Book value per basic share at
'Core underwriting performance in the third quarter of 2021 continued to be very strong, with growth in gross premiums written of 24.8%. Despite significant catastrophe losses, principally from Hurricane Ida and the European floods, of
'Net gains on investments of
'We continue to focus on being soundly financed and ended the quarter with approximately
The table below presents the sources of the company's net earnings in a format which the company has consistently used as it believes it assists in understanding Fairfax:
Third quarter First nine months
2021 2020 2021 2020
($ millions)
Gross premiums written 5,970.9 4,743.2 17,376.6 14,221.6
Net premiums written 4,746.4 3,735.2 13,421.8 11,137.1
Underwriting profit (loss) (46.5 ) 52.4 330.4 142.2
Interest and dividends - insurance and reinsurance 119.0 127.7 341.2 440.3
Share of profit of associates - insurance and reinsurance 172.2 74.6 269.6 18.3
Operating income - insurance and reinsurance 244.7 254.7 941.2 600.8
Life insurance and Run-off (excluding net gains (losses) on investments) (2.6 ) (9.3 ) (43.2 ) (47.6 )
Non-insurance companies (excluding net gains (losses) on investments) 25.7 0.6 (103.6 ) (113.7 )
Interest expense (109.7 ) (120.9 ) (393.6 ) (358.8 )
Corporate overhead and other income (expense) 31.1 (18.3 ) 93.8 (268.2 )
Net gains (losses) on investments 509.5 (27.3 ) 2,753.7 (805.6 )
Pre-tax income (loss) 698.7 79.5 3,248.3 (993.1 )
Recovery of (provision for) income taxes (122.6 ) (37.7 ) (569.4 ) 72.1
Non-controlling interests (113.7 ) 91.9 (209.1 ) 230.3
Net earnings (loss) attributable to shareholders of Fairfax 462.4 133.7 2,469.8 (690.7 )
Highlights for the third quarter of 2021 (with comparisons to the third quarter of 2020 except as otherwise noted) include the following:
Gross premiums written by the insurance and reinsurance operations increased by 24.8% to
The consolidated combined ratio of the insurance and reinsurance operations was 101.1%, producing an underwriting loss of
Operating income of the insurance and reinsurance operations was
Float of the insurance and reinsurance operations increased by 17.4% to
Excluding the impact of
Consolidated interest and dividends of
Consolidated share of profit of associates of
Interest expense of
At
Net gains on investments of
Third quarter of 2021
($ millions)
Realized gains Unrealized gains
(losses) Net gains
(losses)
Net gains (losses) on:
Long equity exposures 473.2 (442.0 ) 31.2
Bonds 37.6 (85.2 ) (47.6 )
Other 78.9 312.1 391.0
589.7 (215.1 ) 374.6
First nine months of 2021
($ millions)
Realized gains (losses) Unrealized gains
(losses) Net gains
(losses)
Net gains (losses) on:
Long equity exposures 971.3 972.4 1,943.7
Bonds 211.4 (381.6 ) (170.2 )
Other (29.9 ) 763.2 733.3
1,152.8 1,354.0 2,506.8
Net gains on long equity exposures of
At
At
On
On
On
The company held
The company's total debt to total capital ratio, excluding non-insurance companies, decreased to 25.7% at
During the third quarter of 2021 the company purchased 55,155 subordinate voting shares for treasury at a cost of
At
There were 25.9 million and 26.3 million weighted average common shares effectively outstanding during the third quarters of 2021 and 2020 respectively. At
Unaudited consolidated balance sheet, earnings and comprehensive income information, together with segmented premium and combined ratio information, follow and form part of this news release.
In presenting the company's results in this news release, management has included operating income (loss), combined ratio, float and book value per basic share measures. Operating income (loss) is used in the company's segment reporting. The combined ratio is calculated by the company as the sum of claims losses, loss adjustment expenses, commissions, premium acquisition costs and other underwriting expenses, expressed as a percentage of net premiums earned. Float is calculated by the company as the sum of insurance contract liabilities and insurance contract payables, less the sum of insurance contract receivables, recoverable from reinsurers and deferred premium acquisition costs. Book value per basic share is calculated by the company as common shareholders' equity divided by the number of common shares effectively outstanding.
