Earnings call transcript: Fairfax Financial Q4 2024 earnings beat expectations

Fairfax Financial Holdings Ltd (TSX:FFH) reported strong financial results for the fourth quarter of 2024, surpassing analysts' expectations. The company achieved an earnings per share (EPS) of $50.42, significantly higher than the forecasted $41.44. Revenue also exceeded expectations, reaching $7.55 billion compared to the projected $7.25 billion. Following the announcement, Fairfax Financial's stock rose by 5%, closing at $2,100, nearing its 52-week high. According to InvestingPro analysis, the stock has demonstrated impressive momentum with a 40.51% return over the past year and appears slightly undervalued based on their Fair Value model. As a prominent player in the insurance industry, Fairfax has maintained dividend payments for 24 consecutive years, showcasing its financial stability.

Key Takeaways

• Fairfax Financial reported record net earnings and underwriting income for 2024.
• The company's stock surged 5% post-earnings, driven by strong financial performance.
• Strategic acquisitions and investments contributed to growth.
• Catastrophe losses impacted the combined ratio but were offset by strong income growth.
• The company continues to focus on international market expansion.

Company Performance

Fairfax Financial demonstrated robust performance in 2024, with net earnings reaching $3.9 billion. The company's underwriting income hit a record $1.8 billion, while interest and dividend income grew by 32% year-over-year. Gross premiums also reached an all-time high of $32.5 billion, marking a 12.6% increase from the previous year. These results underscore the company's strong position in the insurance industry and its effective strategic initiatives.

Financial Highlights

• Revenue: $7.55 billion, exceeding the forecast by $300 million.
• Earnings per share: $50.42, a 21.6% beat over the forecast.
• Net earnings: $3.9 billion for 2024.
• Book value per share increased by 14.5% to $10.60.
• Gross premiums: $32.5 billion, a 12.6% increase from 2023.

Earnings vs. Forecast

Fairfax Financial's EPS of $50.42 surpassed the forecast of $41.44 by approximately 21.6%. Revenue also exceeded expectations by $300 million, reaching $7.55 billion. This strong beat in both metrics highlights the company's effective management and strategic positioning, continuing its trend of outperforming market expectations.

Market Reaction

Following the earnings announcement, Fairfax Financial's stock price rose by 5%, closing at $2,100. This increase reflects positive investor sentiment driven by the company's strong financial performance and strategic growth initiatives. The stock is now approaching its 52-week high of $2,119.64.

Outlook & Guidance

Looking ahead, Fairfax Financial remains focused on downside protection and value investing. The company anticipates continued growth in international markets, particularly in India, and expects interest income to increase if rates remain stable. The company is also optimistic about its Golf Insurance segment returning to historical sub-95% underwriting results. InvestingPro's analysis shows the stock generally trades with low price volatility, and their exclusive Fair Value model suggests potential upside. For comprehensive insights including detailed valuation metrics and peer comparison tools, access the full Pro Research Report, available for Fairfax and 1,400+ other top stocks through InvestingPro.

Executive Commentary

"We always focus on the downside first," stated Wade Burton, President and CIO, emphasizing the company's cautious strategy. Peter Clark, President and COO, remarked, "2024 was another outstanding year," highlighting the company's successful performance. Wade Burton also noted, "Our long-term track record is outstanding, averaging 7.7% on the float over thirty-nine years."

Risks and Challenges

• Catastrophe losses: The company faced $1.1 billion in catastrophe losses, impacting its combined ratio.
• Macroeconomic uncertainties: Potential economic downturns could affect future performance.
• Regulatory changes: Changes in insurance regulations may impact operations.
• Currency fluctuations: International operations expose the company to currency risks.
• Competitive pressures: The insurance market remains highly competitive, requiring continuous innovation.

Q&A

During the earnings call, analysts inquired about the one-time $112 million dividend from the Digit IPO and the company's baseline cash holding of $1 billion. Executives expressed comfort with current catastrophe exposure and mentioned a potential dividend capacity update in the annual report.

Full transcript - Fairfax Financial Holdings Ltd (FFH) Q4 2024:

Conference Operator: Good morning, and welcome to Fairfax's twenty twenty four Year End Results Conference Call. Your lines have been placed in a listen only mode. After the presentation, we will conduct a question and answer session.

: Call.

Conference Operator: Your host for today's call is Peter Clark with opening remarks from Derek Bielis. Sir, you may begin.

