Fairfax Financial Holdings Limited (OTCPK:FRFHF) Q1 2016 Results Earnings Conference Call April 29, 2016 8:30 AM ET
Rick Salsberg - VP, Corporate Affairs and Corporate Secretary
Prem Watsa - Chairman and CEO
Dave Bonham - CFO
Paul Holden - CIBC
Mark Dwelle - RBC Capital Markets
Tom MacKinnon - BMO Capital
Zack Perry - Vine Street Capital
Binoy Jariwala - Sunidhi Securities and Finance Ltd.
Good morning and welcome to Fairfax 2016 First 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. [Operator Instructions] 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 Rick Salsberg. Mr. Salsberg, you may begin.
Yes, good morning and welcome to our call to discuss Fairfax’s 2016 first 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 and our Base Shelf prospectus, which has been filed with Canadian Securities regulators and is available on SEDAR.
I’ll now turn the call over to our Chairman and CEO, Prem Watsa.
Thank you, Rick. Good morning, ladies and gentlemen. Welcome to Fairfax’s first quarter conference call. I plan to give you some of the highlights and then pass it on to Dave Bonham, our CFO for additional financial details.
In the first quarter of 2016, book value per share increased 1.4% adjusted for the $10 per share common dividend paid in the first quarter of 2016. Our insurance companies had an excellent first quarter with a combined ratio of 93.1% with excellent reserving and significant underwriting profits of $122 million. All of our major insurance companies again had combined ratios of less than 100% with Fairfax Asia at 76.5%, Zenith at 83.4% and OdysseyRe at 90.3%.
First quarter operating income was very strong at $247 million offset by net investment losses in the quarter of $160 million which arose primarily as a result of stock price fluctuations and foreign currency movement. Excluding all hedging losses and before mark to market fluctuations in our investment portfolio and excluding realized gains and losses, we had pre-tax income of $164 million. Including all hedging losses and mark to market fluctuations in our investment portfolio, we reported after-tax loss of $51 million in the first quarter of 2016.
Our insurance and reinsurance business volume was up in the first quarter by 20%, primarily due to Brit, while the combined ratio for our insurance and reinsurance operations, as I said, was 93.1%. At the subsidiary level the combined ratios in the first quarter was OdysseyRe 90.3%, Crum & Forster 97.6%, Northbridge in Canadian dollars 98.6%, Zenith 83.4%, Fairfax Asia 76.5% and Brit was 96%.
As we have said before, very low interest rates and reduced reserve redundancies means there is no place to hide for our industry. Combined ratios have to drop well below 100% for the industry to make a single-digit return on equity, with these low interest rates. While the short-term is always tough to predict, fundamentals will eventually play out.
Net investment losses of $160 million in the first quarter consisted of the following. Please refer to page two of our press release. Net losses on equity and equity related investments of $444 million resulting from the net losses of $336 million and $108 million net loss on our equity hedge due to stock fluctuations and losses on our hedges. Stock fluctuations in three stocks BlackBerry, Eurolife and Bank of Ireland accounted for most of the net losses of $336 million in common stocks. We’ve realized losses of $34 million on our equity and equity related holdings in the first quarter of 2016, of which $68 million was a result of APR Energy being taken private. We continue to hold APR Energy and expect these losses to reverse in the future. Now, this was offset by realized gains on our equity hedges of $32 million. Also, we had gains of $433 million, primarily on our treasury and municipal bond portfolio because of the impact of dropping interest rates.
The loss on other, principally foreign exchange, was primarily offset by the translation gain on foreign exchange and comprehensive income on our balance sheet. As we have mentioned in our annual meetings, 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 widely and investment results will only make sense over the long-term.
Our CPI-linked derivatives with a notional value of approximately $112 billion produced unrealized losses of $55 million in the first quarter. The majority of these contracts, as you know, are based on the underlying U.S. CPI index or the European Union CPI index. Further information is available on page three of our press release where we have included a table on our deflation swaps. On average, they have 6.3 years to run.
As I’ve said before, with deflation in the year, these contracts have come to life but they’re very volatile. They can change dramatically, quickly as we saw in the first quarter. When you review our statements, please remember that when we own more than 20% of a company, re-equity account and when we own more than 30%, we consolidate, so that mark-to-market gains in these companies are not reflected in our results.
As you can see on page 11 of our quarterly report, the fair values of our investments in associates is $2.8 billion versus the carrying value of $2.4 billion and unrealized gain of about $0.4 billion not on our balance sheet.
