Fairfax earnings drop on investment slide

A steep decline in realized gains has put a damper on earnings growth for Fairfax Financial Holdings (TSX, NYSE: FFH). Net earnings for the second quarter ending June 30, 2004 were down to US$46.0 million (US$3.13 per share) from US$173.7 million (US$12.09 per share) for the same period in 2003.The company did hold true to its recent underwriting discipline, posting a combined ratio of 94.9% overall for the quarter, down from 98.5% a year earlier, and with every operating company bringing its individual combined ratio under 100%. The result was an underwriting profit of US$54.9 million for the second quarter of 2004, up from US$13.8 million the year prior.Net premiums written were also strong, up US$1.17 billion for the most recent quarter from US$1.14 billion a year ago.But realized gains plagued the company, falling in the second quarter to US$104.6 million from US$403.7 million for the same period in 2003.Claims costs were also up, to US$815.9 for the second quarter of this year from US$805.9 million a year ago, but overall expenses remained flat at US$1.30 billion.For the first six months of 2004, net earnings fell to US$85.5 million (US$5.76 per share) from US$275.2 million (US$19.06 per share) at the same point in 2003. Net written premiums were up to US$2.37 billion from US$2.19 billion, but realized gain on investments was down dramatically to US$165.2 million from US$547.9 million over the same comparative period. This is despite a gain of US$40.1 million from the secondary offering of Northbridge stock accounted for in the second quarter of 2004.