Derek Bielis/Peter Clark, President and COO/Executive, Fairfax: Good morning, and welcome to our call to discuss Fairfax's twenty twenty four year end results. This call may include forward looking statements. Actual results may differ, perhaps materially, from those contained in such forward looking statements as a result of a variety of uncertainties and risk factors, the most foreseeable of which are set out under Risk Factors in our base shelf prospectus, which has been filed with Canadian securities regulators and is available on SEDAR. 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 President and COO, Peter Clark.

Thank you, Derek. Good morning, and welcome to Fairfax's twenty twenty four fourth quarter and year end conference call. I plan to give you some highlights and then pass the call to Wade Burton, our President and Chief Investment Officer of Hambla Oatesa, to comment on investments and Jen Allen, our Chief Financial Officer, to provide some additional financial details. 2024 was another outstanding year. We earned $3,900,000,000 after taxes with record underwriting income of $1,800,000,000 record interest and dividend income of $2,500,000,000 and strong earnings from investments and associates of $956,000,000 Operating income from our insurance and reinsurance operations on an undiscounted basis and before risk margin was $4,800,000,000 dollars Our book value per share increased 14.5% adjusted for our $15 dividend to $10.60 dollars Included in our book value was a loss of $477,000,000 or almost $22 per share in other comprehensive income relating to currency losses due to the significant strengthening of the U.

S. Dollar against many currencies around the world, primarily in the fourth quarter after the elections in The United States. We view these unrealized foreign currency movements as market fluctuations similar to unrealized gains or losses on our equity and fixed income investments. Our insurance and reinsurance companies are in great shape, running over $32,000,000,000 of premium worldwide. We benefit greatly from our scale and diversification and the exceptional talent and experience of our long serving presidents and teams that run our insurance and reinsurance companies.

In the fourth quarter, we closed our previously announced purchase of Sleep Country Canada and also in the fourth quarter, we acquired the remaining 57% ownership of Peak achievement. A big welcome to Stuart Schafer and his team at Sleep Country and Ed Canale and the team at Peak. We also announced a 33 investment in Albinje, a property and casualty insurance company based in France. It writes primarily specialty commercial insurance. The transaction is subject to regulatory approvals and expected to close in the second quarter.

I will now give you some additional detail on the components of our net earnings for the year. Our investment return for 2024 was 6.7%, driven by increased interest and dividend income, strong share of profits of associates and net gains on equities, offset by unrealized losses on our bond portfolio due to rising interest rates. Consolidated interest and dividend income of $2,500,000,000 was up 32% year over year benefiting from a growing investment portfolio, reinvesting at higher interest rates and increased dividend income. Net gains on investments of approximately $1,100,000,000 for the year were driven by gains on our equity exposures of $1,900,000,000 offset by unrealized losses on our bond portfolio of $731,000,000 primarily from U. S.

Treasuries, again due to the increase in interest rates in the fourth quarter. The net gains of $1,900,000,000 on our equity and equity related holdings were driven by realized gains and unrealized mark to market gains on our Fairfax TRS, telco, PEAK, Orla Mining, offset by unrealized losses on IISL Finance and Commercial International Bank. We have always said, and please remember, our net gains or losses on investments only make sense over the long term and will fluctuate from quarter to quarter or for that matter year to year. More on investments from Wade. As mentioned in previous quarters, our book value per share of $10.60 dollars does not include unrealized gains or losses in our equity accounted investments and our consolidated investments, which are not mark to market.

At the end of the year, the fair value of these securities is in excess of carrying value by $1,500,000,000 and unrealized gain position or $68 per share on a pre tax basis. This is after realizing the gain on Stelco (TSX:STLC) of $352,000,000 which we sold in 2024 and closed in the fourth quarter. As we had an ownership above 20%, we actually accounted STELCO. The market value was much higher than the carrying value and the way the accounting works is that gain is not reflected in our book value until realized. And this was the case for STELCO.

In 2024, net earnings included an unrealized loss due to increasing interest rates in the year of $530,000,000 This consisted of unrealized losses on our bond portfolio of $731 previously mentioned, offset by the increase in discount on our insurance and reinsurance contracts held of $2.00 $1,000,000 dollars For comparison purposes, in 2023, this number was a net benefit of $496,000,000 a swing of around $1,000,000,000 year to year. Our insurance and reinsurance businesses wrote $32,500,000,000 of gross premium in 2024, an all time high, up 12.6% versus 2023. The growth was driven by the consolidation of Golf Insurance, whose operating results were consolidated into our results beginning 01/01/2024. Excluding Golf's premium of $2,700,000,000 gross premium was up 3.1%. Our North American Insurance segment increased gross premiums by $469,000,000 in 2024 or 5.6%.

