Fairfax Financial posts $83.3 million Q2 profit
Fairfax Financial Holdings Limited reported net earnings of $83.3 million in the second quarter of 2011 ($3.40 per diluted share) compared to net earnings of $23.7 million in the second quarter of 2010 ($0.87 per diluted share). The increase in earnings arose primarily from net gains on investments of $119.6 million compared to net losses on investments of $29.3 million last year. Book value per share decreased to $358.60 at June 30, 2011 from $376.33 at December 31, 2010, a decrease of 2.0% (adjusted for the $10.00 per share common dividend paid in the first quarter of 2011).
“Despite the challenging insurance industry and investment environment, during the second quarter we recorded good operating results and essentially maintained our common shareholders’ equity and book value per share,” said Prem Watsa, Chairman and Chief Executive Officer of Fairfax. “Excluding acquisitions, our consolidated premiums grew by 10% during the second quarter. Also, during the quarter, we retired $694 million U.S. of outstanding Fairfax, Crum & Forster and OdysseyRe notes and financed this by issuing ten year Fairfax bonds in the U.S. and Canada at record low interest rates. The company continues to be soundly financed with cash and marketable securities at the holding company level in excess of $1 billion.”
The combined ratio of the company’s insurance and reinsurance operations was 100.5% on a consolidated basis, producing an underwriting loss of $6.1 million, in the second quarter of 2011 compared to a combined ratio and underwriting profit of 99.2% and $8.7 million, respectively, in the second quarter of 2010. Underwriting results in the second quarter of 2011 were negatively affected by $88.1 million of pre-tax catastrophe losses (net of reinsurance and reinstatement premiums) primarily related to U.S. tornado losses which increased the combined ratio by 6.9 points.
Net premiums written by the company in the second quarter of 2011 increased 24.3% (10% excluding acquisitions) to $1,370.1 million from $1,102.4 million in the second quarter of 2010 due primarily to the acquisitions of Zenith National and First Mercury.
Operating income of the company’s insurance and reinsurance operations in the second quarter of 2011 decreased to $146.2 million compared to $152.9 million in the second quarter of 2010, primarily as a result of the slightly higher combined ratio.
