwriting and investment results. We continue to have approximately $1,500,000,000 at the holding company, predominantly in cash and short term securities. Please note our cash in the holding companies to meet any and every contingency that Fairfax might face in the future. We're not making any long term investments with this cash other than to support our insurance and reinsurance operations.
With the closing of the Riverstone Barbados transaction, which we expect in August 2021, we intend to fully pay off our credit facility while maintaining 1,500,000,000 In cash at the holding company. At June 30, 2021, the company's insurance and reinsurance companies held approximately 18,000,000,000 And cash and short dated securities, representing approximately 40% of our portfolio investments. Should interest rates rise As they may, the value of our fixed income portfolio will be relatively unaffected as we have not Reached for yield. Rising interest rates will lead to increased investment income as we are positioned to take advantage of it. We continue to invest with Kelly Wilson in 1st Mortgages with a term less than 5 years.
Our insurance subsidiaries are growing significantly On track to generate $23,000,000,000 to $24,000,000,000 of gross premium this year at a substantial underwriting profit. Investment portfolio now exceeds $45,000,000,000 and our reported book value per share As a result of $5.41 with strong underlying upward momentum. Most importantly, our fair and friendly culture developed over 35 years continues to serve us well. We think the future is bright and the best is yet to come. I will now pass the call to Peter Clark, our Chief Operating Officer to comment on our insurance and reinsurance operations.
Peter? Thank you, Prem. Our
The 27% growth in gross written premium over the Q2 of 2020 With one of the highest in our history, generating premiums of approximately $6,000,000,000 in the quarter. We also produced a combined ratio of 94% or $228,000,000 of underwriting profit despite additional COVID-nineteen losses of $69,000,000 and increased provisions on the Q1 U. S. Winter storms of 87,000,000 By comparison, in the Q2 of 2020, we produced an underwriting loss of $13,000,000 primarily due to higher COVID-nineteen losses of $308,000,000 On the underwriting front, Northbridge and Zenith reported the lowest combined ratios being 85% And 93%, respectively. All of our major companies again produced combined ratios well below 100%.
As mentioned, our gross premiums for the quarter was up 27%, approximately 25% adjusted for foreign exchange, An increase of approximately $1,300,000,000 in the quarter from the previous year. This growth Have been made possible by the favorable market conditions that prevail in many of our markets, particularly in North America. Allied World grew its premiums by 29% with growth especially strong in the Directors and Officers and Excess Casualty segments. Odyssey Group's gross premiums were up 25% with expansion in both its insurance and reinsurance segments. In Canada, Northbridge's top line expanded 36% in U.
S. Dollar terms as it continues to register impressive rate increases, Strong retention and new business. In Canadian dollars, premiums were up 22%. Crum and Forster increased its premium by 30%, driven by its accident and health division and includes the rebound of its Travel business that was significantly affected by the COVID-nineteen shutdown in 2020. While these four posted the most impressive growth among our major Companies, Brit and Zenith also increased premiums this quarter as well.
Of note, Brit launched its innovative follow on syndicate Key in the first Quarter of 2021 and Key had gross written premiums of $77,000,000 in the second quarter, which contributed to the overall 18% growth Great at Brit. Growth was strong in our international operations as well with expansion in South America, Eastern Europe and South Africa. Overall, our international companies grew by approximately 125,000,000 year over year. We expect growth to remain strong as overall price levels continue to arrive at a double digit pace. Our global footprint and exceptional management teams gives us the ability to generate significant organic growth.
In the Q2, our combined ratio of 94.3% benefited from a lower level of catastrophe losses in the quarter, but included increased provisions on extraordinary the extraordinary winter freeze event in the U. S. In the Q1, This added 2.2 combined ratio points in the quarter. In addition, we absorbed COVID losses of $69,000,000 or 1.7 points in the combined ratio, principally in our reinsurance operations at Odyssey Group and Allied World. With respect to COVID, our inception to date losses now totaled $787,000,000 of which approximately half is held in IBNR.