Krum Foerster continued to grow its specialty business with growth of 7.8% for the year, driven by its surplus and specialty lines, accident and health business and Seneca Insurance. Northbridge was up 4.4% in Canadian dollars, reflecting continued strong customer retention and continued rate increases. While Zenith's premiums were down 1.2% year over year due to continued competitive workers' compensation market. Our global insurer and reinsurer segment was up 1.5% with gross premiums of $17,200,000,000 in 2024. Allied World was up 4.5% for the year with gross premiums of $7,200,000,000 the Reinsurance segment was up 13% its global markets insurance premium was up 9% while its North American insurance segment was relatively flat.

Odyssey's group's premiums were down 1.4% in 2024 with gross written premium of $6,200,000,000 Its insurance business was down 3.3 percentage points, principally from targeted decreases at Hudson (NYSE:HUD) in its crop and financial lines of business, while reinsurance was flat, impacted negatively by the non renewal of a large quota share in the fourth quarter of twenty twenty three. Excluding the quota share contract, Odyssey's reinsurance business was up 7.3% in 2024. Brits gross premium was up 1% for the year, primarily in property, both direct and reinsurance, offset by long tail casualty in select areas. On a net basis though, premium was up 6% as they retained a greater share of profitable business. Our international insurance and reinsurance operations gross premium increased significantly in 2024 versus 2023 with gross written premium of $6,500,000,000 up over 80% or $2,900,000,000 The growth was primarily the result of the consolidation of golf insurance that added $2,700,000,000 of gross premium in our international operations.

Excluding golf insurance, our international operations gross premiums were up 5% or almost $200,000,000 despite U. S. Dollar strengthening. Our international operations now make up approximately 20% of our total gross premiums and the long term prospects of our international operations are excellent and will be a significant source of growth over time, driven by excellent management teams. On underwriting, we had a very strong end to the year with a fourth quarter combined ratio of 89.5, producing an underwriting profit of $658,000,000 Focusing on the full year, our combined ratio was 92.7 producing record underwriting profit of $1,800,000,000 The combined ratio included catastrophe losses of $1,100,000,000 adding 4.5 combined ratio points, primarily from hurricanes Milton and Hodean in The United States, the significant catastrophe events in Canada and the floods in Dubai.

This compares to a combined ratio of 93.2 and catastrophe losses of four points in 2023. As our premium base has expanded and with the benefits of diversification, we expect to be able to absorb significant catastrophe losses within our underlying underwriting profit. For the full year 2024, our global insurers and reinsurers posted a combined ratio of 91%, led by Allied World with a combined ratio of 89.1% and an underwriting profit of $545,000,000 and its seventh consecutive year of improved combined ratios since we acquired them in 2017. Odyssey Group had another great year and produced a combined ratio of 91.2 with underwriting income of $5.00 $5,000,000 driven by a combined ratio of $84,700,000 in its reinsurance business and all its segments producing underwriting profits. BRIT continues to produce excellent results as well with $191,000,000 of underwriting profit and another year of sub-ninety five combined ratio at 93.6.

Our North American insurers had a combined ratio of 93.7 in 2024 led by Northbridge with a combined ratio of 89.3 and underwriting income of $232,000,000 despite the negative headwinds of the Canadian dollar and withstanding the significant catastrophe losses that affected Canada this year. An outstanding Forster continues to grow profitably with a combined ratio of 95 and Zenith, our workers' compensation specialist, had a combined ratio of 99.1, managing multiple years of price decreases in that line of business. Our international operations delivered a combined ratio of 97.3. Fairfax Asia had a great year with a combined ratio of 92.1, led by Singapore REIT and all our other Asian companies produced underwriting profit. Latin America produced another excellent year under 95% despite some difficult economic conditions in some of the countries they do business.

Pollinate who writes business across Eastern Europe was affected by the significant flood losses in the third quarter and came in with a combined ratio of 96, while bright in South Africa after a number of difficult years from catastrophes had a great year with a combined ratio of 94.9. Euro Life Inc. Greece had a small underwriting loss at 103, driven by a very competitive environment. Finally, golf insurance, which was consolidated in our results for 2024 at an elevated combined ratio of 100.9 affected by the Dubai floods and 3.2 points of purchase price adjustments from the Fairfax consolidation. This will be eliminated after this year.

