Re/insurance holding firm Fairfax Financial Holdings has reported net earnings of $915.4 million ($37.18 per diluted share after preferred share dividends) for the second quarter of 2024.
This performance was primarily driven by an increase in adjusted operating income to $1,119.4 million and net gains on investments. The book value per basic share rose to $979.63 as of June 30, 2024, up from $939.65 at the end of 2023, marking a 6% increase when accounting for the $15 per common share dividend paid in the first quarter.
Net premiums written by the company’s property and casualty insurance and reinsurance operations increased by 11.5%, reaching $6.84 billion from $6.13 billion. Gross premiums written also saw a rise of 10.8%, largely due to the consolidation of Gulf Insurance, which contributed $523.8 million to net premiums written and $815.9 million to gross premiums written in 2024.
Fairfax noted that this growth was somewhat offset by decreases at Odyssey Group, mainly due to the non-renewal of a significant quota share contract that previously offered minimal underwriting profit and a reduction in U.S. crop insurance.
The underwriting profit for the property and casualty insurance and reinsurance operations was $370.4 million, compared to $337.5 million in 2023. The combined ratio remained consistent at 93.9%.
This was attributed to increased net favorable prior-year reserve development of $131.8 million, balanced by higher underwriting expenses due to investments in personnel and technology to support business growth.
Adjusted operating income rose by 22.5% to $1.12 billion, up from $913.5 million, driven by higher interest and dividend income, a share of profit from associates, and continued strong underwriting performance.
The company recorded a total net benefit of $229.5 million from the application of IFRS 17. This included a net benefit of $434.2 million from discounting losses and ceded losses on claims, net of risk adjustment changes, partially offset by a net finance expense of $204.7 million.
The expense included $366.1 million from interest accretion on net losses on claims, partially mitigated by a $161.4 million benefit from modest increases in discount rates on prior-year net losses.
Consolidated interest and dividend income increased significantly to $614 million, up from $464.6 million. This included $547.1 million earned by the investment portfolios of the property and casualty insurance and reinsurance operations.
The company's insurance and reinsurance entities held portfolio investments totaling $61.5 billion as of June 30, 2024, excluding Fairfax India's portfolio of $2.0 billion. Of these investments, $7.7 billion was in cash and short-term investments, representing 12.6% of the total portfolio.
During the first half of 2024, Fairfax used net proceeds from the sales and maturities of U.S. Treasuries to purchase $729.6 million in other government bonds and $207.9 million in short-dated first mortgage loans.
“We remain focused on maintaining strong financial stability and ended the quarter with about $2.5 billion in cash and marketable securities, prior to Allied World's redemption of its $500.0 million in senior notes. Additionally, we have $2.0 billion, at fair value, in investments in associates and consolidated non-insurance companies owned by the holding company,” chairman and chief executive officer Prem Watsa (pictured above) said.
What are your thoughts on this story? Please feel free to share your comments below.
