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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Fairfax Financial Holdings Limited | TSX:FFH | Toronto | Common Stock |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
-5.31 | -0.34% | 1,551.15 | 1,550.26 | 1,555.00 | 1,556.46 | 1,546.00 | 1,556.46 | 121,375 | 21:11:30 |
"2023 was the best year in our history with net earnings of $4.4 billion, producing record adjusted operating income of $3.9 billion (or operating income of $5.7 billion including the benefit of discounting, net of a risk adjustment on claims) from our property and casualty insurance and reinsurance operations, reflecting records achieved in our core underwriting performance, interest and dividends of $1.7 billion and increased favourable results from profit of associates. All of our major insurance and reinsurance companies achieved combined ratios below 100% for a consolidated combined ratio of 93.2% and underwriting profit of $1.5 billion, on an undiscounted basis. Gross premiums written grew by 4.8% or $1.3 billion to $28.9 billion, while net premiums written grew by 3.5%, primarily reflecting new business and incremental rate increases in certain lines of business.
"On December 26, 2023 we acquired an additional 46.3% of Gulf Insurance, increasing the company's total equity interest to 90.0% which will add approximately $2.7 billion of gross premiums written to our consolidated results in 2024.
"We have increased our annual interest and dividend income run-rate to approximately $2.0 billion and we anticipate it will remain at this level for approximately the next four years. Our fixed income portfolio continues to be conservatively positioned with effectively 69% of the fixed income portfolio invested in government bonds, 20% in high quality corporate bonds, primarily short-dated, and 11% in first mortgage loans.
"Our net gains on investments of $1.9 billion were principally comprised of net gains on common stocks of $1.2 billion and bonds of $0.7 billion.
"We remain focused on being soundly financed and ended 2023 in a strong financial position with $1.8 billion in cash and investments in the holding company, our debt to capital ratio at 23.1%," said Prem Watsa, Chairman and Chief Executive Officer.
The table below presents the sources of the company's net earnings in a segment reporting format which the company has consistently used as it believes it assists in understanding Fairfax:
Fourth quarter | Year ended December 31, | ||||||||||
2023 | 2022 | 2023 | 2022 | ||||||||
($ millions) | |||||||||||
Gross premiums written | 6,639.3 | 7,019.1 | 29,092.5 | 27,912.6 | |||||||
Net premiums written | 5,161.5 | 5,612.8 | 22,903.6 | 22,271.7 | |||||||
Net insurance revenue | 5,680.9 | 5,306.0 | 21,957.4 | 20,194.3 | |||||||
Sources of net earnings | |||||||||||
Operating income - Property and Casualty Insurance and Reinsurance: | |||||||||||
Insurance service result: | |||||||||||
North American Insurers | 265.7 | 245.5 | 977.1 | 964.0 | |||||||
Global Insurers and Reinsurers | 714.7 | 823.1 | 2,828.0 | 1,886.7 | |||||||
International Insurers and Reinsurers | 100.9 | 59.6 | 330.8 | 230.2 | |||||||
Insurance service result | 1,081.3 | 1,128.2 | 4,135.9 | 3,080.9 | |||||||
Other insurance operating expenses | (246.8 | ) | (182.6 | ) | (822.1 | ) | (701.8 | ) | |||
834.5 | 945.6 | 3,313.8 | 2,379.1 | ||||||||
Interest and dividends | 482.1 | 279.5 | 1,654.7 | 746.1 | |||||||
Share of profit of associates | 153.4 | 164.5 | 761.6 | 721.5 | |||||||
Operating income - Property and Casualty Insurance and Reinsurance | 1,470.0 | 1,389.6 | 5,730.1 | 3,846.7 | |||||||
Operating income (loss) - Life insurance and Run-off | (187.3 | ) | (85.2 | ) | (144.6 | ) | 77.4 | ||||
Operating income (loss) - Non-insurance companies | (40.3 | ) | 61.1 | 121.9 | 221.3 | ||||||
Net finance income (expense) from insurance contracts and reinsurance contract assets held | (1,010.3 | ) | 45.3 | (1,605.6 | ) | 1,617.3 | |||||
Net gains (losses) on investments | 1,464.4 | 496.2 | 1,949.5 | (1,573.2 | ) | ||||||
Gain on sale and consolidation of insurance subsidiaries | 290.7 | 1,219.7 | 549.8 | 1,219.7 | |||||||
Interest expense | (130.5 | ) | (125.7 | ) | (510.0 | ) | (452.8 | ) | |||
Corporate overhead and other | (153.4 | ) | 26.0 | (182.8 | ) | (52.2 | ) | ||||
Earnings before income taxes | 1,703.3 | 3,027.0 | 5,908.3 | 4,904.2 | |||||||
Provision for income taxes | (28.5 | ) | (546.1 | ) | (813.4 | ) | (1,092.5 | ) | |||
Net earnings | 1,674.8 | 2,480.9 | 5,094.9 | 3,811.7 | |||||||
Attributable to: | |||||||||||
Shareholders of Fairfax | 1,328.5 | 2,318.1 | 4,381.8 | 3,374.2 | |||||||
Non-controlling interests | 346.3 | 162.8 | 713.1 | 437.5 | |||||||
1,674.8 | 2,480.9 | 5,094.9 | 3,811.7 | ||||||||
The table below presents the insurance service result for the property and casualty insurance and reinsurance operations reconciled to underwriting profit (loss), a key performance measure used by the company and the property and casualty industry in which it operates. The reconciling adjustments are (i) other insurance operating expenses as presented in the consolidated statement of earnings, (ii) the effects of discounting of losses and ceded losses on claims recorded in the period, and (iii) the effects of the risk adjustment and other, which are presented in insurance service expenses and recoveries of insurance service expenses.