Excluding these adjustments, the combined ratio was 97.7%. We are confident they will return to their historical sub 95% underwriting results going forward. For the year, our insurance and reinsurance companies recorded favorable reserve development of $594,000,000 or a benefit of 2.4 points on our combined ratio. This compared to $310,000,000 or a benefit of 1.4 points in 2023. This is the eighteenth consecutive year our insurance and reinsurance operations had favorable reserve development.

We are focused on setting our ongoing reserves at conservative levels, especially on long tail lines of business. Offsetting this, our runoff operation strengthened reserves by $221,000,000 as part of their annual actuarial reserve process. The strengthening related primarily to latent liabilities due to continued increases in litigation activity. Through our decentralized operations, our insurance and reinsurance companies continue to thrive, writing close to $33,000,000,000 in gross premium, producing record underwriting profit. And as we said before, led by our exceptional management teams, our companies are positioned very well to continue capitalizing on their opportunities in their respective markets.

Finally, a comment on the devastating fire losses that occurred in Southern California last month. For us, this will be primarily a reinsurance event as we have very little direct insurance exposure to the fires. Our main exposure is to the reinsurance business at Odyssey, Brit and Allied World. Insured industry losses are estimated to be in the $35,000,000,000 to $45,000,000,000 range and we typically take on 1% to 1.5% of the industry losses. This could be a little higher given this is a reinsurance event for us.

But at a high level, our early estimate of the net losses would be in the $500,000,000 to $750,000,000 range on a pre tax basis. With that said, we are five weeks in since the fire started and we have not received many reports from our scenes. We will have a much better estimate at the end of the first quarter. We expect much of the loss and possibly all will be covered by our first quarter cat margin and underwriting income. Many people have lost their homes and many businesses have been destroyed by the fires.

As part of our overall charitable giving, which is 2% of pre tax profit, we have donated $1,000,000 to the Red Cross in support of the relief efforts to the people affected by the wildfires as we also did for the people affected by Hurricane Milton. I will now pass the call to Wade Burton, our President and Chief Investment Officer of Hambla Watsa to comment on our investment. Thank you, Peter, and good morning. We ended 2024 in excellent shape on the investment side. Our $47,000,000,000 fixed income portfolio is earning $2,500,000,000 in interest and dividend income in very high quality investments with a 5.1% yield and duration of 3.3.

Our $20,000,000,000 of equity investments had an excellent year with solid unrealized and realized gains and strong associated earnings. Our experienced investment team continues to closely monitor all the holdings, both fixed income and equities. As many of you know, our long term track record is outstanding, averaging 7.7% on the float over thirty nine years with only a handful of down years and nothing worse than negative 4.5%, primarily unrealized. In 2024, the overall portfolio was up 6.7% in spite of mark to market losses on fixed income due to higher rates. It was a solid year of performance and we are well positioned from a downside perspective going into 2025 and beyond.

Also, if rates stay where they are, which we think they might, interest income could be even higher over the next few years. Higher rates hurt the market in 2024 with unrealized bond losses of $731,000,000 but really set us up for excellent interest income for the next few years. I wanted to highlight two investments on this call. First, our investments in India. In this fast growing economy, Verifact has direct investments of over $4,500,000,000 This includes a $900,000,000 market value, $679,000,000 carrying value investment and controlling stake in Fairfax, India, where we have an incredible investment team led by Chandran Ratnaswamy, Gopal Soundarajan and Sumit Maheshwari.

We think Fairfax India's book value significantly understates the intrinsic value of its holdings, especially considering their current 64% stake in Bangalore Airport alone is 48% of the assets of Fairfax India. The other key investments in Fairfax India of IIFL Capital, TSB Bank and Seven Islands Shipping are performing very well, making good profits and growing. Outside of Fairfax India, we also have a large investment in India's biggest tour operator, Thomas Cook. Quest is the largest staffing company in India. And of course, our direct investment in Digit, a very fast growing and profitable online insurance company.

Second, I wanted to discuss an investment that closed just after year end '20 '20 '4. We invested in the largest independent timeshare company in America called the Berkeley Group (OTC:BKGFY). Carolyn Shin and her team at Vacatia are Fairfax partners here. The investment is underpinned by asset value where we directly own 4,950 full service vacation units, mostly located in Las Vegas, Orlando and other high traffic vacation areas in The U. S.