Based on knowledge today, we expect these provisions to adequately cover our exposure. At the same time, the pandemic is ongoing As is much litigation and therefore some uncertainty remains. In the Q4, we recorded favorable reserve development of $32,000,000 or 0.8 of a combined ratio point, which includes unfavorable development of $60,000,000 Of the previously mentioned COVID-nineteen losses that were attributable to the prior years. Excluding the COVID losses, Our reserves developed favorably again by $92,000,000 Our reserve position continues to strengthen as our companies expand with today's well priced business. Another important side effect of the growth we are experiencing is the reduction in our expense ratio component of our combined ratio.
Our premiums are growing faster than our underwriting expenses. Once again, this is most apparent at Allied World, where the expense ratio in the quarter dropped a full two points from 2020. We expect market conditions to remain strong throughout 2021 and well into 2022. Low interest rates, social inflation and reduced industry Risk appetite will keep the pressure on. Our companies are well positioned to continue growing organically.
Our decentralized system allows our companies to respond quickly to opportunities in their markets. When conditions are improving, This is an especially critical Fairfax Advantage. I will now pass the call to Jen Allen, Our Chief Financial Officer to comment on our investment results, our non insurance company's performance and overall financial position.
Thank you, Peter. The results of the Q2 of 2021 were very strong. Building on the momentum we achieved In the Q4 of 2020 and in the Q1 of 2021, we delivered net earnings attributed to shareholders of Fairfax of just over 1.2 1,000,000,000 in the Q2 of 2021 and a book value per basic share at June 30, 2021 of $5.41 which represented growth in book value per share of 15.2 percent adjusted to include the $10 common share dividend Paid in the Q1 of 2021. Turning to some highlights on our Q2 results. Peter provided detailed commentary on our insurance Reinsurance operations.
So I'll start with the results of our non insurance company. In the Q2 of 2021, our non insurance Consolidated companies reporting operating losses of $44,000,000 compared to operating losses of $80,000,000 in the Q2 of 2020. The Q2 of 2021 included Fairfax India's performance fee accrual of $43,000,000 compared to nil in the 2nd quarter Of 2020. In the 1st 6 months of 2021, Fairfax India recorded a performance fee accrual of approximately 100,000,000 With pre tax earnings attributed to Fairfax shareholders benefiting by about $71,000,000 as Fairfax India's non controlling interest was allocated 72% of Fairfax India's expense. Excluding the impact of Fairfax India's performance fee, operating losses from our non insurance Consolidated companies decreased to a nominal loss of $1,000,000 in the Q2 of 2020 That compares to $80,000,000 in the Q2 of 2020, with a significant improvement noted in the restaurant and retail segment.
The Q2 of 2021 saw stronger results from our Restaurant and Retail segment reporting operating income of $15,000,000 compared to an operating loss of $43,000,000 in the Q2 of 2020. As restrictions eased across Canada, we saw increased foot traffic at the bricks and mortar locations. This when added to robust e commerce platforms drove significant double digit revenue growth in certain companies. These factors combined with expense management programs that were already in place Delivered healthy gross margin increases across our key operating companies with recognition for Gulf Town for achieving outstanding results in the Q2 of 20 In the Q2 of 2021, Thomas Cook India continued to be negatively impacted by the reduced travel restrictions As a result of COVID-nineteen. During the Q2 of 2021, India's economy impacted by a second wave of COVID-nineteen pandemic, But it appears that the economic damage was less than experienced during 2020 with 2 primary reasons for this.
First, India now has a vaccine program in place and second, there was no nationwide lockdown that was imposed during the 2nd wave as was done in 2020. With the vaccination penetration in India expected to continue to improve And the decline in case numbers from the 2nd wave, Thomas Cook is seeing increased positive travel segments. To this end, we saw positive increases in revenue in Thomas in the quarter as compared to last year. However, each follow on wave of COVID-nineteen may continue to have an impact on revenues. But with global vaccine rollouts, we're beginning to see international travel increase and expect this trend to continue.