Fourth quarter | Year ended December 31, | ||||||||||
2023 | 2022 | 2023 | 2022 | ||||||||
($ millions) | |||||||||||
Insurance service result | 1,081.3 | 1,128.2 | 4,135.9 | 3,080.9 | |||||||
Other insurance operating expenses | (246.8 | ) | (182.6 | ) | (822.1 | ) | (701.8 | ) | |||
Discounting of losses and ceded losses on claims recorded in the period | (393.7 | ) | (412.8 | ) | (1,813.6 | ) | (1,302.7 | ) | |||
Changes in the risk adjustment and other | 138.5 | (36.7 | ) | 22.0 | 28.9 | ||||||
Underwriting profit | 579.3 | 496.1 | 1,522.2 | 1,105.3 | |||||||
Interest and dividends | 482.1 | 279.5 | 1,654.7 | 746.1 | |||||||
Share of profit of associates | 153.4 | 164.5 | 761.6 | 721.5 | |||||||
Adjusted operating income - Property and Casualty Insurance and Reinsurance | 1,214.8 | 940.1 | 3,938.5 | 2,572.9 | |||||||
Highlights for fiscal year 2023 (with comparisons to fiscal year 2022 except as otherwise noted) include the following:
Fourth quarter of 2023 | |||||||
($ millions) | |||||||
Realized gains (losses) | Unrealized gains | Net gains | |||||
Net gains (losses) on: | |||||||
Equity exposures | 348.0 | 22.2 | 370.2 | ||||
Bonds | 102.6 | 894.5 | 997.1 | ||||
Other | (98.9 | ) | 196.0 | 97.1 | |||
351.7 | 1,112.7 | 1,464.4 |
Year ended December 31, 2023 | |||||||
($ millions) | |||||||
Realized gains (losses) | Unrealized gains | Net gains | |||||
Net gains (losses) on: | |||||||
Equity exposures | 506.6 | 711.0 | 1,217.6 | ||||
Bonds | (415.3 | ) | 1,129.4 | 714.1 | |||
Other | (220.9 | ) | 238.7 | 17.8 | |||
(129.6 | ) | 2,079.1 | 1,949.5 | ||||
There were 23.2 million and 23.6 million weighted average common shares effectively outstanding during 2023 and 2022 respectively. At December 31, 2023 there were 23,003,248 common shares effectively outstanding.
Consolidated balance sheet, earnings and comprehensive income information, together with segmented premium and combined ratio, prior year reserve development and catastrophe loss information, follow and form part of this news release.
As previously announced, Fairfax will hold a conference call to discuss its 2023 year-end results at 8:30 a.m. Eastern time on Friday February 16, 2024. The call, consisting of a presentation by the company followed by a question period, may be accessed at 1 (888) 390-0867 (Canada or U.S.) or 1 (212) 547-0141 (International) with the passcode “FAIRFAX”. A replay of the call will be available from shortly after the termination of the call until 5:00 p.m. Eastern time on Friday, March 1, 2024. The replay may be accessed at 1 (800) 934-9450 (Canada or U.S.) or 1 (203) 369-3854 (International).
Fairfax Financial Holdings Limited is a holding company which, through its subsidiaries, is primarily engaged in property and casualty insurance and reinsurance and the associated investment management.