The opportunity here is for Carolyn and her team to generate overnight rental income from the huge stock of nightly vacancies. Her experience designing Hotwire online booking software and then as an executive at Starwood is perfect for what Vacation is trying to do with Berkeley. In fact, prior to this acquisition, our group at Vacation made investments in five smaller timeshare assets from 2019 to 2024. And in each case, they were very successful at significantly growing EBITDA in a short period of time. The total deal was USD $835,000,000, which we funded with a $275,000,000 5 year preferred note at 13.5 percent, a $365,000,000 7 year senior secured note at nine point five percent and $170,000,000 mortgage warehouse loan with a five year maturity at SOFR plus 400.

The $50,000,000 equity is funded 50% by Fairfax and 50% by Carolyn and our partners. We are absolutely thrilled to be her partner on this. Overall, Fairfax's investment book is in great shape to end the year. We have an outstanding team of investors and business partners, and we are very excited about the returns we can generate with our mix of talent and assets. To close the year, I wanted to remind you all of three core tenants on the investment side of Fairfax.

One, we always focus on the downside first. We have to believe there's a margin of safety before we make an investment. Two, we are value investors, and a big part of that is independently studying the fundamentals of each and every investment we make. And finally, third, we are always focused on absolute return over the long run. We believe the focus on the long run and absolute returns is a huge competitive advantage for investment performance and ultimately shareholder return.

And with that, I'll pass it to Jen Allen, our CFO.

Jen Allen, Chief Financial Officer, Fairfax: Thank you, Wade. I'll begin my comments by discussing the impact changes in interest rates had on our consolidated statement of earnings in the fourth quarter and full year of 2024, specifically the effects it had on discounting on our prior year net loss on claims in our fixed income portfolio. Our net earnings of just under $3,900,000,000 in the full year of 2024 included a net loss of $530,000,000 reflecting the effects of increases in interest rates during the year, which was comprised of net losses on bonds of $731,000,000 primarily unrealized that was partially offset by a net benefit reporting on our insurance contracts and reinsurance contracts held of two zero one million dollars I'd like to note that of that $530,000,000 net loss reported for the full year of 'twenty four, a significant portion or $438,000,000 was incurred in the fourth quarter of twenty twenty four. This compared to 2023 where we reported a net benefit of $496,000,000 reflecting decreases in the interest rate environment in 2023. And then that year was comprised of net gains on our bond portfolio of $7.14 primarily unrealized that was offset by net loss on our insurance and reinsurance contract held of $218,000,000 And similar to the fourth quarter of 'twenty four, most of that benefit was reported in the full year 'twenty three of $496,000,000 as a result of the decrease in the interest rates in the fourth quarter of 'twenty three that represented $329,000,000 of that benefit in the year.

When you compare the year over year change on a pre tax basis, it represents just over $1,000,000,000 movement in our pre tax earnings on a year over year as a result of changes in interest rates, where this full year included that net loss of $5.30 compared to the benefit in 23 '4 '90 '6. With the adoption of IFRS 17, generally an increase or decrease in interest rates will result in a decrease in increase to our carrying values of both the fixed income portfolio and now our net liability for incurred claims for insurance contracts. While the change to the carrying values of each does not necessarily are equal in magnitude in size, there is the movement in interest rates that mitigated and partially offset in our net earnings now. A few comments on our non insurance companies in the fourth quarter. If you exclude any impact, which was nil in the fourth quarter of Fairfax and E's performance fee and some non cash goodwill impairment charges that we reported in the fourth quarter of 'twenty three, the operating income of our non insurance companies increased to $150,000,000 in the fourth quarter of twenty twenty four from $52,000,000 in the fourth quarter of 'twenty three.

And that primarily reflected higher operating income in our restaurant and retail segment, which increased by $38,000,000 and that was primarily all driven by our acquisition of Sleep Country on 10/01/2024, where their operating results are now consolidated into our reporting. There was higher operating income at Fairfax India, it increased by $35,000,000 and that was driven by primarily their share of profit from its underlying investments in associates and that was principally related to its interest in Bangalore International Airport. And our operating income from the other segment of $18,000,000 compared to an operating loss in 2023, primarily was driven by higher business volumes at AGT. Looking for the full year of 2024, if we also exclude the impact on Fairfax India's performance fees and some non cash goodwill impairment charges that were taken in 'twenty three, the operating income on our non insurance companies modestly decreased to $241,000,000 in the full year 'twenty four from $299,000,000 in 'twenty three. We had lower operating income at Fairfax India, a decrease of $92,000,000 that was driven by a lower share of profit from its investments and associates.

