Fairfax reports results for Q2 2024

Re/insurance holding firm Fairfax Financial Holdings has reported net earnings of $915.4 million ($37.18 per diluted share after preferred share dividends) for the second quarter of 2024.

This performance was primarily driven by an increase in adjusted operating income to $1,119.4 million and net gains on investments. The book value per basic share rose to $979.63 as of June 30, 2024, up from $939.65 at the end of 2023, marking a 6% increase when accounting for the $15 per common share dividend paid in the first quarter.

Net premiums written by the company’s property and casualty insurance and reinsurance operations increased by 11.5%, reaching $6.84 billion from $6.13 billion. Gross premiums written also saw a rise of 10.8%, largely due to the consolidation of Gulf Insurance, which contributed $523.8 million to net premiums written and $815.9 million to gross premiums written in 2024.

Fairfax noted that this growth was somewhat offset by decreases at Odyssey Group, mainly due to the non-renewal of a significant quota share contract that previously offered minimal underwriting profit and a reduction in U.S. crop insurance.

The underwriting profit for the property and casualty insurance and reinsurance operations was $370.4 million, compared to $337.5 million in 2023. The combined ratio remained consistent at 93.9%.

This was attributed to increased net favorable prior-year reserve development of $131.8 million, balanced by higher underwriting expenses due to investments in personnel and technology to support business growth.

Adjusted operating income rose by 22.5% to $1.12 billion, up from $913.5 million, driven by higher interest and dividend income, a share of profit from associates, and continued strong underwriting performance.

The company recorded a total net benefit of $229.5 million from the application of IFRS 17. This included a net benefit of $434.2 million from discounting losses and ceded losses on claims, net of risk adjustment changes, partially offset by a net finance expense of $204.7 million.

The expense included $366.1 million from interest accretion on net losses on claims, partially mitigated by a $161.4 million benefit from modest increases in discount rates on prior-year net losses.

Consolidated interest and dividend income increased significantly to $614 million, up from $464.6 million. This included $547.1 million earned by the investment portfolios of the property and casualty insurance and reinsurance operations.

The company’s insurance and reinsurance entities held portfolio investments totaling $61.5 billion as of June 30, 2024, excluding Fairfax India’s portfolio of $2.0 billion. Of these investments, $7.7 billion was in cash and short-term investments, representing 12.6% of the total portfolio.

During the first half of 2024, Fairfax used net proceeds from the sales and maturities of U.S. Treasuries to purchase $729.6 million in other government bonds and $207.9 million in short-dated first mortgage loans.

“We remain focused on maintaining strong financial stability and ended the quarter with about $2.5 billion in cash and marketable securities, prior to Allied World‘s redemption of its $500.0 million in senior notes. Additionally, we have $2.0 billion, at fair value, in investments in associates and consolidated non-insurance companies owned by the holding company,” chairman and chief executive officer Prem Watsa (pictured above) said.

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