Fairfax Financial Holdings Limited has announced its financial results for the second quarter of 2023 reporting net earnings of $734.4 million, compared to a net loss of $32.0 million in the second quarter of 2022.
“During the second quarter we continued to build on our great start to 2023, with our property and casualty insurance and reinsurance operations producing adjusted operating income of $913.5 million ($1,526.4 million including discounting, net of risk adjustment on claims of $612.9 million), reflecting increased interest and dividends, strong insurance underwriting results and stable share of profit of associates,” said Prem Watsa, Chairman and Chief Executive Officer.
“Our underwriting performance in the second quarter of 2023 continued to produce favourable results, with growth in gross premiums written of 10.0% and net premiums written of 8.4%, primarily reflecting new business and continued incremental rate increases in certain lines of business,” Watsa added.
Net premiums written by the property and casualty insurance and reinsurance operations increased for Fairfax, 8.4% to $6,134.4 million in Q2 2023 from $5,658.6 million in Q2 2022. Gross premiums written also increased, to $7,988.4 million.
The consolidated combined ratio of the property and casualty insurance and reinsurance operations was 93.9% compared to the combined ratio of 94.1% in Q2 2022. The company produced an underwriting profit of $337.5 million in Q1 2023, compared to $301.7 million in 2022.
There was also a net insurance revenue increase of 6.2% prudent expense management and decreased catastrophe losses of $134.8 million or 2.4 combined ratio points in the quarter.
Adjusted operating income of the property and casualty insurance and reinsurance operations increased by 41.6% to $913.5 million from $645.3 million, principally due to increased interest and dividend income and strong underwriting profit.
The company’s net finance expense from insurance contracts and reinsurance contract assets held at $424.0 million in Q2 2023, predominantly consisted of interest accretion resulting from the unwinding of the effects from discounting associated with net claim payments made during the period.
This compares to net finance income from insurance contracts and reinsurance contract assets held of $730.1 million in the second quarter of 2022 which reflected the benefit of changes in discount rates, that was only partially offset by the interest accretion.
“The new reporting requirement IFRS 17 has not changed the way management evaluates the business and we continue to be focused on underwriting profit on an undiscounted basis with strong reserving. The effects of discounting and risk adjustment in the quarter resulted in an increase to pre-tax earnings of $221.2 million,” Watsa added.
He continued: “Net losses on investments of $342.1 million in the quarter was principally comprised of mark to market losses on bonds of $405.3 million due to continued rising interest rates, which was partially offset by mark to market gains on common stocks of $163.7 million.
“We continue to focus on being soundly financed and ended the quarter with approximately $1.1 billion in cash and investments in the holding company and our credit facility undrawn.”
