Fairfax earnings drop slightly on market softening

Insurance giant Fairfax Financial Holdings Ltd. (TSX, NYSE: FFH) saw its net income dip slightly in the first quarter ending March 31, 2005 as a result of deteriorating underwriting conditions in the reinsurance segment.
First-quarter 2005 net income was US$35.2 million, or US$2.03 per share, versus US$39.0 million, or US$2.63 per share, in first-quarter 2004. Total revenue also dropped slightly to US$1.47 billion from US$1.48 billion over the same comparative period, however, during the same period net premiums written at ongoing operations rose 5.9% to US$1.10 billion from US$1.04 billion.
The company did post an underwriting gain of US$33.5 million from its ongoing operations in the first quarter of 2005 (Q1 2004: US$44.4 million). And all business segments were able to pull in combined ratios below 100%. The consolidated combined ratio in first-quarter 2005 was 96.7% (Q1 2004: 95.7%).
This reflects improved combined ratios for primary operations, including a ratio of 91.4% for Canadian operations (Q1 2004: 92.8%), and a performance of 95.9% for U.S. operations (Q1 2004: 99.7%) and progress in the Asian operations at 99.8% (Q1 2004: 91.7%). However, deterioration in the reinsurance segment dragged results, with Odyssey Re posting a combined ratio of 99.8% in the first quarter of 2005 versus 95.0% a year earlier.
Interest and dividends rose to US$107.1 million in the first quarter of 2005 from US$92.4 million a year earlier, while realized gains on investments reached US$131.4 million from US$72.6 million over the same comparative period.
Expenses fell slightly to US$1.37 billion in the first quarter from US$1.40 billion a year earlier.
Total shareholders’ equity remained constant at US$3.0 billion at the end of March, 2005.