At June 30, 2021, we've seen significant improvements in the pretax excess of fair value over the adjusted carrying value of our non Associates and certain consolidated non insurance subsidiaries that the company considers to be portfolio investments. I'll walk you quickly through a few highlights. At June 30, 2021, the pretax excess was $754,000,000 Compared to a deficiency or our adjusted carrying value was higher than the fair value at December 31, 2020 by $663,000,000 That's an improvement in the first half of twenty twenty one of over $1,400,000,000 that is not reflected in our book value per share, but regularly reviewed by management as an indicator of investment performance, With the Restaurant and Other segment and Thomas Cook India contributing $169,000,000 $65,000,000 respectively. Refer you to Page 72 and 73 in our Q2 interim report for further details on the underlying positions that are driving that $1,400,000,000 improvement. As we mentioned before, we are focused on organic growth, supported by smaller friendly acquisitions with a commitment to growing long term shareholder value.
Given our focus on the long term And the near term concerns on inflation, we continue to hold significant portion of our investment portfolio in cash, Short term investments and other short dated fixed income securities that represented approximately $18,100,000,000 or 39.5 percent of the insurance and reinsurance company's investment portfolio. While we've been extremely low interest rate and inflation rate environment For some time, things can turn quickly and significantly, and we want to make sure we're insulated from large swings that may happen. This position dampens our interest income in the short term, but protects us from rising rates and inflation, a trade off we're willing to take to align with the focus on providing long term benefit to our stakeholders and expect to drive long term growth in our book value per share. Our interest and dividend income of $161,000,000 in the Q2 of 2021 was down from the $205,000,000 in the quarter of 2020 reflecting the lower interest income earned principally due to the general decrease in sovereign bond yield, Sales of maturities of our U. S.
Treasury bonds through 2020 and net sales of our U. S. Corporate bonds in the first half of twenty twenty one. We added net purchases of 1st mortgage loans of $408,000,000 in the 1st 6 months of 2021 that are secured by high quality real estate in the U. S, Ireland and the U.
K. And have terms less than 5 years. These investments will provide some benefit to our interest income in the later half of twenty twenty one. Our consolidated share of profit of associates of $75,000,000 in the Q2 of 2021 reflected strong results from our investments in associates, principally, we're comprised of share of profit of $27,000,000 from EuroLife, dollars 26,000,000 from Resolute, dollars 23,000,000 from Eurobank, $18,000,000 from Atlas Corp. And it was partially offset by $11,000,000 from Bangalore Airport, primarily related to the continued COVID-nineteen related travel restrictions.
We had a very favorable quarter with respect to our investment portfolio. Our net gains on investments of just under 1,300,000,000 And over $2,100,000,000 in the 1st 6 months of 2021. Net gains on the investments in the 2nd quarter were primarily comprised of the following, With the largest component coming from our net gains of $884,000,000 on our long equity exposures, which unrealized gains on our BlackBerry common stock and convertible debenture positions, Stelco and BDT Capital. We continue to hold our long equity total return swaps of approximately 2,000,000 Fairfax Suboden Shares That had an original notional amount of approximately $733,000,000 or just under $3.73 a share. As we look at potential investments that are available to Fairfax and fit within our long term focus, Fairfax was among the best, especially when you consider where our share price is trading.
