Fairfax’s 2011 net earnings tumble

Fairfax Financial Holdings Limited (TSX: FFH; FFH.U) reported net earnings of $45.1 million for 2011, marking a sharp drop from 2010’s net earnings of $335.8 million.

Fairfax cited weak underwriting results, primarily arising from an “unprecedented” severity of large catastrophe claims worldwide, as a cause for the drop in profit.

“Notwithstanding catastrophe losses of $1 billion in one of the worst catastrophe years on record, our investment results allowed Fairfax to basically break even in 2011, with our book value being essentially unchanged,” said Prem Watsa, Fairfax’s chairman and CEO.

The combined ratio of the insurance and reinsurance operations was 114.2% on a consolidated basis, producing an underwriting loss of $754.4 million at the end of 2011.

Northbridge, Fairfax’s commercial insurance unit, reported an improvement in combined ratio, year-over-year, dropping from 106.9% in 2010 to 102.8% in 2011.

On the other hand, OdysseyRe, Fairfax’s reinsurance unit, saw its combined ratio deteriorate from 95% in 2010 to 116.7% in 2011.