In March, Fairfax India agreed to acquire at 33% equity at interest in Bangalore International Airport from a wholly-owned subsidiary of GVK Power and Infrastructure Limited for approximately $325 million. Fairfax India, given its current investment restrictions, will invest $250 million and Fairfax will invest the remainder. Subsequently, we acquired another 5% from the Zurich Airport. The transaction is expected the close in the second or third quarter of 2016.
In April, Fairfax India agreed to invest approximately $300 million in Sanmar Chemicals Group through a combination of equity, representing a 30% ownership interest and debt securities. Fairfax India, given the same investment restrictions I mentioned earlier, will invest $250 million, and Fairfax or another investor will invest $50 million within 90 days after the expected closing of Fairfax India’s investment, in the second quarter f 2016. Sanmar is one of the largest PVC manufacturers in India. After these two investment, Fairfax India will have invested approximately $870 million of the approximately $1 billion raised from the initial IPO in early 2015.
Also in the first quarter, Cara entered into an agreement to acquire 100% interest in St-Hubert for approximately $537 million Canadian or $415 million U.S. Closing of this transaction is expected to occur by the end of the third quarter of 2016. St-Hubert is the province of Quebec’s leading full service restaurant operator as well as wholly integrated food manufacturer. After this investment, Cara will be the third largest restaurant group in Canada. Cara completed a private placement offering of subscription receipts at a price of Canadian $29.25 per receipt for gross proceeds up approximately $230 million Canadian or $179 U.S. that will form part of the financing for the acquisition in St-Hubert. Each subscription receipt entitles the holder to receive one Cara subordinate voting share upon closing of the St-Hubert acquisition. Fairfax and its subsidiaries purchased approximately Canadian $102 million or $79 million U.S. to maintain Fairfax’s equity interest and voting interest in Cara.
In March, Fairfax completed an underwritten public offering of 1 million subordinate voting shares at a price of Canadian $735 per share, realizing proceeds of approximately Cdn$705 million or $523.5 million U.S. net of commissions and expenses. Also in march, the Company completed an underwritten public offering of Cdn$400 million principal amount of 4.5% senior notes due 2023, realizing proceeds of approximately $303 million U.S., net of commissions and expenses. Proceeds from the stock and bond issue will be used to finance the investment in ICICI Lombard, Eurolife and for other corporate purposes.
Now, we continue to be very concerned about the prospects for the financial markets and the economies of North America and Western Europe, accentuated as we have said many times before by the potential weakness in China and emerging markets. Again, as we have said now for some time, we believe that there continues to be a disconnect between the financial markets and the underlying economic fundamentals. We see the potential for major dislocations at the marketplace with many significant unintended consequences. And we want to protect your Company from them.
As of March 31, 2016, we have $6.3 billion in cash and short-term investments in our portfolio, which is approximately 20.9% of our total investment portfolio to take advantage of opportunities that come our way. As a result, in the short-term, our investment income will continue to be reduced.
Now, I’d like to turn it over to Dave Bonham, our CFO, so he can give you some more information on the underlying financials. Dave?
Thank you, Prem. For the first quarter of 2016, Fairfax reported a net loss of $51 million or a net loss of $2.76 per share on a fully diluted basis and that compared to the first quarter of 2015 when we reported net earnings of $225 million or $9.71 per share fully diluted. Underwriting profit at our insurance and reinsurance operations decreased slightly to $122 million at a 93% combined ratio compared to underwriting profit of $127 million at a 91% combined ratio first [ph] quarter 2015, a decrease in underwriting profit of $5 million year-over-year. Our combined ratio benefited from net favorable prior year reserve development in the first quarter 2016 of $86 million, translating into 4.8 combined ratio points, slightly higher in dollar terms than the net favorable development of $68 million in the first quarter of 2015, which represented 4.6 combined ratio points.
Current period catastrophe losses in the first quarter of 2016 all of which were attritional, totaled $31 million or 1.8 combined ratio points and were slightly higher than cat losses in the first quarter of 2015, which totaled 28 million or 1.9 combined ratio points.