For further information, contact: | John Varnell |
Vice President, Corporate Development | |
(416) 367-4941 | |
Information onCONSOLIDATED BALANCE SHEETSas at December 31, 2023, December 31, 2022 and January 1, 2022 (US$ millions except per share amounts)
December 31, 2023(1) | December 31, 2022 | January 1, 2022 | ||||||
Restated(2) | Restated(2) | |||||||
Assets | ||||||||
Holding company cash and investments (including assets pledged for derivative obligations – $197.7; December 31, 2022 – $104.6; January 1, 2022 – $111.0) | 1,781.6 | 1,345.8 | 1,478.3 | |||||
Insurance contract receivables | 926.1 | 648.9 | 650.1 | |||||
Portfolio investments | ||||||||
Subsidiary cash and short term investments (including restricted cash and cash equivalents – $637.0; December 31, 2022 – $854.4; January 1, 2022 – $1,246.4) | 7,165.6 | 9,368.2 | 21,799.5 | |||||
Bonds (cost $36,511.9; December 31, 2022 – $29,534.4; January 1, 2022 – $13,836.3) | 36,850.8 | 28,578.5 | 14,091.2 | |||||
Preferred stocks (cost $898.3; December 31, 2022 – $808.3; January 1, 2022 – $576.6) | 2,447.4 | 2,338.0 | 2,405.9 | |||||
Common stocks (cost $6,577.2; December 31, 2022 – $5,162.6; January 1, 2022 – $4,717.2) | 6,903.4 | 5,124.3 | 5,468.9 | |||||
Investments in associates (fair value $7,553.2; December 31, 2022 – $6,772.9; January 1, 2022 – $5,671.9) | 6,607.6 | 6,093.1 | 4,749.2 | |||||
Derivatives and other invested assets (cost $952.0; December 31, 2022 – $869.8; January 1, 2022 – $888.2) | 1,025.3 | 828.5 | 991.2 | |||||
Assets pledged for derivative obligations (cost $137.7; December 31, 2022 – $52.4; January 1, 2022 – $119.6) | 139.3 | 51.3 | 119.6 | |||||
Fairfax India cash, portfolio investments and associates (fair value $3,507.6; December 31, 2022 – $3,079.6; January 1, 2022 – $3,336.4) | 2,282.7 | 1,942.8 | 2,066.0 | |||||
63,422.1 | 54,324.7 | 51,691.5 | ||||||
Reinsurance contract assets held | 10,887.7 | 9,691.5 | 9,893.1 | |||||
Deferred income tax assets | 301.1 | 137.3 | 449.1 | |||||
Goodwill and intangible assets | 6,376.3 | 5,689.0 | 5,928.2 | |||||
Other assets | 8,290.2 | 6,981.3 | 6,034.1 | |||||
Total assets | 91,985.1 | 78,818.5 | 76,124.4 | |||||
Liabilities | ||||||||
Accounts payable and accrued liabilities | 5,487.2 | 4,806.6 | 4,587.6 | |||||
Derivative obligations | 444.9 | 191.0 | 152.9 | |||||
Deferred income tax liabilities | 1,250.3 | 868.0 | 586.5 | |||||
Insurance contract payables | 1,206.9 | 1,402.7 | 1,826.0 | |||||
Insurance contract liabilities | 46,171.4 | 39,906.6 | 39,742.2 | |||||
Borrowings – holding company and insurance and reinsurance companies | 7,824.5 | 6,621.0 | 6,129.3 | |||||
Borrowings – non-insurance companies | 1,899.0 | 2,003.9 | 1,623.7 | |||||
Total liabilities | 64,284.2 | 55,799.8 | 54,648.2 | |||||
Equity | ||||||||
Common shareholders’ equity | 21,615.0 | 17,780.3 | 15,199.8 | |||||
Preferred stock | 1,335.5 | 1,335.5 | 1,335.5 | |||||
Shareholders’ equity attributable to shareholders of Fairfax | 22,950.5 | 19,115.8 | 16,535.3 | |||||
Non-controlling interests | 4,750.4 | 3,902.9 | 4,940.9 | |||||
Total equity | 27,700.9 | 23,018.7 | 21,476.2 | |||||
91,985.1 | 78,818.5 | 76,124.4 | ||||||
Book value per basic share | $ | 939.65 | $ | 762.28 | $ | 636.89 | ||
(1) Includes the company's preliminary estimates of the fair values of assets acquired and liabilities assumed in connection with the acquisition of Gulf Insurance. Those fair values will be finalized within twelve months of the acquisition date and differences, if any, from the company's preliminary estimates will result in reclassifications between the affected balance sheet lines and goodwill. | ||||||||
(2) Restated for the transition to IFRS 17. | ||||||||
Information onCONSOLIDATED STATEMENTS OF EARNINGSfor the fourth quarters and years ended December 31, 2023 and 2022(US$ millions except per share amounts)
