Fairfax earnings jump; TIG reserve cover found

It was good news all around for Fairfax Financial Holdings Ltd. (NYSE, TSX: FFH) with the release of vastly improved first quarter 2003 results, plus the announcement that reinsurers have agreed to adverse development cover for the majority of troubled sub TIG’s reserves.
Currently Fairfax’s ORC Re subsidiary has taken on the full US$300 million in adverse development cover related to TIG, but now a group of reinsurers led by Bermuda-based Chubb Re has agreed to take over US$200 million of the coverage. The move, if approved by California’s insurance commission, will free up US$200 million that has been in trust for TIG, with some of this to go towards paying for the reinsurance cover.
In reporting results for the first quarter of 2003 (in Canadian dollars), the company notes that net earnings are $154.6 million, a huge jump over the $11.3 million reported for last year’s first quarter. Net earnings per share are $10.60 for the most recent period, versus $0.46 a year earlier.
Revenue grew to $2.03 billion from $1.74 billion the first quarter prior, with net written premiums up 18.6%, and realized gains of $228.2 million for the most recent period.
Overall, the company’s combined ratio was brought below the “magic 100%”, to clock in at 98.1%, against 100.1% in first-quarter 2002. For the Canadian insurance operations (soon to be released in an IPO as Northbridge Financial Corp.) the combined ratio for Q1 2003 is 95.3% versus 99.4% last year.