As previously announced, Fairfax will hold a conference call to discuss its third quarter 2021 results at
For further information, contact:
Vice President, Corporate Development
(416) 367-4941
Certain statements contained herein may constitute forward-looking statements and are made pursuant to the 'safe harbour' provisions of the United States Private Securities Litigation Reform Act of 1995 and any applicable Canadian securities regulations. Such forward-looking statements are subject to known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Fairfax to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, but are not limited to: a reduction in net earnings if our loss reserves are insufficient; underwriting losses on the risks we insure that are higher or lower than expected; the occurrence of catastrophic events with a frequency or severity exceeding our estimates; changes in market variables, including interest rates, foreign exchange rates, equity prices and credit spreads, which could negatively affect our investment portfolio; risks associated with the global pandemic caused by COVID-19, and the related global reduction in commerce and substantial downturns in stock markets worldwide; the cycles of the insurance market and general economic conditions, which can substantially influence our and our competitors' premium rates and capacity to write new business; insufficient reserves for asbestos, environmental and other latent claims; exposure to credit risk in the event our reinsurers fail to make payments to us under our reinsurance arrangements; exposure to credit risk in the event our insureds, insurance producers or reinsurance intermediaries fail to remit premiums that are owed to us or failure by our insureds to reimburse us for deductibles that are paid by us on their behalf; our inability to maintain our long term debt ratings, the inability of our subsidiaries to maintain financial or claims paying ability ratings and the impact of a downgrade of such ratings on derivative transactions that we or our subsidiaries have entered into; risks associated with implementing our business strategies; the timing of claims payments being sooner or the receipt of reinsurance recoverables being later than anticipated by us; risks associated with any use we may make of derivative instruments; the failure of any hedging methods we may employ to achieve their desired risk management objective; a decrease in the level of demand for insurance or reinsurance products, or increased competition in the insurance industry; the impact of emerging claim and coverage issues or the failure of any of the loss limitation methods we employ; our inability to access cash of our subsidiaries; our inability to obtain required levels of capital on favourable terms, if at all; the loss of key employees; our inability to obtain reinsurance coverage in sufficient amounts, at reasonable prices or on terms that adequately protect us; the passage of legislation subjecting our businesses to additional adverse requirements, supervision or regulation, including additional tax regulation, in
CONSOLIDATED BALANCE SHEETS
as at
(unaudited - US$ millions)
September 30, 2021 December 31, 2020
Assets
Holding company cash and investments (including assets pledged for derivative obligations -$125.6 ;December 31, 2020 -$79.5 ) 1,543.3 1,252.2
Insurance contract receivables 6,802.5 5,816.1
Portfolio investments
Subsidiary cash and short term investments (including restricted cash and cash equivalents -$968.6 ;December 31, 2020 -$751.9 ) 18,461.1 13,197.8
Bonds (cost$16,154.6 ;December 31, 2020 -$14,916.1 ) 16,656.4 15,734.6
Preferred stocks (cost$573.9 ;December 31, 2020 -$268.3 ) 1,733.2 605.2
Common stocks (cost$4,848.1 ;December 31, 2020 -$4,635.5 ) 5,481.5 4,599.1
Investments in associates (fair value$5,525.4 ;December 31, 2020 -$4,154.3 ) 4,792.7 4,381.8
