Combined ratio deteriorates 38.9 points for Fairfax amid hurricane losses

Fairfax Financial Holdings Ltd. has reported an underwriting loss of $833 million during the three months ending September 30, with its insurers’ share of losses from three recent hurricanes and an earthquake in Mexico amounting to $960 million.

All figures are in United States dollars.

Toronto-based Fairfax owns Northbridge Insurance, OdysseyRe and the majority of both Allied World and London-based Brit, among others.

“During the third quarter of 2017, the insurance industry experienced some of the largest catastrophe losses in its history as a result of Hurricanes Harvey, Irma and Maria and earthquakes in Mexico,” stated Prem Watsa, the chairman, chief executive officer and founder of Fairfax, in a release Thursday. “Our companies’ share of the losses amounted to $960 million, well within our expectation that in a year of extreme catastrophe losses, we expect to break even but will not suffer any significant loss of capital.”

Company-wide, Fairfax reported an underwriting loss of $833 million in the latest quarter, compared to underwriting profit of $174.5 million in Q3 2016.

Net losses on claims were $1.134 billion in the latest quarter, compared to $189.6 million in Q3 2016. For the nine months ending Sept. 30, net losses on claims were $1.69 billion in 2017, compared to $733.4 million in 2016.

Net premiums written rose 42%, from $1.965 billion in Q3 2016 to $2.8 billion in the most recent quarter.

Fairfax recently announced several acquisitions, including the majority of Indonesia-based PT Asuransi Multi Artha Guna Tbk (AMAG) and American International Group Inc.’s local commercial and consumer insurance operations in Argentina, Chile, Colombia, Uruguay, Venezuela and Turkey.

On July 6, 2017, Fairfax closed its acquisition of a majority interest in Allied World Assurance Company Holdings AG, a Zug, Switzerland-based reinsurer and commercial primary insurer that has a Canadian branch.

Allied World’s Q3 2017 combined ratio was 182.2% and 106.1% if losses from Hurricanes Harvey, Irma and Maria are excluded. Those hurricanes made landfall Aug. 25 in Texas, Sept. 10 in Florida and Sept. 20 in Puerto Rico.

Fairfax’s consolidated combined ratio was 130.2% in the latest quarter, up 38.9 points from 91.3% in Q3 2016.

In addition to the majority of Allied World (in which Alberta Investment Management Corporation and Ontario Municipal Employees Retirement System own minority interests), Fairfax also owns workers compensation insurer Zenith National of Woodland Hills, Calif., commercial specialty insurer Crum & Forster of Morristown, N.J., Stamford, Conn.-based OdysseyRe and the majority of Brit, among others.

OdysseyRe had a combined ratio of 126.3% in Q3 2017, up 36.8 points from 89.5% in Q3 2016 while Brit had a combined ratio of 158.3% in Q3 2017, up 59.8 points from 98.5% in Q3 2016.

Brit provides insurance and reinsurance in the Lloyd’s market. As of June 30, Fairfax owned 72.51% of Brit’s ordinary shares and the rest was owned by OMERS Administration Corporation, Brit said in August in its financial report for the first half of 2017.

On Thursday, Fairfax reported net earnings attributable to shareholders of $476 million in the latest quarter, compared to $1.3 million in Q3 2016.

The results for the quarter ending Sept. 30 include a net gain after tax of $930.1 million on the sale of about two-thirds of Fairfax’s equity interest in ICICI Lombard General Insurance Company Limited “and the adjustment to fair value of the company’s residual interest,” Fairfax reported. Mumbai-based ICICI Lombard is a joint venture between Fairfax and ICICI Bank that writes auto, home, bicycle, travel and health insurance.

Fairfax reported net gains on investments of $1.1 billion in Q3 2017 compared to net losses on investments of $200 million in the same period of 2016.

For the first nine months of the year, Fairfax reported net premiums written of $8.86 billion this year, up 21.5% from $7.29 billion in Q3 2016.