Fairfax Posts $60 Million Q1 Loss on Investment Woes

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Fairfax Financial Holdings Ltd. said Thursday that it had a net loss in the first quarter as investments shed value in volatile markets. [Amounts are in U.S. $, unless otherwise indicated].

The Toronto-based insurance holding company said it had a loss of $60.4 million, or $3.55 a diluted share, in the quarter ended March 31, compared with net earnings of $631.8 million, or $33.78 a share, in the comparable period in 2008.

Revenue fell to $1.28 billion from $2.37 billion.

Analysts had expected earnings per share of $6.71, according to Reuters Estimates.

The company said net losses on investments were $153.0 million in the first quarter, principally due to the inclusion of $213.0 million of impairments recorded on common stock and bond investments. That compared with investment gains of $1.07 billion for the same period a year earlier.

“As to our investments, our increased focus on high quality common stocks reflects our view that these should provide excellent returns over the long term, though the volatility of the markets may result in lumpy quarters and even years,” Prem Watsa, Fairfax’s chief executive, said in a statement.

Analysts said the results were not terribly surprising. “This was a transition quarter for Fairfax, where they’ve now removed the hedges that they had against the market and they have a much greater common equity investment portfolio,” said Jeff Fenwick, an analyst at Cormark Securities.

“I think what we’re going to see now is some more quarterly volatility in terms of the investment performances as a result of that.”

Fairfax’s consolidated combined ratio, a measure of profitability, for its various insurance and reinsurance operations was 98.7 percent.

Net premiums written increased 4.9 percent to $1.12 billion from $1.06 billion in the first quarter of 2008, reflecting the inclusion of Advent and Polish Re in the first quarter of 2009.

Shares of Fairfax, which has insurance operations in Canada, the United States and Asia, closed up 1.38 percent at C$311.29 [$261.50] on the Toronto Stock Exchange Thursday.

($1=$1.19 Canadian) (Reporting by Andrea Hopkins; editing by Rob Wilson)