So, now turning to our operating Company results, we’ll start with OdysseyRe. In the first quarter, OdysseyRe reported an underwriting profit of $45 million and a combined ratio of 90% and that compared to an underwriting profit of $58 million at a combined ratio of 89% in the same period last year. Catastrophe losses in the first quarter, again all of which were attritional, totaled $27 million, translating into 6 combined ratio points and that was slightly higher than cat losses of $23 million, which translated into 4 combined ratio points in the first quarter of 2015.
Net favorable prior year reserve development of $35 million or eight combined ratio points in the first quarter of 2016, principally related to property catastrophe loss reserves, and that was higher than in the first quarter of 2015 when Fairfax reported -- or when OdysseyRe reported $11 million or 2 combined ratio points of net favorable prior year reserve development. OdysseyRe’s net premiums written decreased by 14.2% to $484 million in the first quarter of 2016 and that was reflecting the non-renewal of a Florida property quota share reinsurance contract that we mentioned in the past. It also reflected the unfavorable impact of foreign currency translation on Odyssey’s EuroAsia division and lower writings generally across several lines of business due to competitive market conditions.
Moving on to Crum & Forster, Crum & Forster reported an increased underwriting profit of $10 million at a combined ratio of 98% in the first quarter and that compared to an underwriting profit of $5 million at a combined ratio of 99% in the first quarter of 2015. There was no net prior year reserve development or significant current period catastrophe losses in the first quarters of 2016 or 2015.
Crum & Forster’s net premiums written increased by 17% in the first quarter, reflecting broad-based growth across most of its lines of business, the incremental contributions from the acquisitions that it made last year, and the impact of reduced reinsurance costs.
Zenith: Zenith reported an underwriting profit in the first quarter of $31 million at a combined ratio of 83% and that compared to underwriting profit of $40 million at a combined ratio of 78% in the first quarter of 2015. The change in 2016 reflected lower net favorable development year-over-year, $24 million in the first quarter of 2016 or 13 combined ratio points. And that development reflected a net favorable emergence on the accident years 2012 through 2015 and that compared to $36 million or 20 combined ratio points of net favorable development in the same period last year.
The second driver was a year-over-year decrease of 1.2 combined ratio points in the estimated current accident year loss ratio and that was due to favorable loss development trends for accident year 2015 that are emerging now in 2016, that was partially offset by estimated loss trends for the 2016 accident year and modest price decreases that are now beginning to become reflected in net premiums earned. Net premiums written by Zenith of $328 million in the first quarter increased by 6% year-over-year, reflecting an increase in exposure partially offset by modest price decreases.
Northbridge reported an underwriting profit of $3 million and a combined ratio of 99% in the first quarter of 2016 and that compared to an underwriting profit of $6 million and a combined ratio of 97% in the same period last year. The decrease in Northbridge’s underwriting profit principally reflected higher underwriting and commission expenses, partially offset by the impact of higher net premiums earned and favorable non-catastrophe loss experience related to the current year, and that was primarily due to improved results in commercial automobile and personal property lines of business.
Net prior year reserve development and current period catastrophe losses were nominal, both the first quarters of 2016 and 2015. In Canadian dollar terms, net premiums written by Northbridge in the first quarter increased by 10% and that was reflective of increased renewals and new business, modest price increases across the group and the impact of reduced reinsurance costs.
Fairfax Asia reported an improved underwriting profit of $12 million at a combined ratio of 77% in the first quarter and that compared to an underwriting profit of $6 million at combined ratio of 91% in the comparable period for 2015. Net premiums written by Fairfax Asia decreased by 14% and that reflected lower writings at First Capital in marine, health, engineering and workers’ compensation lines of business and also reflected the impact of a loss portfolio transfer Pacific Insurance which reduced net premiums written by $16 million, partially offset by increased retention in First Capital’s commercial automobile line of business.
The insurance and reinsurance other segment produced an underwriting profit of $8 million at a combined ratio of 93% in the first quarter of 2016 and that compared to an underwriting profit of $11 million and a combined ratio of 91% in the same period of last year. The lower underwriting profit principally reflected lower net premiums earned as well as the inclusion of Colonnade Insurance, which is our newly formed Eastern European operation. Net premiums written by the insurance and reinsurance other segment decreased by 27% in the first quarter of 2016, reflecting the non-recurring impact in the first quarter of 2015 on Polish Re of the QBE loss portfolio transfer. There Polish Re reported net premiums written and incurred losses in its income statement and that was both equal to the value of the loss reserves they assumed in that portfolio transfer.
