Property and casualty re/insurance holding company Fairfax Financial has reported net earnings of just $125.5 million for the first quarter of 2022, compared with $806.0 for the same period last year.
The dip in performance comes after Fairfax reported record earnings of $3.4 billion in 2021.
Earnings in Q1 were affected primarily by net losses of $214.3 million on investments, versus a net gain of $908.7 million for Q1 2021.
But Fairfax did also report substantial top line growth for the period, with net premiums written by its property and casualty insurance and reinsurance operations increasing by 27.8% to $5,297.3 million from $4,145.9 million last year, while gross premiums written increased by 21.9%.
The consolidated combined ratio of the property and casualty insurance and reinsurance operations was 93.1%, producing an underwriting profit of $324.4 million, compared to a combined ratio of 96.0% and an underwriting profit of $149.0 million in 2021.
This was driven by significant growth in business volumes (net premiums earned increased by 26.9%) and modest catastrophe losses of $130.2 million or 2.8 combined ratio points in the quarter.
This also meant that operating income for the property and casualty insurance and reinsurance operations increased to $562.4 million from $298.2 million.
“The company continued to grow significantly in the first quarter,” said said Prem Watsa, Chairman and Chief Executive Officer.
“During the quarter we had net gains on common stocks of $262.9 million, but due to rising interest rates we had unrealized losses on bonds of $494.1 million, for a net loss on investments of $214.4 million,” he explained.
“Our low duration of 1.4 years on our $37 billion fixed income portfolio (mainly cash and U.S. treasuries) reduced the impact that rising interest rates had on our bonds in the first quarter of 2022 to only a decrease of 1.3% of the fixed income portfolio, while enabling the company to benefit significantly from increased interest income in the remainder of 2022 as we deploy the portfolio into one to two year treasury bonds.”