We feel it's a very strong investment and the total return swap structure allows us to preserve cash and liquidity in a very effective way. Secondly, $443,000,000 of net gains on our preferred stock with $425,000,000 of that related to our investment in the Digit compulsory preferred Which I'll provide details on shortly. 3rd, dollars 94,000,000 net gain on a deconsolidation of a non insurance That related to Fairfax India's sale of its 48.8 percent equity interest in Privy for $165,000,000 for a gain of 95,000,000 And lastly, dollars 43,000,000 on our net gains on bonds, principally related to our corporate bond portfolio. A few additional comments on the $425,000,000 unrealized gain recorded on our investment in the Digit compulsory convertible preferred shares. During June 2021, the company's 49% equity accounted associate, Go Digit Infowork Services, or we refer to it as Digit entered into agreements with certain third party investors where its underlying general insurance subsidiary Digit Insurance We'll raise approximately $200,000,000 of new equity shares, valuing Digit Insurance at approximately $3,500,000,000 At June 30, 2021, Fairfax estimated the fair value of Digit using a probability weighted valuation model, where we ascribe 60% weighting to the fair value determined through an internal discounted cash flow analysis And a 40% weighting ascribed to the risk adjusted transaction fair value, implying a fair value for our investment in the Digit compulsory convertible preferred shares of approximately $900,000,000 That resulted in a net unrealized gain of $425,000,000 representing on an after tax basis a book value per share of $14.60 Upon closing of the Digit Insurance Equity issuance Anticipated in the Q3 of 2021 and upon final approval by the Indian government of its previously announced intention to Increase the foreign ownership limits from 49% to 74% as well as the company obtaining regulatory approval Specific to our holdings in digits, we anticipate recording an additional gain of approximately 1,400,000,000 That represents an increase in book value per share of approximately $46 As we continue to advance our plans to monetize certain investments strengthen our global insurance footprint.
We have a number of key transactions that I would like to highlight that were completed in the quarter or subsequent to. Starting with our insurance company transactions, on July 14, 2021, we increased our interest in Eurolife to 80% From the 50% by acquiring the joint venture interest of Omer's for cash consideration of approximately 143,000,000 I want to remind you of the disclosure in our 2021 annual report, where we provided you with Euralife's gross premiums written A $512,000,000 and investment portfolio of $3,700,000,000 These are significant operations that will be consolidated into our results Commencing in the Q3 of 2021. On June 17, 2021, we increased our ownership in Singapore REIT from 28 point 2% equity interest to 94% for $103,000,000 through completion of a public cash offer And we commenced consolidating the underlying assets, liabilities and results of Singapore Re in the Fairfax Asia Reporting segment. And finally, as I mentioned previously, we also anticipate consolidating Digit in the Q3 of 2021 following the receipt of the required approvals. Over the last few years, Fairfax has been quite active with the strategic monetization of investments.
In the Q2 of 2021, We had 3 transactions to note. The first was the investment in Mosaic Capital, where we entered into a privatization arrangement with a third party purchaser, which will exchange our current holdings of our debentures and warrants and cash of approximately $11,000,000 For newly issued Mosaic 25 year debentures, we'll also acquire a 20% interest in the purchaser for approximately $4,000,000 And upon closing, which is expected to occur in the Q3 of 2021, we anticipate to deconsolidate Mosaic Capital And commence applying the equity method of accounting to our interest position of the purchaser. The second transaction on June 11, 2021, which was with Recipe, They entered into an agreement to sell substantially all of the assets and liabilities comprising its Milestones restaurant brand. Transaction will enable Recipe to focus on the larger brands that generate significant free cash flow and dominate their Segment with younger brands that offer attractive opportunities for accelerated new restaurant growth. The assets and liabilities for both Mosaic
and Milestone were recorded as assets held for
sale at June 30, 2020 With the interest in privy. Various initiatives are underway as we continue to look for opportunities to monetize our investments. Turning to our liquidity position, we remain strong with our cash and investments at the holding company with being just under $1,500,000,000 at June 30, 2021. The cash provides us with distinctive advantage that supports the decentralized structure and enables us to deploy our capital to the to the insurance companies efficiently. We're not making any long term investments with this cash other than to support our insurance and reinsurance operations.
We continue to be prudent in terms of our deployment of capital strategy. And to note, on June 29, 2021, we amended and restated our December 2022 to June 2026. Our total debt to total cap ratio excluding our consolidated non insurance Companies decreased to 28.4 at June 30, 2021 from 29.7 at December 31, 2020, primarily reflecting a significant increase in our shareholders' equity. And we anticipate at the close of the Riverstone Barbados transaction That we would have paid off the facility completely and our total debt to total cap ratio would have been 27% if it had closed prior to June 30. In summary, it's been a very positive first half of twenty twenty one.
