Fairfax, FY2019: investments gains lifted consolidated net earnings to USD 2 billion

18 February 2020 — press.release
Fairfax Financial Holdings Limited announced fiscal year 2019 net earnings of USD 2,004 million compared to fiscal year 2018 net earnings of USD 376 million, primarily reflecting net gains on investments.

The fourth quarter alone net earnings (attributable to shareholders) were USD 672 million (FY2018: EUR (478) million).

Fairfax FY2019 (12 months) figures, y-o-y changes

  • Gross premiums written: EUR 17,511 million (+12.8%)
  • Net premiums written: EUR 13,836 million (+11.3%), of which:
    • Northbridge: EUR 1,350 million (+15.0%)
    • Odyssey Group: EUR 3,394 million (+17.1%)
    • Crum & Forster: EUR 2,332 million (+17.9%)
    • Zenith National: EUR 721 million (-8.6%)
    • Brit: EUR 1,656 million (+10.8%)
    • Allied World: EUR 2,429 million (+2.5%)
    • Fairfax Asia: EUR 231 million (+20.3%)
    • Other Insurance and Reinsurance: EUR 1,148 million (+2.1%)
  • Underwriting profit: EUR 395 million (+24.2%)
  • Operating income: EUR 1,108 million (+15.9%)
  • Net gains on investments: EUR 1,716 million (+578.3%)
  • Combined ratio: 96.9% (-0.4 pp.)
  • Net earnings: EUR 2,004 million (+433%)

The consolidated combined ratio of the insurance and reinsurance operations was 96.9% (-0.4 pp.), producing an underwriting profit of USD 394.5 million (+24.2%), primarily reflecting growth in net premiums earned and lower current period catastrophe losses, partially offset by lower net favorable prior year reserve development.

Net premiums written by the insurance and reinsurance operations increased by 10.3% to USD 13,261.1 million.

Operating income of the insurance and reinsurance operations increased by 15.9% to USD 1,107.5 million, primarily reflecting higher interest and dividends and underwriting profit.

Interest and dividends of USD 880.2 million increased by 12.3%, primarily reflecting higher interest income earned on increased holdings of high quality U.S. corporate bonds, partially offset by lower interest income earned on decreased holdings of U.S. municipal bonds.

Interest expense of USD 472.0 million was comprised of USD 268.4 million incurred on borrowings by the holding company and the insurance and reinsurance companies, USD 135.8 million incurred on borrowings by the non-insurance companies (which are non-recourse to the holding company) and USD 67.8 million of accretion on lease liabilities subsequent to the adoption of IFRS 16 on January 1, 2019.

Net investment gains were USD 1,716.2 million in 2019 (+578%).

Net gains on long equity exposures of USD 1,631.1 million in 2019 was primarily comprised of unrealized appreciation of preferred shares of Go Digit Infoworks (USD 350.9 million), the sale of the company's remaining interest in ICICI Lombard (USD 240.0 million), a non-cash gain on the merger of Grivalia Properties into Eurobank (USD 171.3 million) and significant unrealized appreciation of common stocks.

The company's total debt to total capital ratio, excluding non-insurance companies, decreased by 0.5 percentage points to 24.5% at December 31, 2019 (FY2018: 25.0%).

At December 31, 2019, common shareholders' equity was USD 13,042.6 million, or USD 486.10 per basic share, (FY2018: USD 11,779.3 million / USD 432.46 per basic share). The increase in common shareholders' equity per basic share was primarily due to net earnings attributable to shareholders of Fairfax.

Prem Watsa, Chairman and Chief Executive Officer, said:

"2019 was a record year for Fairfax with USD 2 billion in net earnings, resulting in book value per share growth of 14.8%. Our insurance companies continued to have strong underwriting performance during 2019 with a consolidated combined ratio of 96.9%, with Zenith National at 85.2% and all of our other major companies between 96.2% and 97.6%, and our operating income was excellent at USD 1,107.5 million. We continue to be soundly financed, with over USD 1 billion in cash and investments at the holding company and no significant holding company debt maturities until 2022."

More financial information about Fairfax can be found at fairfax.ca/financials/interim-reports.

Source: fairfax.ca
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