The decrease in the insurance and reinsurance other segment also reflected the impact on Group Re of the cancellation of an intercompany quota share agreement in the fourth quarter of 2015 between Group Re, Fairfax Asia and the unfavorable impact of foreign currency at Fairfax Brazil. The runoff operating loss of $15 million in the first quarter of 2016 was comparable to its operating loss of $13 million in the same period in 2015 and there were no significant transactions to report in the first quarter of 2016.
Looking at our consolidated results, consolidated interest and dividend income increased from $114 million in the first quarter of 2015 to $153 million in the first quarter of 2016. That reflected increase holdings of higher yielding government bonds year-over-year and the impact of consolidating Brit’s portfolio investments.
Due to our small base of pre-tax income in the first quarter of 2016, we had an unusually high effective tax rate, which primarily reflected losses that we incurred, mainly at the holding company that we do not capitalize on our balance sheet as deferred tax assets, because the recognition criteria under IFRS are not met. And that was -- the effect of that is partially offset by the benefit to our effective tax rate of nontaxable investment income. And moving to our financial position, our total debt to total capital ratio decreased -- sorry, rather increased to 23.4% at March 31, 2016 from 21.8% at December 31, 2015. And that was primarily as a result of the issuance of the 400 Canadian principal amount of 4.5% unsecured senior notes in the first quarter and that was somewhat offset by the increase in our common shareholders’ equity that resulted from the issuance of 1 million subordinate voting shares and those were principally to finance the investments in ICICI Lombard and Eurolife. We ended the quarter of 2016 with an investment portfolio which included holding company cash and investments of $29.6 billion compared to $29 billion at the end of 2015.
And now, I’ll pass it back to you, Prem.
Thank you, Dave. Now, we’re happy to answer your questions. Please give us your name, your company name and try to limit your questions to only one, suits to everyone on the call. So Bob, we’re ready for the questions.
Thank you. [Operator Instructions] Our first question is from Paul Holden from CIBC. Your line is open.
Thank you. Good morning. Wondering if you’re able to comment at all on your exposure of any two cat events that have taken place so far in Q2, thinking specifically of the earthquakes in Japan and then Ecuador?
Yes, Paul, on the earthquake in Ecuador and in Japan, very minimal losses for us. In Ecuador, I think, it’d be fair to say, very -- earthquake insurances are not freely available, so the insured losses, even though the total losses will be significant, insured losses are very minimal. And in Japan, our reading is it’s not significant for us.
And then, Prem, as part of your prepared remarks, you pointed to three specific equity investments that led to the loss in the quarter. And did I hear right that it was Blackberry, Bank of Ireland and then Eurolife? Is that right?
I am sorry. That’s watching exactly what I’m saying; so, hearing it properly. No, it’s Europe Bank. Paul, sorry about that. It’s Europe Bank. Eurolife of course is a private company and we’ve are in process of closing that purchase.
Our next question is from Mark Dwelle from RBC Capital Markets. Your line is open.
A couple of questions, first on the Bangladesh airport deal. Is that something that’s going to be consolidated in the other affiliates line or is that going to be below the threshold but it’ll just be another equity investment or whatever you would call that?
I’ll pass it on to Dave on that. Dave?
Yes. From what we know now that will be an equity accounted investment. And it’ll reside in the other reporting segment as part of the Fairfax India column.
Second question is, it looked like you added fairly substantially to the fixed income portfolio in the quarter, some of that was just regular appreciation, but were there any -- did you do anything with the duration there or maybe just some color on where you made the decision?
Yes. During the quarter, Mark, we added to U.S. treasury bonds, long U.S. treasury bonds and reduced our cash position some. So, what you see is mainly the increase in U.S. treasury bonds.
The last think I wanted to add is really just maybe an observation or an open ended question; you don’t need to answer. But, I was wondering at Fairfax we consider reporting some type of a number that might be regarded as an operating income number. As you noted at the beginning, there are so many quarters where there is such volatility in the investment portfolio. It seems that the net income number has a tendency to obscure what have been absolutely terrific results in the insurance units?
