Fairfax Financial Holdings Ltd T.FFH.PR.F

Primary Symbol: T.FFH Alternate Symbol(s): FRFHF | T.FFH.PR.C | FXFLF | FRFZF | T.FFH.PR.D | FRFGF | T.FFH.PR.E | FXFHF | FAXRF | T.FFH.PR.G | FAXXF | T.FFH.PR.H | FRFXF | T.FFH.PR.I | T.FFH.PR.J | T.FFH.PR.K | FRFFF | T.FFH.PR.M | FFHPF

Financial Services Insurance - Property & Casualty

Fairfax Financial Holdings Limited is a Canada-based holding company. The Company, through its subsidiaries, is engaged in property and casualty insurance and reinsurance and the associated investment management. The Company’s segments include Property and Casualty Insurance and Reinsurance, Life insurance and Run-off and Non-insurance companies. The Property and Casualty Insurance and Reinsurance segment includes North American Insurers, Global Insurers and Reinsurers and International Insurers and Reinsurers. The Life Insurance and Run-off segment include Eurolife and Run-off. The Non-insurance companies segment includes restaurants and retail, Fairfax India, Thomas Cook India and others. Eurolife underwrites traditional life insurance policies (endowments, deferred annuities, whole life and term life), group benefits, including retirement benefits, and accident and health insurance policies. The North American Insurers include Northbridge, Crum & Forster and Zenith National.

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Fairfax Financial Holdings Ltd

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Post by retiredcfon Jul 29, 2022 9:09am

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Post# 34859567

RBC

July 29, 2022

Fairfax Financial Holdings Limited Core insurance results beat expectations

TSX: FFH.U | USD 531.31 | Outperform | Price Target USD 750.00

Sentiment: Neutral

Net/Net: On an operating basis (which excludes the impact of unrealized and realized investment gains and losses) Fairfax reported better than expected results principally as a result of better than expected underwriting margins, which came in about 1 point better on a GAAP basis and almost 3 points better on an accident year basis. Premium growth remains strong across all units, with a combination of pricing, new business, and exposure growth driving a 24.9% increase in premiums. Dividend & interest income also continue to top expectations as more cash is deployed and yields rise. Non-insurance results were a bit disappointing and adverse portfolio marks were a drag on book value (down 6%). Overall a good result. A conference call will be held on Friday, July 29, at 8:30 a.m. ET. Key topics will include capital return, deployment of investment assets, insurance pricing and market conditions, and a discussion of key operating unit metrics.

2Q results: Fairfax Financial reported 2Q22 net loss per share of $37.59 vs. earnings of $43.25 last year and our $15.64 estimate. Results included $1.5 billion of net realized and unrealized losses on investments. On an operating basis, which excludes these items, the company earned $16.04 per share (RBCe $12.70). Better than forecast underwriting results and investment and associate income offset weaker than forecast non-insurance results.

Premiums: Net written premiums at ongoing operating units rose 24.9% to $5.7 billion, which beat our +13.5% estimate. Crum & Forster (+19.7%) and Odyssey Re (+34.3%) were particular standouts. Brit’s results were up 63.3% including Ki and 25.6% excluding Ki. Growth reflects continued strong rate increases, exposure growth, and new business.

Margins: The overall combined ratio amounted to 94.1% vs. 94.3%, which beat our 95.5% forecast. Total cat losses were $165 million or 3.2 combined ratio points (RBCe 4.6 points). Losses from Ukraine totaled $40 million in the quarter (0.8 points). Favorable reserve development was 0.9 points ($21.9 million), which lagged our 3.5 point forecast. On an accident year basis the company had a combined ratio of 91.8%, much better than our 94.4% estimate, reflecting better core accident year margins.

Investments/other: Associate and interest and dividend income totaled $460 million, beating our $297 million estimate. Consolidated non-insurance affiliates produced a loss of $60.1 million, lagging our $25 million earnings assumption. Results include a $109 million goodwill writedown associated with Farmers Edge. Book value per share ended the quarter at $588.36, down 6.0%,