With the dynamics of the market remaining strong, Our plan is to remain focused on organic growth, looking forward to strong insurance and reinsurance subsidiaries focused on the underwriting profitability The prudent reserving combined with our conservative investment managed philosophy positions Fairfax to continue to deliver excellent long term results. Before closing, I just wanted to touch on our commitment to ESG, which has been meaningful for Fairfax since we began. As you've seen earlier this year, we published our first ESG or environmental social governance report that highlights the importance and achievements we've made to date. We think about ESG as being truly committed to doing good by doing well. Recognizing that there's always room to grow and improve, We will continue to enhance our initiatives through 2021 beyond.
Thank you for your attention, and I'll turn it back over to Pratt.
Thank you, Jan. We now look forward to answering your questions. Please give us your name and your company name and try to limit your questions to only one so that it's fair to all on the call. Okay, Catherine. We are ready for the questions.
The first question is coming from Jeff Fenwick, Cormark Securities. Your line is open.
Hi, good morning everyone.
Hey, good morning. Good morning, Jeff.
So Prem, hard markets continue to be very beneficial for Fairfax. I know you're The most of it. So just wanted to touch on that this morning. The first one was with Brit. There's been a period of time here where they've been reorienting the business and we're starting See some very good results there and the benefit from their key insurance platform.
I noticed in your release there that you intend to sell 14% A Brit to Olmer's in a transaction. Just wondering what's the decision to do that? Is it to help bring in some additional capital Continue the growth or why would that decision made?
Yes. So Jeff, the reason for that is just what we announced some time back We're going to conclude that with the Riverstone UK sale. And basically, it gives us a lot of We just thought we should have the flexibility. We have a very good relationship with Omer's and we can buy that back soon. So Peter, you want to add to that?
Yes. No, I think it just it all relates, Jeff, to the Riverstone U. K. Transaction as, owners had an investment in there and now they're moving some of that Which has worked out extremely well.
Okay. Thank you. That's helpful. And then just one more. With respect to Crum and Forster, Krum really saw a very significant step up in the reported premium growth in the quarter.
It had been doing well, but this quarter was up 30%, I believe, year over year in terms of net premium. So what sort of triggered that acceleration at Chrom? Is it just pushing on some new lines And taking advantage of hard markets there or any color you could offer on that might be helpful.
Rito?
Sure.
Yes. I think the biggest thing at Crum and Forster was their they started writing premium again in their travel book. The Q2 of 2020, essentially their travel premium went to 0. And so now they're starting to write that business again and it's starting to grow. So that was probably, Jeff, the biggest Factor in the sort of the significant growth and at Crum and Forster.
Okay. Okay. Well, I'll re queue and let someone else ask a question. Thanks.
Perfect. Thank you, Jeff. Catherine, next question?
The next question is coming from Tom Kennen, BMO Capital. Your
line is open.
Yes. Thanks very much. Good morning, everyone.
Hey, good morning, Tom.
Yes. With respect to Digits, Is it still the intention that you expect $1,400,000,000 unrealized gain in the 3rd quarter And then another potential $400,000,000 when the final approval to increase foreign ownership comes in. Is that still the thinking?
No, it's like $400,000,000 $425,000,000 that's what Jen talked about in the 2nd quarter. The $1,400,000,000 will come after the regulatory approval and the approval by the government. It's more like the administrative rulings to go to 74%. It's already passed by legislation, but those two things have to be done. And either that gets done in the 3rd quarter or the 4th quarters, whenever it gets done.
But the addition will be 1.4
Okay. So the total addition will be $1,400,000,000
Yes. So the other way to look at it is we got $1,800,000,000 and in total of which $400,000,000 It's mark to market accounting rules. We don't like reporting it till it's actually happened. The accounting rules are very specific. You have to show the Because that's $200,000,000 that came in, you have to show the increase in value of digit.