That was partially offset by higher operating income in our restaurant and retail segments, which was an increase of $48,000,000 And as noted, it was driven by the acquisition of Sleep Country and lower expenses at Respey due to improved cost management and better sales mix of higher margin products. We turn to look at our share profit of investments and associates in both the fourth quarter and full year of 'twenty four. We continue to report strong consolidated share profit of associates of $347,000,000 in the fourth quarter, principally related to share of profit of $171,000,000 from Eurobank and $50,000,000 from Poseidon. And in the full year of 2024, our consolidated share of profit of associates was $956,000,000 principally reflecting the share of profit of five fifteen million dollars from Eurobank, two thirteen million dollars from Poseidon and $57,000,000 from our peak achievement investments. That was partially offset by a share of loss of $73,000,000 from Fairfax India's investment in SandMark Chemicals Group.

A few comments on the transactions in the fourth quarter and subsequent two. During the fourth quarter, we completed two significant acquisitions and commenced consolidating each of these acquisitions in our non insurance company's reporting segments. On 10/01/2024, we acquired all of the issued and outstanding common shares of Sleep Country for purchase consideration of $881,000,000 or CAD1.2 billion dollars And then on 12/20/2024, we increased our interest in peak achievement to 100% by acquiring the 42.6% equity owned by CAGR Holdings and 14.8% equity interest owned by other minority shareholders for aggregate purchase consideration of $765,000,000 Fairfax was required to remeasure our equity accounted investment and peak achievement to the fair value of $326,000,000 upon consolidation. And as a result, we reported a pre tax gain of $2.00 $3,000,000 in our net gains on investments in our consolidated statement of earnings. And that reflected peak achievement being now carried at approximately 8.5 times free cash flow.

During 2024, these and other small acquisitions resulted in an increase to goodwill and intangible assets of $2,300,000,000 and an increase in non recourse debt of $1,200,000,000 as presented on our balance sheet. And finally, on 12/13/2024, we purchased the remaining shares of Brit from Brit's minority shareholders, increasing the company's ownership in Brit from 86.2% to now wholly owned sub at 100%. I'll close with a few comments on our financial condition. At 12/31/2024, cash and investments at the holding company was $2,500,000,000 with access to our fully undrawn $2,000,000,000 unsecured revolving credit facility and we also have an additional $2,000,000,000 at fair value of investments and associates in consolidated non insurance companies owned at the holding company and no long term debt maturities until the fourth quarter of twenty twenty six. On 11/22/2024, we completed an offering for an aggregate CAD700 million principal amount of unsecured senior notes comprising CAD450 million at 4.73% unsecured senior notes that are due in 02/1934 and a CAD250 million of 5.23 unsecured senior notes due in 02/1954.

A portion of the aggregate net proceeds were used to redeem all of the company's Series C and D preferred shares on December 31. In the full year 2024, we purchased 1,350,000 subordinate voting shares for cancellation at a cost of approximately US1.6 billion dollars or US1179 dollars per share, of which 334,000 subordinate voting shares or a cost of $461,000,000 were completed in the fourth quarter of twenty twenty four. At 12/31/2024, the excess of our fair value over carrying value of our investments and associates and our non insurance consolidated subsidiaries was $1,500,000,000 compared to $1,000,000,000 at 12/31/2023, with $397,000,000 of that increase related to the publicly traded euro bank. The pretax excess of $1,500,000,000 or $68 per share is not reflected in our book value per share, but is regularly reviewed by management as an indicator of investment performance. The excess of that carrying fair value over carrying value at 12/31/2024, no longer includes an unrealized gain of $3.52 on Stelco as it was realized in the fourth quarter, as Peter noted, of 2024.

Our total debt to total cap ratio, excluding our non insurance company, increased to 24.8% at 12/31/2024, compared to 23.1% at 12/31/2023, primarily reflecting increased total debt that was primarily related to our issuance of the $1,000,000,000 principal amount of senior notes that are due in 02/1954. That was offset by our increased shareholder equity. Our book value per basic share of $10.50 dollars at 12/31/2024 compared to $940 at 12/31/2023, which represented an increase in per basic share for the full year of 14.5% adjusted to include our $15 per common share dividend that we paid in the first quarter of twenty four. And in closing, a few remarks on our common shareholder equity that increased by just over $1,300,000,000 to $23,000,000,000 at 12/31/2024, up from $21,600,000,000 in the prior period. It reflected our net earnings attributed to Fairfax shareholders of the $3,900,000,000 and that was partially offset by the purchases of the 1,300,000.0 subordinate voting shares for cancellation for cash consideration of $1,600,000,000 the other comprehensive loss from CTA of $477,000,000 or $22 per share relating to unrealized foreign currency losses as a result of the significant strengthening of the U.