Fourth quarter | Year ended December 31, | ||||||||||||||
2023 | 2022 | 2023 | 2022 | ||||||||||||
Restated(1) | Restated(1) | ||||||||||||||
Insurance | |||||||||||||||
Insurance revenue | 6,901.8 | 6,517.6 | 26,934.8 | 24,703.5 | |||||||||||
Insurance service expenses | (6,022.7 | ) | (4,937.8 | ) | (21,944.1 | ) | (20,467.3 | ) | |||||||
Net insurance result | 879.1 | 1,579.8 | 4,990.7 | 4,236.2 | |||||||||||
Cost of reinsurance | (1,220.9 | ) | (1,211.6 | ) | (4,977.4 | ) | (4,509.2 | ) | |||||||
Recoveries of insurance service expenses | 1,258.0 | 649.7 | 3,943.7 | 3,274.4 | |||||||||||
Net reinsurance result | 37.1 | (561.9 | ) | (1,033.7 | ) | (1,234.8 | ) | ||||||||
Insurance service result | 916.2 | 1,017.9 | 3,957.0 | 3,001.4 | |||||||||||
Other insurance operating expenses | (307.6 | ) | (197.4 | ) | (966.4 | ) | (656.4 | ) | |||||||
Net finance income (expense) from insurance contracts | (1,318.9 | ) | 62.5 | (2,152.7 | ) | 2,014.4 | |||||||||
Net finance income (expense) from reinsurance contract assets held | 308.6 | (17.2 | ) | 547.1 | (397.1 | ) | |||||||||
(401.7 | ) | 865.8 | 1,385.0 | 3,962.3 | |||||||||||
Investment income | |||||||||||||||
Interest and dividends | 536.6 | 333.3 | 1,896.2 | 961.8 | |||||||||||
Share of profit of associates | 127.7 | 258.4 | 1,022.2 | 1,022.4 | |||||||||||
Net gains (losses) on investments | 1,464.4 | 496.2 | 1,949.5 | (1,573.2 | ) | ||||||||||
2,128.7 | 1,087.9 | 4,867.9 | 411.0 | ||||||||||||
Other revenue and expenses | |||||||||||||||
Non-insurance revenue | 1,752.0 | 1,668.5 | 6,614.5 | 5,581.6 | |||||||||||
Non-insurance expenses | (1,777.7 | ) | (1,622.5 | ) | (6,568.7 | ) | (5,520.9 | ) | |||||||
Gain on sale and consolidation of insurance subsidiaries | 290.7 | 1,219.7 | 549.8 | 1,219.7 | |||||||||||
Interest expense | (130.5 | ) | (125.7 | ) | (510.0 | ) | (452.8 | ) | |||||||
Corporate and other expenses | (158.2 | ) | (66.7 | ) | (430.2 | ) | (296.7 | ) | |||||||
(23.7 | ) | 1,073.3 | (344.6 | ) | 530.9 | ||||||||||
Earnings before income taxes | 1,703.3 | 3,027.0 | 5,908.3 | 4,904.2 | |||||||||||
Provision for income taxes | (28.5 | ) | (546.1 | ) | (813.4 | ) | (1,092.5 | ) | |||||||
Net earnings | 1,674.8 | 2,480.9 | 5,094.9 | 3,811.7 | |||||||||||
Attributable to: | |||||||||||||||
Shareholders of Fairfax | 1,328.5 | 2,318.1 | 4,381.8 | 3,374.2 | |||||||||||
Non-controlling interests | 346.3 | 162.8 | 713.1 | 437.5 | |||||||||||
1,674.8 | 2,480.9 | 5,094.9 | 3,811.7 | ||||||||||||
Net earnings per share | $ | 57.02 | $ | 98.62 | $ | 186.87 | $ | 140.83 | |||||||
Net earnings per diluted share | $ | 52.87 | $ | 91.87 | $ | 173.24 | $ | 131.37 | |||||||
Cash dividends paid per share | $ | — | $ | — | $ | 10.00 | $ | 10.00 | |||||||
Shares outstanding (000) (weighted average) | 23,076 | 23,387 | 23,183 | 23,638 | |||||||||||
(1) Restated for the transition to IFRS 17. | |||||||||||||||
Information onCONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME for the fourth quarters and years ended December 31, 2023 and 2022(US$ millions)
Fourth quarter | Year ended December 31, | ||||||||||
2023 | 2022 | 2023 | 2022 | ||||||||
Restated(1) | Restated(1) | ||||||||||
Net earnings | 1,674.8 | 2,480.9 | 5,094.9 | 3,811.7 | |||||||
Other comprehensive income (loss), net of income taxes | |||||||||||
Items that may be reclassified to net earnings | |||||||||||
Net unrealized foreign currency translation gains (losses) on foreign subsidiaries | 123.0 | 208.3 | (39.6 | ) | (676.6 | ) | |||||
Gains (losses) on hedge of net investment in Canadian subsidiaries | (52.1 | ) | (28.6 | ) | (56.6 | ) | 149.5 | ||||
Gains (losses) on hedge of net investment in European operations | (34.2 | ) | (65.0 | ) | (27.8 | ) | 51.8 | ||||
