Fairfax Reports $271 Million 2003 Earnings

Toronto-based Fairfax Financial Holdings Limited announced that it earned US$271.1 million in 2003, the largest annual profit in its history, despite a sharp drop in the fourth quarter, due primarily to net reserve charges aggregating $224 million at Crum & Forster and the company’s runoff operations.

Fairfax also announced that, as the majority of its business is conducted in the U.S., it will henceforth report its financial results in U.S. rather than Canadian dollars. It had total revenues of $5.7139 billion in 2003, compared to $ 5.0674 billion in 2002. Net earnings increased from $263 million to $ 271.1 million.

Fairfax also cited the following “operating highlights:”
— The combined ratio of the company’s continuing insurance and reinsurance operations improved to 97.6percent in 2003 from 101.5 percent in 2002.
— Net premiums written at the companies continuing insurance and reinsurance operations increased 28.4 percent in 2003 to US$4.1 billion.
— Underwriting profit at the company’s continuing insurance and reinsurance operations increased to US$87.7 million in 2003 from an underwriting loss of US$42.8 million in 2002.
— Cash flow from operations at OdysseyRe, Crum & Forster and Northbridge improved to US$1,099.2 million in 2003 from US$236.1 million in 2002.
— Realized gains on investments in 2003 totaled US$845.9 million compared to US$469.5 million in 2002.
— Cash and investments increased to US$12.6 billion at December 31, 2003 from US$10.6 billion at the end of 2002.
— Total interest and dividends decreased to US$330.1 million in 2003 from US$418.6 million in 2002, reflecting lower investment yields since almost half the portfolio investments have been held in cash and short term investments since the second quarter of 2003 pending the company identifying suitable opportunities for reinvestment in line with its long term value-oriented investment philosophy.

The report also noted that as of December 31, 2003, “United States Fire Insurance, Crum & Forster’s principal operating subsidiary, had moved to a positive earned surplus position of approximately US$146 million, thereby achieving dividend capacity in 2004 of approximately US$80 million.”