Odyssey’s 2-Q earnings rise on realized gains

The Fairfax group’s reinsurance arm, Odyssey Re Holdings Corp. (TSX: ORH), increased net earnings for the second quarter of this year by more than three-fold to US$112.7 million compared with the US$32.8 million reported for the same period last year. The latest quarterly earnings equate to US$1.73 a share against the 50c a share shown for the same period in 2002. The reinsurer’s net earnings for the first half of this year came in 79% higher year-on-year at US$159.3 million (June 2002: US$89.1 million) which translates to earnings of US$2.45 a share.The company’s strong earnings growth for the second quarter of this year, as well as the first half-year result, was largely driven by realized investment gains. Net realized gains for the second quarter of this year amounted to US$85.5 million (76% of total net earnings reported) while the gain disclosed for the full six months is US$110.4 million (69% of total net earnings reported). A company statement says that the realized gains made during the latest reporting periods primarily arose from the sale of fixed income securities. The second quarter of this year saw investment income clock in moderately lower at US$26.7 million compared with the US$30 million disclosed for the same period last year.Odyssey also made gains in business written across all geographic markets the company operates in, according to a statement. Premiums written in the U.S. show the biggest gain for the second quarter of this year with a year-on-year increase of 106%. The reinsurer’s gross total premiums for the second quarter of this year rose by 42% to US$610 million compared with the US$428 million reported for the same period last year. Total net written premiums climbed by 46% to US$542.7 million for the latest reporting quarter versus the US$371 million posted for the same period in 2002. Odyssey’s combined ratio for the second quarter of this year improved by 2.4 percentage points year-on-year to 96.4% while the ratio for the first half of 2003 dropped to 97.6% from last year’s first half-year ratio of 98.8%.The reinsurer’s investments and cash amounted to US$3.6 billion by the 2003 half-year mark – showing a gain of more than half a billion dollars from the value of holdings reflected at the end of 2002. The company’s total assets reached US$5.7 billion by the end of June this year, with the net asset value clocking in at US$19.77 a share against the US$16.25 a share shown at the end of 2002. “Odyssey Re’s book value per share has grown at a pace significantly ahead of our target return on equity of 15%. This performance has resulted from the combination of our disciplined underwriting with a total return, value-oriented investment approach,” says CEO Andrew Barnard.