Share of other comprehensive gains (losses) of associates, excluding net gains (losses) on defined benefit plans | 97.3 | 107.8 | 30.5 | (132.0 | ) | ||||||
Other | (7.2 | ) | (0.9 | ) | 0.3 | 2.2 | |||||
126.8 | 221.6 | (93.2 | ) | (605.1 | ) | ||||||
Net unrealized foreign currency translation losses on foreign subsidiaries reclassified to net earnings | — | 19.7 | 1.9 | 19.7 | |||||||
Net unrealized foreign currency translation (gains) losses on associates reclassified to net earnings | 19.8 | (3.0 | ) | 18.2 | (4.3 | ) | |||||
146.6 | 238.3 | (73.1 | ) | (589.7 | ) | ||||||
Items that will not be reclassified to net earnings | |||||||||||
Net gains (losses) on defined benefit plans | (46.8 | ) | 16.2 | (32.9 | ) | 121.7 | |||||
Share of net gains (losses) on defined benefit plans of associates | (1.1 | ) | — | (5.1 | ) | 59.4 | |||||
Other | 7.2 | — | 28.2 | — | |||||||
(40.7 | ) | 16.2 | (9.8 | ) | 181.1 | ||||||
Other comprehensive income (loss), net of income taxes | 105.9 | 254.5 | (82.9 | ) | (408.6 | ) | |||||
Comprehensive income | 1,780.7 | 2,735.4 | 5,012.0 | 3,403.1 | |||||||
Attributable to: | |||||||||||
Shareholders of Fairfax | 1,436.3 | 2,539.3 | 4,353.4 | 3,163.5 | |||||||
Non-controlling interests | 344.4 | 196.1 | 658.6 | 239.6 | |||||||
1,780.7 | 2,735.4 | 5,012.0 | 3,403.1 | ||||||||
(1) Restated for the transition to IFRS 17. | |||||||||||
SEGMENTED INFORMATION (US$ millions)
Third party gross premiums written, net premiums written and combined ratios, on an undiscounted basis, for the property and casualty insurance and reinsurance operations (excluding Life insurance and Run-off) in the fourth quarters and full years ended December 31, 2023 and 2022 were as follows:
Gross Premiums Written
Fourth quarter | Year ended December 31, | % change year-over-year | ||||||||||||
2023 | 2022 | 2023 | 2022 | Fourth quarter | Full year | |||||||||
Northbridge | 623.7 | 594.6 | 2,442.2 | 2,301.7 | 4.9 | % | 6.1 | % | ||||||
Crum & Forster | 1,296.1 | 1,137.2 | 5,217.5 | 4,571.3 | 14.0 | % | 14.1 | % | ||||||
Zenith National | 149.1 | 139.0 | 738.3 | 727.9 | 7.3 | % | 1.4 | % | ||||||
North American Insurers | 2,068.9 | 1,870.8 | 8,398.0 | 7,600.9 | 10.6 | % | 10.5 | % | ||||||
Allied World | 1,461.5 | 1,424.1 | 6,840.5 | 6,490.0 | 2.6 | % | 5.4 | % | ||||||
Odyssey Group(1) | 1,314.6 | 1,765.9 | 6,332.6 | 6,559.7 | (25.6) | % | (3.5) | % | ||||||
Brit(2) | 799.3 | 1,007.6 | 3,731.7 | 3,945.9 | (20.7) | % | (5.4) | % | ||||||
Global Insurers and Reinsurers | 3,575.4 | 4,197.6 | 16,904.8 | 16,995.6 | (14.8) | % | (0.5) | % | ||||||
International Insurers and Reinsurers | 934.8 | 734.1 | 3,587.3 | 2,965.2 | 27.3 | % | 21.0 | % | ||||||
Property and casualty insurance and reinsurance | 6,579.1 | 6,802.5 | 28,890.1 | 27,561.7 | (3.3) | % | 4.8 | % | ||||||
Net Premiums Written
Fourth quarter | Year ended December 31, | % change year-over-year | |||||||||||
2023 | 2022 | 2023 | 2022 | Fourth quarter | Full year | ||||||||
Northbridge | 557.0 | 529.5 | 2,145.4 | 2,059.3 | 5.2 | % | 4.2 | % | |||||
Crum & Forster | 937.3 | 847.5 | 3,902.3 | 3,658.4 | 10.6 | % | 6.7 | % | |||||
Zenith National | 153.5 | 144.6 | 755.1 | 739.9 | 6.2 | % | 2.1 | % | |||||
North American Insurers | 1,647.8 | 1,521.6 | 6,802.8 | 6,457.6 | 8.3 | % | 5.3 | % | |||||
Allied World | 960.8 | 935.0 | 4,839.5 | 4,456.1 | 2.8 | % | 8.6 | % | |||||
Odyssey Group(1) | 1,162.5 | 1,541.2 | 5,740.6 | 5,908.0 | (24.6) | % | (2.8) | % | |||||
Brit(2) | 686.7 | 882.1 | 2,982.7 | 3,142.2 | (22.2) | % | (5.1) | % | |||||
Global Insurers and Reinsurers | 2,810.0 | 3,358.3 | 13,562.8 | 13,506.3 | (16.3) | % | 0.4 | % | |||||
International Insurers and Reinsurers | 645.9 | 518.1 | 2,329.8 | 1,963.1 | 24.7 | % | 18.7 | % | |||||
Property and casualty insurance and reinsurance | 5,103.7 | 5,398.0 | 22,695.4 | 21,927.0 | (5.5) | % | 3.5 | % | |||||
Combined Ratios
Fourth quarter | Year ended December 31, | ||||||||||