Your point is well taken, Mark, our operating income, which is underwriting profit from the 93% combined and interest and dividend income is $247 million, which is a very good number. And I have said in our annual meeting and annual reports that IFRS skews these numbers positive or negative because you’ve got fluctuations; there is always fluctuations of stock prices, fluctuation in bonds until you realize it, until you really realize them or in some cases if you’re holding them for a long time, it on a quarter by quarter or perhaps even on a yearly basis it doesn’t make any sense. We have sort of tried to give you that by looking at operating income but we will look at again, Mark. That’s a good observation that you have. We will look at it again. We tend to -- on page 31 of our quarterly statement, which is a very nice way to look at it, we show you underwriting profit and we show you the interest and dividend income; we show what happens in the runoff area and non-insurance businesses; we show you -- so, it’s broken down. And then we show you the unrealized swings, show you the realized gains, and that page 31 is a good…
I liked page 31 quite a bit; maybe there is a way that it can be included within the press release to get it more visibility rather than just in the supplement.
Other than keeping it buried in the quarterly report, okay. No, we will think about that, Mark.
Thank you. Our next question is from Tom MacKinnon from BMO Capital. Your line is open.
A bit more of a -- maybe a bit of detailed question, maybe Dave might be able to help. But, I found the $108 million equity hedge loss little bit confusing in the quarter, especially given that the Russell 2000 was down a little bit in the quarter. So, just what contributed to the hedge loss in the first quarter?
That’s a very good question, Tom. Very simply, we as we said in our press release and at year-end, we added to our Russell position, meaning we increased our short position to about a 100% in that quarter and timing wasn’t the best. And so, the Russell moved up after we increased our short position, so that’s part of it. And the other part of it, Tom, was very simply some individual names that we’ve shorted, went up. And so, the combination of the two resulted in about $100 million, we’d like to say fluctuation, but that’s what it was for the quarter.
Okay, that’s great. And also you noted $642 million of net cash received in connection with the shorts in the quarter; it seems a little high. Maybe just help me understand some of the mechanics of those things. Is it settled -- are they settled every quarter?
Dave can answer that. Dave?
I think it kind of dovetails with what Prem just mentioned and the fact that the Russell 2000 declined significantly interquarter and the timing of the settlements of cash kind of corresponded to when the Russell came down to its lowest point. So, we received a lot of cash in and then kind of mid-quarter from there the Russell proceeded back up. So, a lot of that reversed, and that’s what you’re seeing in the overall mark to market losses on the short…
And in fact Dave, we have a payable I guess of approximately $600 million which reflects that I guess.
That’s right. So, a lot of that cash that we received in the quarter is now accrued to be paid out if market conditions don’t change for it.
If the market conditions hold here, Tom, we would be paying that money out.
Okay. So, you’ve got cash in when you settled those things interquarter but the movement since you increased your positions, you didn’t have to settle that in cash, is it…
No. It’s like -- what is it Dave, every 30 days, 90 days?
Yes, some of them are 30, some of them are 90.
30 days, 90 days, depends when it comes in. And then of course over the course of the year, it balances itself out. But in any particular quarter, you could get inflows and outflows.
Thank you. Our next question is from Gava Ramesh [ph] from Picton Mahoney. Your line is open.
So, I was just wondering with central banks kind of increasingly running out of bullets to prop up the global economy, and the U.S. GDP data that came out yesterday was the weakest in two years. Are you -- would you be thinking about increasing your position on the CPI related output options or are you happy with where you are right now on that?
Gava, [ph] that is a very good question. Yes, the U.S. GDP was weak Gava, [ph] as you said. Today the European numbers came out; they’re weak. In Europe, there was deflation of about minus 0.2% I think year-on-year for April. And so, we’re in a deflationary environment, and we have weak economic growth. And the worry we’ve said for some time is with all of this QE1, 2 and 3 in the United States and then followed by Europe and followed by Japan and negative interest rates in Japan and a whole bunch of negative interest rates in Europe, I think more than half the German market is now negative. And so, in spite of all of that the economy is very weak. And if we go into a recession after six-seven years of economic growth, it won’t be unusual, if we go into a recession. Our view has been for some time that we have no bullets; we have no ammunition. And it’s all in a setting where, as you know, China has got many markets that it’s trying to support, the foreign exchange market, the bond market, the real estate market and of course the stock market. So, you have that problem. And you have a lot of debt that’s been raised in the United States. So, the banks we think are relatively safe because they’ve gone through some tough times in ‘07, ‘08, ‘09 but the risk now is in mutual funds. So, there is a lot of high yield debt in mutual funds; there is a lot of corporate bonds and as emerging market bonds all in mutual fund setting where you can have redemptions at any time.
