BNS 08:08 AM EDT, 04/29/2022 (MT Newswires) -- Fairfax Financial's (FFH.TO) first-quarter results came in ahead of expectations driven by stronger-than-expected underwriting profitability and lower-than-expected investment losses, writes Scotiabank.
The company continued to demonstrate very solid top-line momentum with P&C Net Premiums Written (NPW) of $5.3 billion, above Scotiabank's expectations of $5 billion, and increasing by almost 28% y/y. All underlying insurance companies recorded double-digit y/y gains, with the exception of Zenith, which experienced a modest decrease in NPW.
Combined ratio was also stronger-than-expected coming in at 93.1% and improving 290 bps y/y, with all insurance subsidiaries posting a combined ratio below 100%, analyst Phil Hardie writes.
Rising interest rates had a more modest than expected negative impact on Q1/22. Fairfax's $37 billion fixed income portfolio has a low duration of 1.4 years and only decreased by 1.3% in the quarter. Management believes that the company stands to benefit from increased interest income as it deploys the portfolio into one to two-year treasury bonds for the rest of 2022.
Maintain Sector Outperform, $820 TP.