2023 | 2022 | 2023 | 2022 | ||||||||
Northbridge | 91.5 | % | 92.5 | % | 91.1 | % | 89.4 | % | |||
Crum & Forster | 95.9 | % | 94.2 | % | 97.7 | % | 94.5 | % | |||
Zenith National | 87.0 | % | 95.2 | % | 93.8 | % | 94.7 | % | |||
North American Insurers | 93.6 | % | 93.8 | % | 95.2 | % | 92.9 | % | |||
Allied World | 86.1 | % | 88.7 | % | 89.5 | % | 90.7 | % | |||
Odyssey Group | 88.1 | % | 88.0 | % | 93.4 | % | 96.3 | % | |||
Brit(2) | 88.3 | % | 88.2 | % | 91.9 | % | 97.9 | % | |||
Global Insurers and Reinsurers | 87.5 | % | 88.3 | % | 91.7 | % | 94.8 | % | |||
International Insurers and Reinsurers | 93.4 | % | 101.4 | % | 95.9 | % | 99.3 | % | |||
Property and casualty insurance and reinsurance | 89.9 | % | 90.9 | % | 93.2 | % | 94.7 | % | |||
(1) Excluding the non-renewal of a significant quota share contract which contributed nominal underwriting profit, gross premiums written and net premiums written decreased by 6.5% and 2.8% in the fourth quarter of 2023, and increased by 1.7% and 2.9% in the full year of 2023. | |||||||||||
(2) Excluding Ki Insurance, gross premiums written decreased by 19.7% and 8.3% in the fourth quarter and full year of 2023 and net premiums written decreased by 21.4% and 6.6% in the fourth quarter and full year of 2023. Excluding Ki Insurance, the combined ratios were 88.4% and 91.7% in the fourth quarter and full year of 2023 and 89.0% and 97.6% in the fourth quarter and full year of 2022, reflecting Brit's strategic underwriting actions to reduce both its gross and net property catastrophe exposure. | |||||||||||
Prior year reserve development and current period catastrophe losses of the property and casualty insurance and reinsurance operations (which excludes Life insurance and Run-off) in the fourth quarters and full years ended December 31, 2023 and 2022 were as follows:
Net (Favourable) Adverse Prior Year Reserve Development
Fourth quarter | Year ended December 31, | ||||||||||
2023 | 2022 | 2023 | 2022 | ||||||||
Northbridge | (29.0 | ) | (15.3 | ) | (75.9 | ) | (33.1 | ) | |||
Crum & Forster | (0.1 | ) | (0.1 | ) | (0.5 | ) | (0.5 | ) | |||
Zenith National | (19.7 | ) | (8.9 | ) | (50.8 | ) | (43.6 | ) | |||
North American Insurers | (48.8 | ) | (24.3 | ) | (127.2 | ) | (77.2 | ) | |||
Allied World | 1.4 | (0.1 | ) | — | 30.5 | ||||||
Odyssey Group | (86.1 | ) | (45.7 | ) | (78.6 | ) | (49.9 | ) | |||
Brit | (2.8 | ) | 9.6 | (3.0 | ) | (1.7 | ) | ||||
Global Insurers and Reinsurers | (87.5 | ) | (36.2 | ) | (81.6 | ) | (21.1 | ) | |||
International Insurers and Reinsurers | (15.4 | ) | (18.1 | ) | (100.8 | ) | (97.9 | ) | |||
Property and casualty insurance and reinsurance | (151.7 | ) | (78.6 | ) | (309.6 | ) | (196.2 | ) | |||
Current Period Catastrophe Losses
Fourth quarter | Year ended December 31, | |||||||||||||||||||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||||||||||||||||||
Losses(1) | Combinedratio impact(2) | Losses(1) | Combinedratio impact(2) | Losses(1) | Combinedratio impact(2) | Losses(1) | Combinedratio impact(2) | |||||||||||||||||||||
Hawaii wildfires | 3.3 | 0.1 | — | — | 183.6 | 0.8 | — | — | ||||||||||||||||||||
Turkey earthquake | 1.2 | — | — | — | 113.0 | 0.5 | — | — | ||||||||||||||||||||
Italy hailstorms | 30.8 | 0.5 | — | — | 47.2 | 0.2 | — | — | ||||||||||||||||||||
Hurricane Ian | — | — | 6.4 | 0.2 | — | — | 567.0 | 2.8 | ||||||||||||||||||||
France hailstorms | — | — | 22.8 | 0.4 | — | — | 118.7 | 0.6 | ||||||||||||||||||||
Australian floods | — | — | (2.4 | ) | — | — | — | 71.4 | 0.3 | |||||||||||||||||||
Other | 146.6 | 2.6 | 130.4 | 2.4 | 553.5 | 2.5 | 498.6 | 2.4 | ||||||||||||||||||||
Total catastrophe losses | 181.9 | 3.2 | 157.2 | 3.0 | 897.3 | 4.0 | 1,255.7 | 6.1 | ||||||||||||||||||||
(1) Net of reinstatement premiums. | ||||||||||||||||||||||||||||
