Fairfax Financial absorbs Q3 cats to produce solid results

Fairfax Financial Holdings, which owns a number of re/insurers including Allied World, Brit and Zenith National, posted a solid net profit in the third quarter of 2018 despite exposure to a number of natural catastrophes in the quarter.

The company posted net earnings of $106.2 million in the quarter, though this was a big decrease on the $476.9 million it made in the same period a year earlier, the prior year’s results had been boosted by significant investment gains of more than $1 billion.

Prem Watsa, chairman and chief executive, praised the performance of the re/insurance units which posted a consolidated combined ratio of 97.6 percent in the period, despite it being a busy period for catastrophes. This was compared with a combined ratio of 130.2 percent in the same period a year earlier. The worst combined ratio in the company was 108.3 percent produced by Brit.

Also on a consolidated basis, the re/insurance units produced an underwriting profit of $74.2 million in the third quarter of 2018 compared with an underwriting loss of $833.0 million in 2017.

Net premiums written by the insurance and reinsurance operations increased by 6.5 percent to $2.9 billion or 5.4 percent excluding the net premiums written of First Capital, which was sold in the fourth quarter of 2017, and of certain insurance operations of AIG which were acquired in the fourth quarter of 2017.

The insurance and reinsurance operations produced operating income of $249.9 million, compared to an operating loss of $680.4 million in 2017, reflecting lower current period catastrophe losses and higher interest income.

Watsa said: "Despite the catastrophe activity in the quarter, our insurance companies continued to have excellent underwriting performance with a consolidated third quarter combined ratio of 97.6 percent, with Zenith National at 80.3 percent, Northbridge at 89.5 percent and Allied World at 96.7 percent, and our operating income continued to be very strong at $250 million.

“We continue to be soundly financed, with quarter-end cash and marketable securities in the holding company exceeding $1.7 billion and no holding company debt maturities until 2021."

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