And so that's what we did.
Okay. So it was $1,800,000,000 sort of in total and you booked $425,000,000 of that now. So there's another one $400,000,000 to come. Is that the way to think
of that?
That's the way to look at it, yes.
Okay, that's great. And just with respect to the 2 other Actions have to close soon, Riverstone and Brit. It looked like you booked some gain from the Riverstone transaction In the Q2, would we anticipate any sort of gain when that closes in August of 2021? And then what about Brit as well? Is there a potential gain when that 14% sale transaction is completed?
Thanks.
Yes. So the Riverstone transaction will close, but There's a portfolio of approximately $1,100,000,000 Jan that $1,300,000,000 that we will be buying back in the next 2 years, at the end of next year, so the year and a half, at term and that's for our account and the fluctuations in That portfolio accrued to us. At the end of the Q1, it was a small deficit. At the end of The Q2 is a positive number. So you'll see that going up and down over the quarters still we actually We can take it anytime up to the end of December 2022.
And on Brett, is there a gain there?
Brett, no. Brett, there's no changes there, Tom. It's fixed and we don't get any gain. We don't get any loss.
Okay. Thanks for that.
Thank you, Tom. Next question, Catherine.
The next question is coming from Jamie Gowan, National Bank Financial. Your line is open.
Yes, thanks. Good morning.
Hey, good morning, Jamie.
Good. First question is on the reserve development in Quarter and I guess for the first half of the year kind of coming in the 1% -ish range. I'm seeing some little bit more favorable reserve development from other insurance I'm just wondering if you can give us a little bit more detail as to what you're seeing on that front. If you can have Comment maybe around Odyssey where we saw some unfavorable reserve development.
Well, Jamie, we've got Peter here, who is our Chief Operating Officer and he used to be our Chief Actuary. So Peter, Yes,
I guess, Jamie, I think what's distorting the numbers a little bit is We had approximately $60,000,000 in development on COVID losses. So that's sort of a one off thing in our minds. And excluding the COVID losses, I think we had favorable development of around $90,000,000 which isn't that far off from the previous year. But generally speaking, it's the second half of the year where we do more thorough reserve reviews, specifically off 3rd quarter reserves and that's when we'll make more significant adjustments. Our reserves are continuing to be Extremely strong and I think our companies are very conservative on the loss picks they're making on the current years.
We would expect that we'd be building up some redundancy as we go through this strong pricing environment.
Our basic view, Jamie, that we've said for many, many years now is that The cash reserves can develop favorably or unfavorably and we just want it to be developing favorably. So the risk In the property casualty business and we've had favorable development, I think, for more than a decade now and Perhaps even longer than that, but that's a very important requisite in the property
Understood. On those COVID loss developments, Can you describe what it was that was driving that? Is that anything related to BI or a little bit more color on those COVID reserve developments?
Sure thing, Krita? Yes. Really, it relates to on our reinsurance business primarily at Allied and Odyssey, and it's non U. S, so it's in Europe, where there's still uncertainty around What's covered? What's not covered?
Is it one event, many events? So It's really just IBNR that's still being put up on the reinsurance books, mostly in Europe.
Okay. And related to BI, I guess.
Related to BI and some of the BI issues, you might Remember, there was the U. K. Ruling came out late last year and that's still filtering through the system.
Okay. Good. Understood on that one. My second question or theme would be on the share buybacks. Stock trading was fairly low.
The cash position is building and I saw some buybacks for treasury. Just can you update your comments and views and thoughts on share buybacks and as it relates to, I guess, the swap that's still in place?
Yes. So, yes, the swap, as Jen mentioned, we're very we think the We agree with you. The shares are undervalued. And in terms of buybacks, we always balance that with We've got a hard market. We're expanding.
So we have to be cognizant of that. So we Take all that into account, Jamie, and then react accordingly.
Okay. I'll re queue.
Thank you, Jamie. Next question, Catherine.
