Fairfax Reports Record Profit for 2003

Toronto-based insurance giant Fairfax Financial Holdings Ltd. (TSX: FFH) says it posted its largest ever annual profit for the 2003 financial year, earning US$271.1 million, or US$18.55 a share, compared with the US$263.0 million profit (equal to US$18.20 a share) posted for the prior year.

The company’s earnings gain partly resulted from increased gross revenue which rose to US$5.71 billion from the previous year’s US$5.07 billion. Gross written premiums amounted to US$5.52 billion for 2003 versus the US$5.17 billion reported for 2002. Net earned premiums clocked in at US$4.21 billion for 2003 against the US$3.89 billion made during the year prior.

Fairfax also benefited from stronger realized gains which jumped to US$840.2 million for 2003 – almost double the US$469.5 million gain reported the year before. The company’s U.S. operations posted pre-tax income for last year of US$363.8 million (2002: US$122.3 million) largely the result of almost US$300 million in realized gains from Fairfax’s U.S.-based Crum & Forster subsidiary. However, the U.S. operations produced an underwriting loss for 2003 of US$25.6 million (2002: US$68.1 million) on a combined ratio of 102.5% (2002: 107.1%).

Fairfax’s Canadian operations, under Northbridge Financial Corp. (TSX: NB), produced net earnings of $153.0 million, or $3.07 a share for 2003 compared with the $53.7 million, or $1.16 a share reported for the year prior. The four companies that make up Northbridge – Lombard, Commonwealth, Markel and Federated – came in with an underwriting profit of $73.8 million (2002: $19.5 million) on a combined ratio of 92.6% (2002: 97.4%). Overall, Fairfax’s combined ratio – including Canadian and U.S. operations as well as Odyssey Re – improved to 97.6% for 2003 from the 101.5% ratio shown for 2002.

Adjusting arm Lindsey Morden (TSX: LM) continued to struggle in 2003, posting a net loss of $30 million, or $2.18 a share versus a net loss of $17.5 million, or $1.28 a share reported for 2002. However, the operation’s revenues rose to $461.5 million for 2003 from $457.9 million posted for 2002. The adjusting company’s U.S. operations were largely to blame for the decline, having reported an operating loss of $22.2 million for 2003. n