(2) Expressed in combined ratio points. | ||||||||||||||||||||||||||||
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: our ability to complete acquisitions and other strategic transactions on the terms and timeframes contemplated, and to achieve the anticipated benefits therefrom; a reduction in net earnings if our loss reserves are insufficient; underwriting losses on the risks we insure that are higher than expected; the occurrence of catastrophic events with a frequency or severity exceeding our estimates; changes in market variables, including unfavourable changes in interest rates, foreign exchange rates, equity prices and credit spreads, which could negatively affect our investment portfolio; 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 the United States, Canada or other jurisdictions in which we operate; risks associated with applicable laws and regulations relating to sanctions and corrupt practices in foreign jurisdictions in which we operate; risks associated with government investigations of, and litigation and negative publicity related to, insurance industry practice or any other conduct; risks associated with political and other developments in foreign jurisdictions in which we operate; risks associated with legal or regulatory proceedings or significant litigation; failures or security breaches of our computer and data processing systems; the influence exercisable by our significant shareholder; adverse fluctuations in foreign currency exchange rates; our dependence on independent brokers over whom we exercise little control; operational, financial reporting and other risks associated with IFRS 17; impairment of the carrying value of our goodwill, indefinite-lived intangible assets or investments in associates; our failure to realize deferred income tax assets; technological or other change which adversely impacts demand, or the premiums payable, for the insurance coverages we offer; disruptions of our information technology systems; assessments and shared market mechanisms which may adversely affect our insurance subsidiaries; risks associated with the global pandemic caused by COVID-19, the conflicts in Ukraine and Israel and the development of other geopolitical events and economic disruptions worldwide; and risks associated with recent events in the banking sector which have elevated concerns among market participants about the liquidity, default and non-performance risk associated with banks, other financial institutions and the financial services industry generally. Additional risks and uncertainties are described in our most recently issued Annual Report, which is available at www.fairfax.ca, and in our Base Shelf Prospectus (under “Risk Factors”) filed with the securities regulatory authorities in Canada, which is available on SEDAR+ at www.sedarplus.ca. Fairfax disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable securities law.
GLOSSARY OF NON-GAAP AND OTHER FINANCIAL MEASURES
Management analyzes and assesses the underlying insurance and reinsurance operations, and the financial position of the consolidated company, through various measures and ratios. Certain of the measures and ratios provided in this news release, which have been used consistently and disclosed regularly in the company's Annual Reports and interim financial reporting, do not have a prescribed meaning under IFRS Accounting Standards and may not be comparable to similar measures presented by other companies. Those measures and ratios are described below.
Underwriting profit (loss) – A measure of underwriting performance calculated as insurance service result with the effects of discounting for net claims incurred in the current period, changes in the risk adjustment and other, and other insurance operating expenses all removed as shown in the table on page 3 of this news release.
