Fairfax earnings down despite strong combined ratio

Insurance giant Fairfax Financial Holdings (TSX. NYSE: FFH) is reported reduced net earnings for the first quarter of 2004, down to US$39.5 million from US$169.0 million for the same period a year before. This translates to earnings per share dropping to US$2.63 from US$6.97 for the comparative period.Fairfax says some of the problem comes from its adjusting arm, Lindsey Morden, where results were dragged down by the sale of its U.S. third party administration business. Lower realized gains, increased interest expense and runoff costs also contributed to lower earnings.Total revenue for all operations was up to US$1.5 billion in the first quarter of this year, from US$1.3 billion a year prior. And all insurance operations posted strong combined ratios.Canadian insurance operations (known as “Northbridge Financial”), reduced the combined ratio to 92.8% from 95.4%, while U.S. insurance posted a 99.7% ratio, up slightly from the 98.2% achieved in first quarter 2003. The company’s Asian insurance operations managed a 95.0% combined ratio, solid improvement over the 99.2% posted in early 2003. And the reinsurance subsidiary, Odyssey Re, clocked in at 95.0%, down from 99.0% in first quarter 2003.Overall, the company’s combined ratio stood at 95.7% for the first quarter of this year, down from 98.2% a year earlier.As of March 31, 2004, pre-tax unrealized gain on portfolio investments was US$322.1 million, up from US$244.9 million at the end of 2003.The company also announced the closing of its previously announced offer to exchange TIG and Fairfax notes.