Investment in associate held for sale (fair value nil;December 31, 2020 -$729.5 ) - 729.5
Derivatives and other invested assets (cost$929.3 ;December 31, 2020 -$944.4 ) 980.3 812.4
Assets pledged for derivative obligations (cost$101.0 ;December 31, 2020 -$196.1 ) 101.0 196.4
Fairfax India cash, portfolio investments and associates (fair value$3,454.0 ;December 31, 2020 -$2,791.0 ) 2,055.5 1,851.8
50,261.7 42,108.6
Deferred premium acquisition costs 1,783.7 1,543.7
Recoverable from reinsurers (including recoverables on paid losses -$1,009.1 ;December 31, 2020 -$686.8 ) 11,738.4 10,533.2
Deferred income tax assets 544.2 713.9
Goodwill and intangible assets 6,075.3 6,229.1
Other assets 5,779.1 5,857.2
Total assets 84,528.2 74,054.0
Liabilities
Accounts payable and accrued liabilities 4,956.0 4,996.1
Derivative obligations (including at the holding company -$53.7 ;December 31, 2020 -$22.8 ) 160.0 189.4
Deferred income tax liabilities 540.0 356.4
Insurance contract payables 4,557.7 2,964.0
Insurance contract liabilities 46,210.5 39,206.8
Borrowings - holding company and insurance and reinsurance companies 6,258.1 6,614.0
Borrowings - non-insurance companies 1,694.5 2,200.0
Total liabilities 64,376.8 56,526.7
Equity
Common shareholders' equity 14,539.5 12,521.1
Preferred stock 1,335.5 1,335.5
Shareholders' equity attributable to shareholders of Fairfax 15,875.0 13,856.6
Non-controlling interests 4,276.4 3,670.7
Total equity 20,151.4 17,527.3
84,528.2 74,054.0
Book value per basic share$ 561.88 $ 478.33
CONSOLIDATED STATEMENTS OF EARNINGS
for the three and nine months ended
(unaudited - US$ millions except per share amounts)
Third quarter First nine months
2021 2020 2021 2020
Income
Gross premiums written 5,970.9 4,743.2 17,376.6 14,221.6
Net premiums written 4,746.4 3,735.2 13,421.8 11,137.1
Gross premiums earned 5,784.2 4,632.4 15,760.2 13,107.7
Premiums ceded to reinsurers (1,345.0 ) (1,060.6 ) (3,576.2 ) (2,814.6 )
Net premiums earned 4,439.2 3,571.8 12,184.0 10,293.1
Interest and dividends 167.2 181.8 495.9 604.7
Share of profit (loss) of associates 227.3 50.8 347.0 (177.5 )
Net gains (losses) on investments 374.6 (27.3 ) 2,506.8 (922.7 )
Gain on sale and consolidation of insurance subsidiaries 134.9 - 246.9 117.1
Other revenue 1,367.2 1,215.5 3,759.0 3,302.1
6,710.4 4,992.6 19,539.6 13,216.8
Expenses
Losses on claims, gross 4,040.1 2,961.2 10,307.0 8,713.7
Losses on claims, ceded to reinsurers (877.1 ) (594.9 ) (2,206.0 ) (1,894.4 )
Losses on claims, net 3,163.0 2,366.3 8,101.0 6,819.3
Operating expenses 683.1 617.2 2,048.1 1,893.7
Commissions, net 724.4 616.6 2,008.3 1,734.3
Interest expense 109.7 120.9 393.6 358.8
Other expenses 1,331.5 1,192.1 3,740.3 3,403.8
6,011.7 4,913.1 16,291.3 14,209.9
Earnings (loss) before income taxes 698.7 79.5 3,248.3 (993.1 )
Provision for (recovery of) income taxes 122.6 37.7 569.4 (72.1 )
Net earnings (loss) 576.1 41.8 2,678.9 (921.0 )
Attributable to:
Shareholders of Fairfax 462.4 133.7 2,469.8 (690.7 )
Non-controlling interests 113.7 (91.9 ) 209.1 (230.3 )
576.1 41.8 2,678.9 (921.0 )
Net earnings (loss) per share$ 17.43 $ 4.66 $ 93.69 $ (27.27 )
Net earnings (loss) per diluted share$ 16.44 $ 4.44 $ 88.62 $ (27.27 )
Cash dividends paid per share $ - $ -$ 10.00 $ 10.00
Shares outstanding (000) (weighted average) 25,900 26,306 26,002 26,532
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
for the three and nine months ended
(unaudited - US$ millions)
Third quarter First nine months
2021 2020 2021 2020
Net earnings (loss) 576.1 41.8 2,678.9 (921.0 )
Other comprehensive income (loss), net of income taxes
Items that may be reclassified to net earnings (loss)
Net unrealized foreign currency translation gains (losses) on foreign subsidiaries (111.5 ) 88.5 (91.4 ) (370.9 )
Gains (losses) on hedge of net investment in Canadian subsidiaries 50.6 (40.2 ) (10.3 ) 63.1
Gains (losses) on hedge of net investment in European operations 19.9 (36.6 ) 47.8 (38.2 )