And the next question is coming Junior Raugh, Private Investor, your line is open.
Good morning. Congratulations on a wonderful Quarter for the total return swaps, when are they expiring?
They can be extended, Peter. They don't Fire at any time. We can continue to extend them as we like, Junior.
Okay. And in terms of the monetization of the investments, are you guys looking to do any other big monetization in 2021 or is that just Ongoing process?
It's ongoing. Of course, these are things that are in the marketplace, so we can't talk about them till we actually have done it. But yes, no, as Jen mentioned, we continue the process. Okay.
Thanks a lot.
Thank you, Junia. Next question, Catherine.
And the next question is coming from Jack Grant of Water
Good morning. Congratulations on a great job you've been doing. Prem, much like Berkshire Hathaway has run into being asked about succession plans in the future. Can you share Anything on that front in terms of what the future holds when maybe retire or aren't available to run the show there at Fairfax? Thank you.
That's very good question, Jack. It's a very important question. And it's a question that we focus on, of All the time, our directors focus on it. I focus on it because we've tried to build our company over the long term. And so we if something Happens to me today, the directors know exactly what to do.
62, the controlling The company knows exactly what to do. And so of course very much focused on what you say. All our companies have succession plans Right through the organization and you might have seen over the years, it's internal succession, Always be internal succession. It will be internal succession for each of our companies and it will be internal succession for me. So we have always reviewed it and feel very comfortable that we've got the right people to take over.
Good question, Jack. Good question, Jack. Thank you. Okay. Catherine, next question please.
And the next question is coming from Salo of Baselov Capital Management, your line is open.
Very much for taking my questions. I have 2, if I may. But the first one is on the valuation of Digit. If I understood correctly, You value as a combination of DCF and based on the transaction The company is doing with private equity firms. If I understand correctly, The revaluation of Digit, despite not being totally dependent on the private equity people, Has been performed following the investment by the private equity people.
So My question would be, if that transaction finally doesn't come to Frutar and regardless of any penalties From the investors or anything like that, would you revert back to the old valuation you had in Digit, that's my first one. And the second one, if I may, Has to do with the reconciliation on Page 73 of the report Because I've looked at it, and I see that for the non insurance Associates that are not listed, the reconciliation is not necessary because the dollar figures Coincide, but that's not the case with the restaurants and other Fairfax, India and Toman's Cook, India. And if you could help me Reached that gap or understand why the figures are different, how To go from one to the other, roughly that would be of incredible help. Thank you very much.
Okay. Thank you for both questions. The first one on digit, there's a when $200,000,000 comes out At that $3,500,000,000 market capitalization, very good investors, but a very significant Market cap on a company that's growing significantly, but is running at the last number we Gabriel was about $450,000,000 of revenue going at a huge rate in India. India is itself growing, but the market cap is very significant. So the $3,500,000,000 results in a $1,800,000,000 gain.
And the question is how much do you recognize at The second quarter and how much do you recognize in the 3rd whenever those two things happen that I talked to you about. And so Jen explained that using models we figured it was $400,000 odd $425,000,000 But that's just a judgment call. The $1,800,000,000 will be the number at the end of the day, but that's So that's subject to very subjective because it's only $200,000,000 that's gone in on a $3,500,000,000 market cap. We think Digit is going to grow very significantly. We've got a great guy in Kamish Goel, who's building the company.
But there's no risk of that number being turned back if for that If you don't get regulatory approval or whatever, because these are done deals, like $200,000,000 has been signed, sealed and delivered. So There's no risk that they can back out. There's only regulatory approval led now and the 74% going through. On your second question, why don't I pass it to Jen?
Yes. And I think if you wanted the additional details, you're more than welcome to call after. But high level, I think the easiest answer to explain it Would be your biggest driver is for Fairfax India's portfolio on Note 6 where we show The total carrying value versus fair value, you have Bangalore Airport in there, which is the way the accounting standard works is that Fairfax India's Carrying value and Fairfax only has a 28% equity interest in Fairfax India. So when you actually look to the back of at Page 73, we're then taking only our 28% interest. So that would be your largest disconnect on how we look at it Because Note 6 is almost like a gross up basis and then in the back is what our attributable book value per share would be accretive For Fairfax India, but if you want more details, I can walk you through it offline.
