Fairfax Financial Q3 Profit Rises 20%

10/29/2009 11:30 PM ET

(RTTNews) - Canada-based insurance holding company Fairfax Financial Holdings Ltd. (FFH: News ,FFH.TO: News ) on Thursday reported a 20% increase in profit for the third quarter from last year, helped by underwriting profit at its insurance and reinsurance operations along with increased interest and dividend income.

Third-Quarter Results

For the third quarter, the company's net earnings increased to US$562.4 million, or US$30.88 per share, from US467.6 million, or US$25.27 per share in the year-ago quarter. Analysts polled by Thomson Reuters expected the company to report earnings of US$9.91 per share for the quarter. Analysts' estimates typically exclude special items.

The increase in quarterly net earnings was primarily due to underwriting profit at the company's insurance and reinsurance operations compared to an underwriting loss in the year-ago period along with increased interest and dividend income. These were partially offset by reduced net investment gains.

Underwriting profit earned by the company's insurance and reinsurance operations in the quarter was US$1.6 million compared to the underwriting loss of US$170.3 million in the prior-year period, which primarily suffered from U.S. hurricane losses.

Total revenues for the quarter surged 40% to US$2.21 billion from US$2.16 billion in the prior-year quarter. Analysts had consensus revenue estimate of US$1.57 billion for the quarter.

Prem Watsa, Chairman and Chief Executive Officer of Fairfax Financial, said, "Besides excellent results, we have now privatized OdysseyRe and we financed it by issuing $1 billion of common stock. We have also now publicly issued 10-year bonds and preferred shares in Canada for the first time ever. After the OdysseyRe privatization, Fairfax continues to have in excess of $1 billion in cash and marketable securities at the holding company level, and also has a significantly increased annual dividend capacity from its three major insurance/reinsurance operations."

Peer Performance

Zurich, Switzerland-based ACE Ltd. (ACE) said Tuesday that its third-quarter profit surged from last year, driven by higher underwriting income. The company posted net income available to holders of common shares of US$494 million, or US$1.46 per share, for the third quarter, compared to US$54 million, or US$0.16 per share, in the prior-year quarter.

Other Metrics

Fairfax's net premiums written in the third quarter decreased 6% to US$1.06 billion from US$1.13 billion in the year-ago quarter, reflecting the impact of weak economic conditions and the foreign currency translation impact of the year-over-year strengthening of the U.S. dollar. These were partially offset by the inclusion of the results of Advent and Polish Re in the latest quarter.