Fairfax announces 2006 Q2 earnings of US$223 million

Fairfax Financial Holdings Limited (TSX and NYSE:FFH) announced 2006 Q2 earnings of US$223.6 million, and has decided on the commutation of its Swiss Re cover worth US$1 billion.
In a press release, the company also said it will issue a restatement of its earnings, based on an analysis of its 2001 figures.
The combined ratio (COR) of the company’s insurance and reinsurance operations was 100.4 % in 2006 Q2 and 97.8% for the first six months of 2006.
On an individual company basis, Northbridge had a 2006 Q2 COR of 112.1 %, while Crum & Forster had a COR of 99.8% and OdysseyRe a COR of 95.6%.
“Underwriting profit (loss) at the company’s insurance and reinsurance operations for the second quarter and the first six months of 2006 was US$(4.2) million and US$47.8 million respectively,” the company announced in a public statement. “In both cases, [the numbers reflected an] above-noted US$64.5 million increase in the second quarter in Commonwealth’s reserves for 2005 hurricane losses.”
Based on its results, Fairfax has decided to commute its Swiss Re cover. “Fairfax is exercising its right to commute its existing US$1 billion corporate insurance cover ultimately reinsured with a Swiss Re subsidiary (the Swiss Re cover),” the company announced. “It has determined that based on projected payout patterns, the Swiss Re cover no longer provides [Fairfax] with a commercial or economic advantage.”
At the time of commutation, expected to occur in early August 2006, Fairfax intends to terminate its US$450 million letter of credit facility effectively secured by the assets held in trust derived from the premiums on the Swiss Re cover and the interest thereon. “
Fairfax announced that by virtue of the commutation, approximately US$585 million of funds withheld in trust under the Swiss Re cover would be paid to Fairfax’s wholly-owned Irish reinsurance subsidiary, nSpire Re Limited.
“nSpire Re would use approximately US$450 million of those funds to secure or settle the US$450 million of its reinsurance obligations to other Fairfax subsidiaries currently secured by letters of credit issued under the letter of credit facility,” Fairfax announced.