Share of other comprehensive income (loss) of associates, excluding net gains on defined benefit plans (16.9 ) 91.9 (74.6 ) 5.7
(57.9 ) 103.6 (128.5 ) (340.3 )
Net unrealized foreign currency translation losses on foreign subsidiaries reclassified to net earnings (loss) 7.0 - 6.7 111.2
Net unrealized foreign currency translation (gains) losses on associates reclassified to net earnings (loss) (50.7 ) (2.0 ) (51.3 ) 46.0
(101.6 ) 101.6 (173.1 ) (183.1 )
Items that will not be reclassified to net earnings (loss)
Net gains (losses) on defined benefit plans 0.1 (1.3 ) (2.6 ) (28.4 )
Share of net gains on defined benefit plans of associates 4.9 3.1 13.8 14.3
Other - - 13.8 -
5.0 1.8 25.0 (14.1 )
Other comprehensive income (loss), net of income taxes (96.6 ) 103.4 (148.1 ) (197.2 )
Comprehensive income (loss) 479.5 145.2 2,530.8 (1,118.2 )
Attributable to:
Shareholders of Fairfax 383.5 198.3 2,365.0 (797.3 )
Non-controlling interests 96.0 (53.1 ) 165.8 (320.9 )
479.5 145.2 2,530.8 (1,118.2 )
SEGMENTED INFORMATION
(unaudited - US$ millions)
Third party gross premiums written, net premiums written and combined ratios for the property and casualty insurance and reinsurance operations (excluding Life insurance and Run-off) in the third quarters and first nine months ended
Gross Premiums Written
Third quarter First nine months % change year-over-year
2021 2020 2021 2020 Third quarter First nine months
Northbridge 549.7 456.0 1,546.2 1,230.3 20.5 % 25.7 %
Odyssey Group 1,269.9 1,032.8 3,807.3 3,066.1 23.0 % 24.2 %
Crum & Forster 962.3 789.9 2,691.5 2,271.2 21.8 % 18.5 %
Zenith National 163.2 150.3 584.1 528.2 8.6 % 10.6 %
Brit(1) 825.5 597.3 2,281.3 1,871.4 38.2 % 21.9 %
Allied World 1,435.3 1,157.3 4,422.6 3,485.7 24.0 % 26.9 %
Fairfax Asia(2) 152.5 118.2 370.2 329.5 29.0 % 12.4 %
Insurance and Reinsurance - Other 561.7 441.4 1,622.6 1,292.7 27.3 % 25.5 %
Insurance and reinsurance operations 5,920.1 4,743.2 17,325.8 14,075.1 24.8 % 23.1 %
Net Premiums Written
Third quarter First nine months % change year-over-year
2021 2020 2021 2020 Third quarter First nine months
Northbridge 464.2 379.0 1,389.4 1,091.2 22.5 % 27.3 %
Odyssey Group 1,138.9 969.3 3,320.6 2,769.0 17.5 % 19.9 %
Crum & Forster 788.0 657.9 2,220.5 1,888.4 19.8 % 17.6 %
Zenith National 167.3 146.3 576.4 516.3 14.4 % 11.6 %
Brit(1) 704.2 487.2 1,568.6 1,353.4 44.5 % 15.9 %
Allied World 970.4 726.6 3,047.4 2,318.7 33.6 % 31.4 %
Fairfax Asia(2) 71.7 59.4 177.5 164.5 20.7 % 7.9 %
Insurance and Reinsurance - Other 392.9 309.5 1,072.6 889.1 26.9 % 20.6 %
Insurance and reinsurance operations 4,697.6 3,735.2 13,373.0 10,990.6 25.8 % 21.7 %
Combined Ratios
Third quarter First nine months
2021 2020 2021 2020
Northbridge 89.6 % 89.9 % 87.2 % 93.4 %
Odyssey Group 109.5 % 99.4 % 101.3 % 99.2 %
Crum & Forster 97.5 % 99.3 % 97.8 % 98.6 %
Zenith National 92.1 % 92.7 % 91.0 % 91.6 %
Brit(1) 118.0 % 114.0 % 105.3 % 109.6 %
Allied World 94.4 % 93.1 % 94.5 % 95.2 %
Fairfax Asia(2) 87.1 % 96.0 % 91.5 % 99.4 %
Insurance and Reinsurance - Other 97.3 % 99.8 % 97.2 % 98.8 %
Insurance and reinsurance operations 101.1 % 98.5 % 97.3 % 98.6 %
(1)Excluding Ki Insurance , gross premiums written increased by 17.5% and 9.2% in the third quarter and first nine months of 2021. Excluding Ki insurance and the effects of the purchase of multi-year reinsurance protection (for a range ofU.S. catastrophe perils in the first quarter of 2021 which increased ceded premium by$93.0 in the first nine months of 2021), net written premiums increased by 19.1% and 7.9% in the third quarter and first nine months of 2021. Brit's combined ratios excludingKi Insurance for the third quarter and first nine months of 2021 were 114.2% and 103.1% asKi Insurance grows to scale following its launch in the fourth quarter of 2020.
(2) Includes Singapore Re which was consolidated onJune 17, 2021 .
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