And Jen, we talked about that in our annual report and we Explain all of that, Peter?
Yes. No, that might be a good place to look as well at Page 10 of the annual report. We have a similar table and we provide the reconciliation.
Thank you very much for your question. Catherine, next question please?
Page 10, right? Yes.
Yes, Page 10. Thank you.
The next question is coming from Alan Parcel, Elkhorn Partners. Your line is open.
Hey, Prem. Great quarter. Good morning, Alan.
Hi. I have I think I heard this right. I'm on a trip, so I'm on a mobile. But I think I heard that you talked when you talked about the unrealized in the equity portfolio, you mentioned in the Q2 that there were significant Gainson, Blackberry and unrealized in both the debentures and the common.
Very much, yes.
Does that infer, Which I think it does, but I don't know. Does that infer that none of the BlackBerry was sold in the second quarter?
Yes, that's exactly right, Alan. None of the BlackBerry was sold because it's all unrealized.
Yes. Okay. So Up to this point, the company hasn't been able to take advantage of The MEM or the other significant or outsized Gains and fluctuations, let's just say.
Yes. No, I think that's right. We haven't been able to take advantage of it. We're insiders. We've got restrictions and we talked about that last quarter too.
And of course, we are very supportive of John Chen and all the good things that he's doing with BlackBerry.
Right. But I Scott, if I heard you correctly after the Q1 call that any restrictions disappeared or is this after the Q1 Or does that mean that this company is permanently on the restriction list of
No, that's a good question, Alan. No, it's not permanently, but when you're on the Board and we've got the significant interest that we have, There are times, quiet periods and restrictions that apply to Significant shareholders and but it's not no, there's you're not permanently restricted,
no. Okay, fine. Thank you.
Thank you very much, Alan. Can we have the next question, Catherine?
Yes. And the next question is coming from Jamie Glynn of National Bank Financial, your line is open.
Yes. Thanks. I was
just going to
follow-up The on the performance of non insurance subs,
looks like it's
a little bit better in Q2 and Hoping you can give us some additional color and commentary on how the non insurance subs retail restaurant Thomas Cook are performing early into Q3, in particular in Canada, where we're much more open this month than we have been.
Yes. So, Jamie, the restaurants, you'll see their results. Their results haven't come out, I think, for recipe, they will come out. And they're doing much better. But of course, Ontario has just opened for dining, indoor dining.
And for the most of the year, they had a very difficult our restaurants had a very difficult time in terms of being closed. If you see what's happened in the United States once restaurants were open, they've gone through 20 So we expect the restaurants will bounce back significantly. Fairfax India had Thomas Cook, its business went to 0. No travel to speak of. So that was difficult.
So this pandemic for many of our Investments was difficult, but that's all I'm exaggerating to make the point, but That's all in the past. It's on its way back. And these are good companies, good management and we see Over the long term, good returns from them.
Yes. I was also just going to ask in terms of like, I mean, the revenue side looks It's going to be good. Do you have any comments on the labor side of it or expense side of it on this as As we're reopening, are we going to see that revenue uptick flow into the bottom line in those
Yes, Jamie. All of those things, including the Restaurants, we think the revenues will be through 2019 levels once we back up. And unfortunately, lots of smaller restaurants I've gone out of business. And so if you want to go out dining, there's the big restaurant chains where the action is And our recipe expects in the years to come to do well.
Okay. Thanks.
Thank you, Jamie. Any more questions, Catherine?
We have no further questions at this time.
Okay. There are no further questions. Thank you all for joining us on this call. And thank you, Catherine, for hosting it. Thank you till our next call.
Thank you very much.
This will conclude today's conference. All parties may disconnect at this time.