Investment gains boost Fairfax but OdysseyRe shrinks
Fairfax Financial Holdings, the holding company for several re/insurance operations including OdysseyRe, enjoyed a massive boost in its profits for the first quarter of 2014 largely on the back of gains in its investment portfolio. OdysseyRe shrunk slightly in the quarter, however.
Fairfax posted a net profit of $784.6 million for the period, a 385 percent rise on the $161.6 million it made in the same period a year earlier. The increase was largely due to realised and unrealised gains in its investment portfolio together with improved underwriting results.
The company’s net investment gains for the quarter were just over $1 billion compared with $9.4 million in the first quarter of 2013. These included a net $633.7 million gain on equity and equity-related investments, reduced by $71.5 million due to equity hedges it has in place, and a $479 million net gain on bond investments.
The company’s net premiums written saw a small 0.4 percent increase to $1.61 billion. Within this, OdysseyRe’s net written premiums fell to $572.5 million compared with $604 million the year before – a 5.2 percent decline.
Its insurance and reinsurance operations produced operating income of $190.8 million compared with $158.1 million in 2013, primarily as a result of increased share of profit of associates and improved underwriting, the company said.
The combined ratio of the insurance and reinsurance operations was 93 percent producing an underwriting profit of $98.7 million compared with a combined ratio and underwriting profit of 94 percent and $86.0 million respectively in 2013.
“Our insurance companies have begun the year 2014 with a strong underwriting result with a consolidated combined ratio of 93 percent. All of our major insurance companies had a combined ratio less than 100 percent with OdysseyRe at 85.6 percent and Zenith at 90.6 percent. We also realised gains from our equity and equity-related investments of $393 million in the quarter," said Prem Watsa, chairman and chief executive of Fairfax.
“We are maintaining our defensive equity hedges as we remain concerned about the financial markets and the economic outlook. We continue to be soundly financed, with quarter-end cash and marketable securities in the holding company in excess of $1.1 billion.”
