• Net Earnings: $915 million in Q2 2024, up 23% from Q2 2023.

• Operating Income: $1.1 billion from insurance and reinsurance operations.

• Underwriting Income: $370 million with a combined ratio of 93.9%.

• Interest and Dividend Income: $614 million, up from $465 million in Q2 2023.

• Investment Portfolio: Approximately $66 billion.

• Net Gains on Investments: $242 million, including $377 million in equity gains and $191 million in bond losses.

• Book Value Per Share: $980 at June 30, 2024, up from $940 at December 31, 2023.

• Gross Premiums Written: $8.9 billion, up 10.8% from Q2 2023.

• North American Insurance Segment: Gross premiums increased by 5.5%.

• Global Insurers and Reinsurers Segment: Gross premiums down 2.1%.

• International Operations: Gross premiums up over 90%.

• Combined Ratio: 93.9% with $164 million in catastrophe losses.

• Share of Profits from Associates: $221 million, down from $269 million in Q2 2023.

• Debt to Total Capital Ratio: 25.9% at June 30, 2024.

• Common Shareholders' Equity: Increased by $115 million to over $21.7 billion.

• Warning! GuruFocus has detected 5 Warning Sign with TRRSF.

Release Date: August 02, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Fairfax Financial Holdings Ltd (FAXRF.PFD) reported strong net earnings of $915 million in the second quarter of 2024, up 23% from the same period in 2023.

• The company achieved a combined ratio of 93.9%, indicating profitable underwriting performance.

• Interest and dividend income increased significantly to $614 million, benefiting from a larger investment portfolio and higher interest rates.

• Fairfax's investment portfolio remains stable at $66 billion, with a strong fixed income component yielding 5.1%.

• The company announced strategic leadership appointments, including Gobi Athappan as Chairman and CEO of Fairfax Asia, indicating a focus on internal succession and leadership continuity.

Negative Points

• Share of profits from associates decreased to $221 million from $269 million in the second quarter of 2023, impacted by losses from Fairfax India's Sanmar Chemicals.

• Net losses on bonds amounted to $191 million due to rising interest rates, partially offsetting investment gains.

• The Global Insurers and Reinsurers segment saw a modest decrease in gross premiums written, down 2.1% compared to the second quarter of 2023.

• Gulf Insurance reported an elevated combined ratio of 100.2%, affected by purchase price adjustments and higher losses in specific programs.

• Organic growth was below 1% in the quarter, with some segments experiencing declines due to competitive market conditions and strategic non-renewals.

Q & A Highlights

Q: Can you provide insights on the impact of Hurricane Beryl and the CrowdStrike IT outage on Fairfax? A: Peter Clarke, President and COO, stated that both events are expected to have minimal impact. Hurricane Beryl is considered an attritional catastrophe loss, and the CrowdStrike incident is mitigated by quick corrective actions and policy waiting periods, making it unlikely to be a material event.

Q: There has been a significant increase in share buybacks. Can you comment on this trend and its implications? A: Peter Clarke explained that Fairfax prioritizes financial strength, supporting insurance companies, and then share buybacks. With strong financials and excess capital from insurance operations, Fairfax sees current share prices as attractive for buybacks.

Q: Can you elaborate on the casualty reserving situation and any impacts similar to those seen by other industry players? A: Peter Clarke noted that while some casualty development has been observed, it has been offset by favorable development in other lines. Fairfax's reserves remain strong, with a significant portion in hard market years, and the company has not reduced initial loss picks in long-tail lines.

Q: What are your expectations for Gulf Insurance's combined ratios moving forward? A: Peter Clarke mentioned that historically, Gulf Insurance has maintained a combined ratio below 95%, averaging around 94%. Fairfax expects Gulf to continue operating at similar levels in the future.

Q: Could you discuss the growth outlook, particularly in light of the recent organic growth figures? A: Peter Clarke acknowledged slower growth in the first half of 2024, with variations across business lines and geographies. Factors like Odyssey's crop business adjustments and non-renewal of a quota share affected growth. However, Fairfax expects growth to pick up in the second half of the year, driven by strong margins and rate increases.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.