Insurance holding company Fairfax Financial has revealed its 2020 results, reporting net earnings of $218.4 million, compared to 2019’s net earnings of $2,004.1 million – a steep drop-off for the firm.
On the other hand, net premiums written by Fairfax’s insurance and reinsurance operations increased by 11.0% to $14,717.7 million from $13,261.1 million, while gross premiums written increased by 12.5%. Additionally, the consolidated combined ratio of the insurance and reinsurance operations came in at 97.8%, producing an underwriting profit of $309.0 million, in spite of COVID-19 losses of $668.7 million and catastrophe losses of $644.3 million. This is compared to a combined ratio of 96.9% and an underwriting profit of $394.5 million in 2019.
“In 2020, all of our insurance and reinsurance companies, except Brit, achieved a combined ratio below 100%. Our consolidated combined ratio of 97.8% in 2020 included catastrophe losses of $644.3 million or 4.7 combined ratio points and COVID-19 losses of $668.7 million or 4.8 combined ratio points,” said Prem Watsa, Fairfax chairman and chief executive officer. “Core underwriting performance continued to be very strong with a combined ratio excluding COVID-19 losses of 93.0%, continued favourable reserve development and growth in gross premiums written of 12.5%, resulting in operating income of $915.8 million, despite the catastrophe and COVID-19 losses.”
The leader continued that Fairfax’s net losses on investments of around $1.5 billion on March 31, 2020, reversed over the rest of 2020, leading the company to finish 2020 with net gains of $313.1 million.
“We continue to focus on being soundly financed and ended the year with approximately $1.3 billion in cash and investments in the holding company,” he noted. “We expect that by end of the first quarter, with the closing of the RiverStone Barbados transaction … we will have in excess of $1.0 billion of cash and investments in the holding company, with our credit facility fully paid off.”
The chairman and CEO also pointed out that he believed that Fairfax shares were trading in the market at a “ridiculously cheap price” in 2020. Accordingly, since the second half of 2020, Fairfax has purchased total return swaps with respect to 1,407,864 subordinate voting shares of Fairfax, with a total market value at the time of those agreements of $484.9 million.
