Fairfax Financial Holdings Ltd. reported a big increase in second-quarter profit on Thursday, with the Canadian insurance giant crediting investment gains for most of the improvement.
Toronto-based Fairfax said it earned $83.3-million (U.S.), or $3.40 per diluted share, in the quarter. That compared with net earnings of $23.7-million, or 87 cents per diluted share, in the same 2010 period.
Revenue for the three months ended June 30 was $1.75-billion, up from $1.39-billion.
"The increase in earnings arose primarily from net gains on investments of $119.6-million compared to net losses on investments of $29.3-million last year," said Fairfax, which said this week it is among a group of investors buying up part of Bank of Ireland.
"Despite the challenging insurance industry and investment environment, during the second quarter we recorded good operating results and essentially maintained our common shareholders' equity and book value per share," said chairman and chief executive officer Prem Watsa.
He added that the company continues to be "soundly financed" with cash and marketable securities at the holding company level in excess of $1-billion.
Fairfax said the combined ratio of the company's insurance and reinsurance operations was 100.5 per cent on a consolidated basis, producing an underwriting loss of $6.1-million in the quarter compared with an underwriting profit of $8.7-million in the same 2010 quarter.
Underwriting results in the most recent period were hurt by $88.1-million of pre-tax catastrophe losses (net of reinsurance and reinstatement premiums) primarily related to U.S. tornado losses, which increased the combined ratio by 6.9 points.
Net premiums written by the company in the second quarter of 2011 increased 24.3 per cent to $1.37-billion from $1.1-billion in the second quarter of 2010, due primarily to the acquisitions of Zenith National and First Mercury.
Fairfax and its partners will buy a 35 per cent stake in the Bank of Ireland for €1.1-billion ($1.57-billion).
The Irish government is expected to maintain an interest of between 15 and 31 per cent, with the rest of the bank remaining in private hands.
Fairfax has successfully invested in a failed bank before, spending $388-million to acquire a piece of Wells Fargo in 2008. That stake currently has a market value of more than $600-million.