Operating income (loss) – This measure is used by the company as a pre-tax performance measure of operations that excludes net finance income (expense) from insurance contracts and reinsurance contract assets held, net gains (losses) on investments, interest expense and corporate overhead and other, and that includes interest and dividends and share of profit (loss) of associates, which the company considers to be more predictable sources of investment income. Operating income (loss) includes the insurance service result and other insurance operating expenses of the insurance and reinsurance operations and the revenue and expenses of the non-insurance companies. A reconciliation of operating income (loss) to earnings before income taxes, the most directly comparable IFRS measure, is presented in the table on page 2 of this news release.
Adjusted operating income (loss) – Calculated as the sum of underwriting profit (loss), interest and dividends and share of profit of associates, this measure is used in a similar manner to operating income (loss).
Combined ratio – A traditional performance measure of underwriting results of property and casualty companies, it is calculated by the company as underwriting expense (comprised of losses on claims, commissions and other underwriting expenses) expressed as a percentage of net premiums earned. Net premiums earned is calculated as insurance revenue less cost of reinsurance, adjusted for net commission expense on assumed business and other. Underwriting expense is calculated as insurance service expenses less recoveries of insurance service expenses and other insurance operating expenses, adjusted for the effects of discounting, risk adjustment and other. The combined ratio is used by the company for comparisons to historical underwriting results, to the underwriting results of competitors and to the broader property and casualty industry, as well as for evaluating the performance of individual operating companies. The company may also refer to combined ratio points, which expresses a loss that is a component of losses on claims, net, such as a catastrophe loss or prior year reserve development, as a percentage of net premiums earned during the same period.
Float – In the insurance industry the funds available for investment that arise as an insurance or reinsurance operation receives premiums in advance of the payment of claims is referred to as float. The company calculates its float as the sum of its insurance contract liabilities and insurance contract payables, less the sum of its reinsurance contract assets held and insurance contract receivables, adjusted to remove the effects of discounting and risk adjustment from insurance contract liabilities and reinsurance contract assets held.
Book value per basic share – The company considers book value per basic share a key performance measure as one of the company’s stated objectives is to build long term shareholder value by compounding book value per basic share by 15% annually over the long term. This measure is calculated by the company as common shareholders' equity divided by the number of common shares effectively outstanding.
Total debt to total capital ratio, excluding non-insurance companies – The company uses this ratio to assess the amount of leverage employed in its operations. As the borrowings of the non-insurance companies are non-recourse to the Fairfax holding company, this ratio excludes the borrowings and non-controlling interests of the non-insurance companies in calculating total debt and total capital, respectively.
December 31, 2023 | December 31, 2022 | ||||||||||||||
As presented in information on the consolidated balance sheet | Adjust for consolidatednon-insurance companies | Excluding consolidatednon-insurance companies | As presented in information on the consolidated balance sheet | Adjust for consolidatednon-insurance companies | Excluding consolidatednon-insurance companies | ||||||||||
Total debt | 9,723.5 | 1,899.0 | 7,824.5 | 8,624.9 | 2,003.9 | 6,621.0 | |||||||||
Total equity | 27,700.9 | 1,634.6 | 26,066.3 | 23,018.7 | 1,690.4 | 21,328.3 | |||||||||
Total capital | 37,424.4 | 33,890.8 | 31,643.6 | 27,949.3 | |||||||||||
Total debt to total capital ratio | 26.0 | % | 23.1 | % | 27.3 | % | 23.7 | % | |||||||
Excess (deficiency) of fair value over carrying value – These pre-tax amounts, while not included in the calculation of book value per basic share, are regularly reviewed by management as an indicator of investment performance for the company's non-insurance associates and market traded consolidated non-insurance subsidiaries that are considered to be portfolio investments, which are Fairfax India, Thomas Cook India, Dexterra Group, Boat Rocker and Farmers Edge.
In the determination of this non-GAAP performance measure the fair value and carrying value of non-insurance associates at December 31, 2023 were $6,825.9 and $6,221.7 (December 31, 2022 - $5,684.3 and $5,418.0), which are the IFRS fair values and carrying values included in information on the consolidated balance sheets as at December 31, 2023 and 2022. Excluded from this performance measure are (i) insurance and reinsurance associates and (ii) associates held by market traded consolidated non-insurance companies that are already included in the carrying values of those companies.
The fair values of market traded consolidated non-insurance companies are calculated as the company's pro rata ownership share of each subsidiary's market capitalization as determined by traded share prices at the financial statement date. The carrying value of each subsidiary represents Fairfax's share of that subsidiary's net assets, calculated as the subsidiary's total assets, less total liabilities and non-controlling interests. All balances used in the calculation of carrying value are those included in the company's information on consolidated balance sheets as at December 31, 2023 and 2022.
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