Fairfax Financial Holdings Limited expects to report “solid operating income” for the first quarter of 2021 despite the impact of US winter storms.
In preliminary financial reports for the quarter, Fairfax estimated that its consolidated combined ratio will be approximately 96%, with net favourable prior year reserve development.
This was due to “strong underwriting performance” by both its insurance and reinsurance operations, which managed to offset losses from severe winter weather.
Fairfax also currently expects gross premiums written to increase from the first quarter of 2020 by approximately 17% to approximately $5.5 billion.
Net gains on investments of approximately $875 million will primarily reflect net unrealized gains on the company’s equity and equity-related holdings, partially offset by net unrealized losses on bonds.
“As we did a year ago, we are providing our shareholders with preliminary indications of some key developments for Fairfax’s first quarter of 2021 financial results,” explained Prem Watsa, Chairman and Chief Executive Officer (CEO) of Fairfax.
“Our insurance companies continued to have strong underwriting performance in the first quarter of 2021 with a consolidated combined ratio of approximately 96%, favourable reserve development and strong growth in gross premiums written of approximately 17%,” he continued.
“Our investments increased significantly with net gains on investments currently estimated at approximately $875 million for the first quarter of 2021, primarily reflecting net unrealized gains from our common stock portfolio.”
“Mark-to-market movements on certain of our non-insurance consolidated investments and investments in associates, which will not be reflected in our financial statements, also increased significantly in the first quarter of 2021 by approximately $1 billion”
Looking ahead, Watsa said: “We remain focused on continuing to be soundly financed and expect that, at the close of our RiverStone Barbados transaction, we will have paid off our credit facility completely and will have cash and marketable securities in the holding company of approximately $1.3 billion.”