Fairfax takes tax hit on half-year recovery (September 01, 2002)

Toronto-based financial services group Fairfax Financial Holdings (TSE: FFH) lifted net premium for the first six months of this year by 20% to $3.1 billion compared with the previous year’s half year amount of $2.6 billion.

Pre-tax income rose by a dramatic 206% year-on-year to $103.8 million, however, Fairfax incurred a hefty tax bill of $41.7 million in the second quarter (against a tax recovery the previous year of $14.4 million) which saw the company’s net income drop for the latest six months. Net income for the first six months of this year fell to $58.3 million (June 2001: $76.9 million), which is equal to $3.41 a share against the previous year’s $5.38 a share.

Odyssey Re, the reinsurance arm of Fairfax, increased net income for the first six months of this year by 120% to US$89.1 million compared with the US$40.6 million reported at the end of June 2001. Earnings for the latest six month period amounted to US$1.37 a share. The company increased its shares in issue to 65.1 million last year June through an initial public offering representing about 26% of its share capital base. The company declared a cash dividend of US25 a share on June 28.

The group’s reinsurance operation, Odyssey Re, also showed record growth for the second quarter of this year, with net income for the three month period rising by 50% year-on-year to US$32.8 million, which is equal to earnings of US50 a share. Net written premiums for the last six months rose by 58.2% to US$733.7 million compared with the same period the year prior, with net written premiums rising by 58.4% for the second quarter to US$370.8 million. The company’s combined ratio stood at 98.8% at the end of June this year against the 101.8% ratio reported 12 months previous.