31st July 2022
Fairfax Financial Holdings have announced a net loss of $881.4m($37.59 net loss per diluted share after payment of preferred share dividends) in the second quarter of 2022 compared to net earnings of $1,201.4m($43.25 net earnings per diluted share after payment of preferred share dividends) in the second quarter of 2021. Book value per basic share at 30th June 2022 was $588.36 compared to $630.60 at 31st December 2021 (a decrease of 5% adjusted for the $10 per common share dividend paid in the first quarter of 2022).
"The company continued its excellent underwriting performance in the second quarter of 2022 with a consolidated combined ratio of 94.1, with all of our major insurance companies having combined ratios below 95 in the quarter, with Northbridge at 87.2 and Allied World at 92.2 leading the way. Our companies continued to achieve significant growth in the second quarter with gross premiums written up 21.4% and net premiums written up 24.9%, primarily reflecting new business and continued favourable underwriting conditions. Operating income increased to $1,208m which was a record for a half year, reflecting the strong growth in underwriting profit and increases in interest and dividends and share of profit of associates.
"Net losses on investments of $1,547.9m during the quarter were principally comprised of mark-to-market losses on common stocks of $873.8m reflecting the 16% drop in the S&P 500 in the quarter and mark-to-market losses on bonds of $413.4m due to continued rising interest rates. The gain on the sale of our pet insurance business to JAB, the additional gain on consolidation of Digit Insurance and the gain on the sale of Resolute are not accounted for in the second quarter as those transactions have not closed.
"Our low duration of 1.2 years on our $36bn fixed income portfolio (mainly cash, short term investments and short duration US treasuries and Canadian government bonds) reduced the impact that rising interest rates had on the fair value of our bonds in the second quarter of 2022 to only a decrease of 1.1% of the fixed income portfolio, while enabling the company to benefit from increased interest income in the second quarter and in the remainder of 2022 and future periods as we deployed the portfolio into one to two year treasury bonds. Given the low duration of the bond portfolio if the investments are held to maturity a significant portion of the net unrealized losses recorded in the first six months of 2022 of $965m will be reversed in the next 12 to 18 months. Interest and dividend income increased from a run rate of approximately $530m annually at the end of 2021 to a current normalized rate of approximately $950m annually.
We continue to focus on being soundly financed and ended the quarter with approximately $1.1bn in cash and investments in the holding company and our credit facility undrawn," said Prem Watsa, chairman and ceo.
Fairfax Financial Trends(59 articles)
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