Fairfax Financial announces net loss for the second quarter of 2022

Fairfax Financial Holdings reported a net loss of $881.4 million in the second quarter of 2022 after net income of $1,201.4 million in the same period a year earlier.

Meanwhile, the company reports year-over-year increases of 27.5% and 40.5% between the second quarter of 2021 and the second quarter of 2022 in gross premiums written for Odyssey Group and Brit, its main property and casualty/specialty insurers.

Prem Watsa, president and chief executive officer of Fairfax Financial Holdings, said in a statement that the company continued its strong underwriting performance in the second quarter of 2022 with a consolidated combined ratio of 94.1%, all of our major insurance with combined ratios below 95% in the district.

He added: “Net investment losses of $1,547.9 million in the quarter were primarily comprised of losses of $873.8 million on common stocks reflecting the 16% decline in the S&P 500 during the quarter. quarter and bond market losses of $413.4 million due to the continued rise in interest rates. The gain on the sale of our pet insurance business to JAB, the additional gain on the consolidation of Digit Insurance and the gain on the sale of Resolute are not recognized in the second quarter as these transactions are not completed.

It was in February that Fairfax announced that Brit had returned to underwriting profitability in 2021, producing its best result in five years, with a gain of $90.6 million compared to a loss of more than $217 million in 2020. , the combined ratio strengthening to 95.7%. .

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Meanwhile, late last year saw the company announce it was selling 10% of its Odyssey business to CPPIB Credit Investments and pension fund OMERS. Each was to acquire a 4.995% stake in Odyssey through a new class of securities, for a total cash purchase price of $900 million.

In announcing the latest results, Watsa said he spoke about rising interest rates and the impact they had on the value of bonds held by Fairfax.

He said: “Our low duration of 1.2 years on our $36 billion fixed income portfolio (primarily cash, short-term investments and short-dated US Treasuries and government bonds Canada) reduced the impact of rising interest rates on the fair value of our bonds in the second quarter of 2022 to only a 1.1% decrease in the fixed income portfolio, while allowing the company to benefit from increased interest income in the second quarter and the remainder of 2022 and future periods as we deploy the portfolio into one to two one-year Treasury bills.

He added: “Given the short duration of the bond portfolio if investments are held to maturity, a significant portion of the net unrealized losses recorded in the first six months of 2022 of $965 million will be reversed at over the next 12 to 18 months Interest and dividend income has declined from a rate of approximately $530 million per year at the end of 2021 to a current normalized rate of approximately $950 million per year .

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