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Fairfax profit drops on investment losses

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Canadian insurer Fairfax, the owner of a variety of global insurance investments including Allied World, has reported a slide in second-quarter earnings as investment losses driven by share price fluctuations offset stronger operating income.

Net profit fell to $US63.1 million ($85.3 million) from $US311.6 million ($421 million) in the corresponding period last year.

The result includes a loss of $US58.2 million ($78.6 million) on investments, down from a profit of $US205.1 million ($277.1 million).

Gross written premium grew to $US4.1 billion ($5.5 billion) from $US2.8 billion ($3.8 billion).

The combined operating ratio for insurance and reinsurance operations deteriorated to 96.1% from 94.9%, while operating income increased to $US237.3 million ($320.6 million) from $US184.4 million ($249.2 million).

“Our insurance companies continued to have excellent underwriting performance in the second quarter and first half,” CEO Prem Watsa said.

Allied World, which was acquired last year, had a combined operating ratio of 94.9%.

Fairfax’s first-half net profit improved to $US747.4 million ($370.8 million) from $US394.2 million ($532.6 million), with the first quarter lifted by a change in accounting for Quess Corp.