Newspaper article The Canadian Press

Fairfax Financial Second-Quarter Earnings, Net Premiums Improve by 14%

Newspaper article The Canadian Press

Fairfax Financial Second-Quarter Earnings, Net Premiums Improve by 14%

Article excerpt

Fairfax Financial Q2 earnings improve by 14%

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TORONTO - Insurance and investment giant Fairfax Financial Holdings Ltd. (TSX:FFH) says second-quarter profit rose 14 per cent, largely due to improved underwriting results and a jump in revenues from premiums written by its insurance and reinsurance businesses.

The Toronto-based financial services company, which reports in U.S. dollars, said Thursday it earned $95 million, or $3.85 per diluted share, up 14 per cent from the $83.3 million, or $3.40 per diluted share during the year-ago quarter.

The underwriting business at the casualty and property insurer swung back to profit -- $34.8 million -- from a loss of $6.1 million during the quarter a year-ago, when it booked losses related to an influx of tornadoes in the U.S.

Net insurance premiums written increased by 14 per cent to $1.6 billion from $1.37 billion in the 2011 quarter.

However, the improved results from its underwriting and premiums were offset by lower investment gains and lower interest and dividend income during the volatile quarter.

"Our underwriting results continued to improve on increased premiums and we produced a small investment gain notwithstanding unrealized investment losses related to our defensive hedging strategy," said Prem Watsa, chairman and CEO of Fairfax.

"We continue to maintain our equity hedges as we remain very concerned about the economic outlook over the next few years."

Companies buy hedges -- contracts that protect the future value of investments and other assets -- during volatile stock markets. However, unexpected share price swings can lead to paper losses on the balance sheet, which must be accounted for.

Operating income in the insurance and reinsurance businesses fell to $117.3 million from $146.2 million in the quarter of 2011, largely due to the decrease in interest and dividend income.

Interest and dividend income slipped to $104.9 million from $195.1 million as the company increased its holdings in low-yielding cash and short-term investments. …

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