Fairfax Financial CEO Prem Watsa
Fairfax Financial Holdings Ltd. earned $290.2-million (U.S.) in the first quarter on the back of strong investment gains, turning around the $39.6-million loss it announced a year ago.
The money that Fairfax made on its investments more than made up for the $136.8-million in losses the insurer experienced as a result of the Chilean earthquake.
Fairfax's investment gains amounted to $415.6-million in the three months ended March 31. It lost $153-million during the same period a year ago, when it was stung by the investments it then held in a number of media companies, such as Torstar Corp., CanWest Global Communications Corp., and AbitibiBowater Inc. The company wrote down the value of most of those holdings on its books.
About 30 per cent of Fairfax's stock market exposure is currently hedged, the company said Thursday.
"We are pleased with the way our company has performed so far in 2010," chief executive officer Prem Watsa said in a news release. "Our investment results, with record quarterly investment income and significant investment gains, are gratifying, but we remain mindful of the considerable risks in these volatile markets."
He noted that Fairfax continues to hold more than $1-billion in cash and marketable securities at the holding company level.
The stellar investment gains that the insurer reported made up for soft results from its insurance and reinsurance operations, which were hurt by the Chilean earthquake as well as tough conditions in both the industry and the economy. Operating income from Fairfax's core insurance and reinsurance operations, excluding investment gains, fell to $29.8-million in the quarter, from $154.6-million a year ago.
When the impact of the Chilean earthquake is subtracted from the equation, operating income rose 7.8 per cent to $166.6-million.
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