Fairfax Financial Holdings Ltd T.FFH

Alternate Symbol(s): FRFHF | T.FFH.PR.C | FXFLF | FRFZF | T.FFH.PR.D | FRFGF | T.FFH.PR.E | FXFHF | T.FFH.PR.F | 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 Nov 07, 2023 11:10am

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Post# 35721519

RBC Report

Their upside scenario target was raised to US$1125. 00. GLTA

November 6, 2023

Outperform

TSX: FFH.U; USD 909.18; TSX: FFH

Price Target USD 1,020.00 ↑ 980.00

Fairfax Financial Holdings Limited

Q3 better than expected, investment income picking up steam

Our view: Similar to the past few quarters, Fairfax delivered another quarter of solid results across the organization including underwriting, investments, and non-insurance entities. The company extended its duration to pick up yield in the quarter and that should continue benefit investment income throughout 2024. P&C market conditions remain favorable for Fairfax particularly within its Odyssey Re unit. While reserve releases were modest and cat losses slightly elevated in Q3, core underwriting margins were better than we had expected. We remain at Outperform.

Key points:
Estimates: We are raising our 2023 EPS estimate to $151.14 (from $135.00) to reflect Q3 upside. We are also moving up our 2024 EPS estimate to $140.00 (from $130.00) to factor in slightly better investment income and underwriting margin assumptions. We are introducing a 2025 EPS estimate of $150.00.

We are raising our price target to $1,020 from $980 (about C$1,397 at a 1:37:1 exchange rate) which remains based on 1.0x our ending 2024 book value per share estimate (our BV estimate has been raised). The revised price target reflects solid execution across multiple areas of its business.

3Q results: Fairfax Financial reported 3Q/23 net earnings per share of $42.26 vs. $(3.65) last year and our $26.31 estimate. On an operating basis, which excludes realized/unrealized gains/losses, we calculate that the company earned $40.45 per share vs $14.92 in Q3/22 (RBC forecast: $23.31). The upside to our estimate was on multiple areas with the largest proportion from non-insurance company income and associate income.

Notable Takeaways: Fairfax’s Q3 P&C combined ratio amounted to 95.0% vs. 100.3% last year, which was better than our 96.3% forecast. The core loss ratio was solid while reserve releases were modest and the expense ratio was up y/y. Fairfax took the opportunity to extend their fixed income duration to 3.1 years (from 2.4 years). At the end of Q3, a total of 70% of FI was in government securities (vs. 74% in Q2) and 19% were in corporate bonds (vs. 15% in Q2). Net written premiums in the P&C units grew 4.8% with the International Insurers and Reinsurers unit (+15.9% NWP growth) leading the way. Growth was impacted somewhat by declines at Zenith National and Brit. Share buybacks were $55 million in Q3.

Positives:

1) Non-insurance units produced better-than-expected results; 2) Investment income stepped up further; and 3) Core loss ratio better than our estimate.

Negatives:

1) Premium growth a bit slower than in recent quarters; 2) Higher y/y expense ratio; and 3) Modest reserve releases.