S. Dollar against many currencies around the world. And similar to the net loss that we incurred from the changes in interest rates, that unrealized foreign currency losses was primarily all incurred in the fourth quarter of twenty twenty four. And lastly, we had payments of our common share and preferred dividends of $412,000,000 That concludes my remarks and I'll turn the call back over to Peter. Thank you.

Derek Bielis/Peter Clark, President and COO/Executive, Fairfax: Thank you, Jen. Cedric, we are now happy to take on any questions you might have. Thank

Conference Operator: Thank you. Our first question comes

Nick, Analyst: One of the things that stood out to me was that interest in dividend income stepped up quite meaningfully between Q3 and Q4 after plateauing in the preceding few quarters. I wouldn't think that the consolidation of ownership in Brit would have had a meaningful impact. There was a steepening of the yield curve in the quarter, but was there anything specific that you would call out in Q4 that would have driven the sequential growth in that line item?

Derek Bielis/Peter Clark, President and COO/Executive, Fairfax: Hey, good morning, Nick. Thanks for the question. Yes, our run rate on our interest in dividends is running about $2,500,000,000 In the fourth quarter, our dividend income was a little higher than in the past quarters. We did receive a dividend from Digit Insurance. So that's probably what you're seeing in that number.

Got it.

Nick, Analyst: And what was the magnitude of that one?

Derek Bielis/Peter Clark, President and COO/Executive, Fairfax: It was approximately $100,000,000 Okay. Thank you. Thanks. Next (LON:NXT) question, please.

Conference Operator: Next question comes from Tom Mckinnon with BMO Capital Markets. Your line is

: open. Yes, thanks. Just following up on the next question. Yes, good morning. Yes, that dividend associated with the compulsory convertible press from Digit, I don't think you got that dividend in the past.

Is this the first time you're getting it? And is that dividend paid quarterly or annually?

Derek Bielis/Peter Clark, President and COO/Executive, Fairfax: Thanks. Yes. And the dividend really relates to the IPO one digit earlier in the year, but why don't I pass it to Jen who may have

Jen Allen, Chief Financial Officer, Fairfax: some more details? Sure. Thanks, Peter. Good morning, Tom. So as Peter indicated is when we did the IPO on Digit back in May of twenty twenty four, if you recall, we did sell into the market at the holding company, which is where Fairfax has got its ownership in Digit InfoWorks.

Those proceeds remained at the holding company until the dividend was paid out in the fourth quarter, about $112,000,000 So that is the additional increase that you'll see in the fourth quarter related to the BIPOC proceeds being distributed.

: And is that dividend normally in the fourth quarter? Is that how we should be thinking of that going forward?

Jen Allen, Chief Financial Officer, Fairfax: No, it's related to the IPO proceeds specifically.

: Okay. So it's unusual?

Derek Bielis/Peter Clark, President and COO/Executive, Fairfax: That's correct. It's a one off. Okay. Thanks. Thank you.

Next question, please.

Conference Operator: Next question comes from Jack Cohen with National Bank Financial. Your line is open.

Jack Cohen, Analyst, National Bank Financial: Hi, good morning. So you reported $2,500,000,000 in cash and investments at the HoldCo in the year. Is the baseline still to hold at least $1,000,000,000 or is that minimum increase as the business is scaled?

Derek Bielis/Peter Clark, President and COO/Executive, Fairfax: Yes, we say $1,000,000,000 We continually look at what amount we want to keep at the holding company. We've grown significantly over the years. We've held that amount for many, many years. And as we say, that is for the protection of our insurance and reinsurance companies. It's not for investment purposes.

It's not for acquisitions. We think the $1,000,000,000 is prudent. It's been running a little higher. But the $2,500,000,000 may come down a little bit as we raise some debt late in the year and we bought back some of our preferred shares, but we play it by ear and we're very comfortable where we are today. And next question, please.

Conference Operator: Yes. Our next question comes from Farhad Agambi with MBK Wealth. Your line is open.

: Yes. Hi. This is Fadel Hamdi from BK Wealth. One question from my side. In the light of your recent increase of exposure in GCC, we would like to know specifically in Saudi, what are your plans in this competitive market?

Is there specific segments such as B and C or motor you're planning to focus on? Thank you.

Derek Bielis/Peter Clark, President and COO/Executive, Fairfax: Thank you. Yes, I think your question was on golf insurance. And as I said, we consolidated golf insurance into our results this year. And we've had an ownership position in them for the better part of ten years. We've been a huge partner.

