Canadian Underwriter

Fairfax earnings wiped out by hurricanes

October 28, 2004   by Canadian Underwriter

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The quartet of U.S. hurricanes this fall, as well as bad weather here in Canada, have produced a net loss in the third quarter for financial giant Fairfax Financial Holdings Ltd. (TSX, NYSE: FFH). Fairfax reports the four hurricanes Charley, Frances, Ivan and Jeanne coupled with the Peterborough, Ontario floods and hailstorms in Western Canada, have landed a US$127.7 million blow to third quarter results. The company also recorded a US$57.9 million hit from the commutation of reinsurance contracts by its TIG subsidiary.
Overall, the company produced a net loss of US$108.9 million (US$8.08 per share) in the third quarter ending September 30, 2004, compared to net loss of US$10.7 million (US$1.02 per share) during the same period in 2003. The company notes that excepting the hurricanes and TIG commutation, it would have produced net income of US$76.7 million for the most recent quarter.
For the first nine months of 2004, the net loss stood at US$23.4 million, compared to net income of US$264.5 million in the first nine months of 2004.
The company’s underwriting loss stood at US$99.0 million for third quarter 2004, down from an underwriting profit of $34.1 million last year. The combined ratio grew to 109.3% from 96.5% over the same comparative period.
For the first nine months of 2004, the company managed a modest underwriting profit of US$300,000, compared to a profit of US$63.2 million for the same period a year ago. The combined ratio for the first nine months of 2004 was 100.0%, up from 97.7% a year earlier.
The company did post growth in gross premiums in the third quarter to US$1.44 billion this year from US$1.32 billion a year ago. During the same comparative period, net earned premiums grew to US$1.15 billion from US$973.5 million.
And for the first nine months of 2004, gross written premiums were up to US$4.18 billion from US$4.02 the year prior. And net earned premiums were up to US$3.55 billion from US$3.04 billion over the same comparative period.
During the third quarter of this year the company produced interest and dividends of US$98.7 million (Q3 2003: US$79.6 million), and realized gains of US$94.4 million (Q3 2003: US$37.1 million). For the first nine months of 2004, interest and dividends were US$268.6 million (Q3 2003: US$273.2 million), and realized gains were US$231.5 million (Q3 2003: US$585.0 million).
At September 30, 2004 the pre-tax unrealized loss on portfolio investments was US$23.1 million, a drop of US$268.0 million from the same point in 2003, a decline the company attributes largely to rising interest rates.

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