Fairfax, 2Q2020: GWP expanded 8% while net earnings stood at USD 435 million

6 August 2020 — press.release
For the second quarter of 2020, from April to June, Fairfax Financial Holdings announced net earnings of USD 435 million, compared to net earnings of USD 494 million in the second quarter of 2019.

Fairfax 2Q2020 preliminary figures, y-o-y changes

  • Gross written premiums: USD 4,703 million (+8%)
  • Net premiums written: USD 3,556 million (+6%)
    • Northbridge: USD 403 million (+5%)
    • Odyssey Group: USD 935 million (+9%)
    • Crum & Forster: USD 580 million (-3%)
    • Zenith National: USD 116 million (-25%)
    • Brit: USD 418 million (+7%)
    • Allied World: USD 791 million (+20%)
    • Fairfax Asia: USD 44 million (-15%)
    • Others: USD 268 million (-4%)
  • Gross losses on claims: USD 2,969 million (+14%)
  • Underwriting profit (loss): USD -13 million (1H2019: USD 101 million)
  • Combined ratio: 100.4% (+3.6 pp.)
  • Net earnings: USD 435 million (-12%)

Net premiums written by the insurance and reinsurance operations increased by 5.4% to USD 3,556 million from USD 3,373 million.

The consolidated combined ratio of the insurance and reinsurance operations was 100.4%, producing an underwriting loss of USD 13.3 million, compared to a combined ratio of 96.8% and an underwriting profit of USD 101 million in 2019, primarily reflecting COVID-19 and higher current period catastrophe losses, partially offset by growth in net premiums earned and higher net favourable prior year reserve development.

Total COVID-19 losses in the first six months of 2020 of USD 392 million derived primarily from coverages related to business interruption (approximately 46%, principally from international business) and event cancellation (approximately 36%). Incurred but not reported losses comprised approximately 70% of the total.

Operating income of the insurance and reinsurance operations decreased to USD 121 million from USD 330 million, reflecting COVID-19 losses of USD 308 million.

Consolidated interest and dividends of USD 205 million decreased from USD 222 million, primarily reflecting lower dividend income earned on common stocks and lower interest income earned due to sales and maturities of U.S. treasury bonds in the second half of 2019, partially offset by higher interest income earned on the reinvestment of the U.S. treasury bond proceeds into higher yielding, high quality corporate bonds and commercial paper.

Net investment gains of USD 644 million consisted in: (1) net gains on bonds of USD 482 million, primarily reflected a tightening of corporate credit spreads subsequent to the global economic disruption in March 2020 caused by the COVID-19 pandemic; (2) net equity exposures of USD 160 million, primarily comprised of unrealized appreciation of common stocks and equity-related derivatives.

Prem Watsa, Chair and Chief Executive Officer of Fairfax, commented:

"Core underwriting performance continues to be very strong with a combined ratio excluding COVID-19 losses of 91.2%, continued favourable reserve development and growth in gross premiums written of 8.4%, and operating income was USD 120.5 million despite the COVID-19 losses. We remain focused on continuing to be soundly financed and ended the quarter with approximately USD 1.9 billion in cash and investments in the holding company."

More financial information about Fairfax can be found at www.fairfax.ca

Source: fairfax.ca

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