So, we think -- that’s what I said. There is many unintended consequences. And we’re happy with our position; I mean, it’s more than $100 billion that we have. And so, they can increase and decrease. In the quarter, they went through $400 million interim in terms of market value. I remember the credit default swaps and I mentioned it in our annual report between June 2007, and February 2008 that’s February, that’s not September when Lehman went under, our credit default swaps went from 200 million to 2 billion, 10 times. And that’s in like eight-month period. So, these things can change dramatically. We’re happy with our position but we have no plans to add to it, but of course we keep ourselves flexible. But, thank you for mentioning that point, Gava. [Ph]
Our next question is from Zack Perry from Vine Street Capital. Your line is open.
Question from the gentleman before and I fully appreciate your rationale and reasons for worries about deflationary pressure with all the extra spending in emerging markets and China and the debt. But it’s always good to ask the other side of the question. If you look at the U.S. with the fed seemingly on hold, there actually seems to be a lot of inflationary pressures from wages, from rents, basically through America and probably Canadian too, things you need to buy since we have a lot of inflation. Do you think about that at all as principal risk given your position on deflation or do you think that’s strictly transitory at this point, Prem?
Yes, that’s a good question. We watch it carefully of course but as we look and see there is no real pressure on wages yet. Velocity of money, we look at velocity, we talked about that in our annual meeting, velocity of money in the United States, in Europe and in Japan are coming down significantly. And that happens when you’ve got too much debt in the system. There is too much debt in the United States, there’s a lot of debt in Europe even more than the U.S. in terms of percentage of GDP and in Japan of course is the highest. So, you’re not able to, again, inflation going because velocity of money is just plummeting. And the last time I did that was in the 30s in the United States. And so, we watch it and we examine it but it seems to us that it hasn’t impacted it yet.
And it’s interesting thing, more recently this is being shown with interest rates going down, negative interest rates and interest rates going down, the Federal Reserve and the ECB and Japanese, Bank of Japan, they’re expecting people to spend more, but just the opposite is taking place. So in Sweden, if you look and you can see statistics there, interest rates, saving -- interest rates in banks and deposit rates have come down significantly and on the other side, savings rates have gone up dramatically in Sweden and we’re seeing it in different places because you have to save more money, if interest rates are lower to have the same type of income. And so that’s contrary to what people expect, what the Federal Reserve expects and what the other central banks expect. So, there is a lot of unintended consequences. We worry about them, we want to protect our Company from these problems, and we want to survive them. And because we’ve got these deflation swaps, we expect to make quite a bit of money also in that connection. Thank you for your questions, Zack. Bob, next question?
Our next question is Binoy Jariwala from Sunidhi Securities and Finance Ltd.
My question pretends to one of the subsidiaries which is Thomas Cook India, on the financials you have mentioned that you have taken an asset impairment of approximately $13.8 million. Could you share something more on this? And secondly, your thoughts on how is Thomas Cook India performing; is it as per your expectations, exceeding your expectations, how’s it going? Thank you.
Thank you, Binoy. Yes, that $13.8 million, as you know was an impairment Sterling was accounts receivable; it was a surprise. And they follow the traditional accounting policies in the industry. But they felt that it was not conservative; they got right on top of it under Ramesh Ramanathan and took a hard look at it and decided. We’re always, Binoy, when we see a problem, we react and we take heads upfront and that’s what Ramesh did, and it’s a good thing. In terms of -- and then can go forward and build -- has business in Sterling as we go forward. Thomas Cook under Madhavan Menon has that too, foreign exchange and the travel business. And that business over time, because in a country like India, travel’s going to increase significantly, over time, that’s going to do very well. And we like Madhavan and what he’s done, we bought Kone [ph] which is our major competitor and is integrated it very well. This happened recently. We like Sterling Resorts and the possibilities as we go forward in India. And then on top of that we’ve got Quest as you know. And Quest has I think publically said that they will be going public in the next few months. And that’s a very good company run by Ajit Isaac. And Ajit has built an outstanding company.
So, when you look at the Thomas Cook and its various parts, we remain very optimistic for the longer term for the future. We always do things for the long-term basis, we don’t really care about quarterly earnings, Binoy, but we think over time, it will do very well. Thank you for that question. Bob, next question?
At this time, we have no further questions.
Well, if there are no more questions, thank you all for joining us on this call. We look forward to presenting to you again in the next quarter. Thank you, Bob.
That concludes today’s conference. Thank you for participating. You may now disconnect.
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