We're very excited to have them 100 owned. They operate through 12 different regions in The Middle East, and they do have they have an approximate 50% ownership in a company in Saudi Arabia, and we're just very excited for the potential for Gulf going forward. Thank you for the question. And next question, please.

Conference Operator: Our next question comes from Fernando Teruva with Cormark. Your line is open.

Nick, Analyst: Thank you. I was just wondering

Howard Flanker, Analyst, Flanker and Company: if by the way, this

Nick, Analyst: is Fernando on for Jeff Fenwick at Cormark. So I was just wondering if the experience with the wildfires in California moves the needle at all for Fairfax on how it thinks about cat exposure, whether the firm plans to pair back further, just any color on that would be helpful.

Derek Bielis/Peter Clark, President and COO/Executive, Fairfax: Sure. I think the simple answer is no. We're very comfortable where our exposure is on the cat side. Through the hard market, we grew significantly. We didn't grow as much on our catastrophe exposure.

But where we are today, we're very comfortable. And our teams are there that we have no plans of walking away. We'll look and see what rates happen. Rates might firm up after such a large loss such as this. But we're very comfortable where we are.

Our losses were within our expectations and manageable within our underwriting profit. So, no, we're all good on the catastrophe side.

Conference Operator: Our next question comes from Howard Flanker with Flanker and Company.

Howard Flanker, Analyst, Flanker and Company: First a comment and then a question out of the blue. You have a team of terrific, really disciplined underwriters. Nice work. My question out of the blue for Prem is this. If you heard the press conference between Donald Trump and Narendra Modi yesterday, they mentioned a possibility or probability of an undersea cable from India to Israel and then to Italy across Europe and into North America.

Do you have any thoughts off the top of

Derek Bielis/Peter Clark, President and COO/Executive, Fairfax: your head about that Prem? First of all, I guess your comment on our underwriters, that's exactly right. We have a great team of underwriters all around the world. And your comment on Prem is not with us today, but I will for sure pass your question along and

Howard Flanker, Analyst, Flanker and Company: It's kind of interesting and I thought off the top of your head you might have something to say about it.

Derek Bielis/Peter Clark, President and COO/Executive, Fairfax: Myself, I don't. But again, we'll take it away. Thank you very much for the question. Next question, please. Yes.

So we have

Conference Operator: a follow-up with Tom MacKinnon with BMO Capital Markets. Your line is open.

Jen Allen, Chief Financial Officer, Fairfax: Yes, thanks.

: Good morning, Tom. Yes, you still own the equity total return swaps on your own stock. Stock trades at 1.3 times book. Why do you still own this as opposed to perhaps just using buying back more stock?

Derek Bielis/Peter Clark, President and COO/Executive, Fairfax: Right. Yes. No, that's the TRS on Fairfax, that's strictly an investment for us. We put it back on in 2021 or thereabouts. And it's extreme it's performed extremely well.

And we think it will continue to perform very well. We as we said, we can see strong underwriting results going forward. Our interest in dividend income is strong. Our associate income is strong. So we feel we'll be able to continue to compound book value at a very high rate or an acceptable rate and our share price will follow.

We're not trading at a high multiple if you look at our peers. And so for us, it's still an investment we very much like. Thank you, Tom. Next question please.

Conference Operator: Yes. Our next question comes from Jack Cohen again with National Bank Financial. Your line is open.

Jack Cohen, Analyst, National Bank Financial: Thank you. So last year you reported the maximum dividend capacity available in 2024 from the insurance subsidiaries was $3,000,000,000 I was just wondering if you had an update on this figure for 2025?

Derek Bielis/Peter Clark, President and COO/Executive, Fairfax: I think we'll be updating it in our annual report, but Jen, anything to comment on that?

Jen Allen, Chief Financial Officer, Fairfax: No, yes, that's correct. So it'll be disclosure and coming up in our annual report that's released on March 7, Jack. So it will be a standard disclosure. Nothing I think of concern to raise. If anything, as Peter noted, we're doing very well, but it is disclosure we'll provide on that release of the annual report.

Derek Bielis/Peter Clark, President and COO/Executive, Fairfax: Thank you. Next question please.

Conference Operator: I'm showing no further questions, Mr. Clark.

Derek Bielis/Peter Clark, President and COO/Executive, Fairfax: Well, thank you, Cedric. If there are no further questions, thank you for joining us on our year end twenty twenty four conference call, and we hope to see you all at our annual meeting in April. Thank you.

Conference Operator: Thank you. And that concludes today's conference. You may all disconnect at this time.

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