Fairfax, 9M2019: consolidated earnings went up 56.1%

Fairfax Financial Holdings announced net earnings of USD 68.6 million in the third quarter of 2019, 34.4% less compared to the third quarter of 2018, primarily reflecting net losses on investments, partially offset by higher operating income. However, the nine months earnings reached USD 1,332 million, which reflects a 56.1% increase year-on-year.


Fairfax nine months figures (vs. 9M2018)


  • Gross written premiums: USD 13,274 million (+12.8%), from the following branches:
    • Northbridge: USD 1,112 million (+13.5%)
    • Odyssey Group: USD 2,793 million (+11.1%)
    • Crum & Forster: USD 2,101 million (+16.4%)
    • Zenith National: USD 589 million (-8.9%)
    • Brit: USD 1,741 million (+3.6%)
    • Allied World: USD 2,945 million (+12.5%)
    • Fairfax Asia: USD 329 million (+10.6%)
    • Others: USD 1,292 million (-6.4%)
  • Net premiums: USD 10,614 million (+13.2%)
  • Underwriting profit: USD 271 million (-9.5%)
  • Operating income: USD 857 million (+18.2%)
  • Net investments: USD 1,076 million (+17.3%)
  • Net earnings: USD 1,332 million (+56.1%)


2019 third quarter analysis (3Q2019 alone)

The consolidated combined ratio of the insurance and reinsurance operations was 97.5%, producing an underwriting profit of USD 81.3 million, compared to a combined ratio of 97.6% and an underwriting profit of USD 74.2 million in 2018.

Net premiums written by the insurance and reinsurance operations increased by 12.1% to USD 3,318.1 million (13.7% excluding the net premiums written by operations not present in the third quarters of both 2019 and 2018).

The operating income of the insurance and reinsurance operations increased to USD 280.1 million from USD 249.9 million, reflecting primarily higher interest and dividends.

Interest expense of USD 121.5 million is comprised of USD 65.7 million incurred on borrowings by the holding company and the insurance and reinsurance companies, USD 36.6 million incurred on borrowings by the non-insurance companies (which are non-recourse to the holding company) and USD 19.2 million of accretion on lease liabilities subsequent to the adoption of IFRS 16 on January 1, 2019.

Short-dated U.S. treasury bonds and high quality corporate bonds represented 25.7% of the company's portfolio investments at September 30, 2019 compared to 34.7% at December 31, 2018.

Net losses on Other in the third quarter of 2019 in the table above was primarily due to foreign exchange impacts on investments denominated in the euro, which weakened against the U.S. dollar.

The company held USD 1,701.8 million of cash, short term investments and marketable securities at the holding company level (USD 1,699.0 million net of short sale and derivative obligations) at September 30, 2019, compared to USD 1,557.2 million (USD 1,550.6 million net of short sale and derivative obligations) at December 31, 2018.

The company's total debt to total capital ratio, excluding non-insurance operations, increased to 27.1% at September 30, 2019 from 25.0% at December 31, 2018, primarily reflecting increased borrowings at the holding company, partially offset by increased common shareholders' equity.


Prem WATSA, Chairman and Chief Executive Officer, said:

"Despite the catastrophe activity in the quarter, our insurance companies continued to have strong underwriting performance with a third quarter consolidated combined ratio of 97.5%, with Zenith National at 87.1% and all but one of our other major companies between 96.2% and 97.9%, and our operating income remained excellent, improving to USD 280 million. We continue to be soundly financed, with over USD 1 billion cash and marketable securities at the holding company and no significant holding company debt maturities until 2022."



More financial information about Fairfax is available at fairfax.ca/financials/interim-reports


Fairfax Financial Holdings, headquartered in Toronto, Canada, is a holding company which, through its subsidiaries, is engaged in property and casualty insurance and reinsurance and the associated investment management. Its presence in CEE can be seen in multiple companies based in Poland (Polish Re), Luxembourg (Colonnade), Greece (Eurolife ERB) or Ukraine (ARX).


Source: fairfax.ca

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