Fairfax Financial Holdings Limited (TSX: FFH and FFH.U) announces
fiscal year 2021 net earnings of $3,401.1 million ($122.25 net
earnings per diluted share after payment of preferred share
dividends) compared to fiscal year 2020 net earnings of $218.4
million ($6.29 net earnings per diluted share after payment of
preferred share dividends). Book value per basic share at
December 31, 2021 was $630.60 compared to $478.33 at
December 31, 2020 (an increase of 34.2% adjusted for the $10
per common share dividend paid in the first quarter of 2021).
"2021 was the best year we have had in our history. We had
record net earnings of $3.4 billion and growth in book value per
share of 34.2% (adjusted for the $10 per common share dividend paid
in the first quarter) to $630.60. At $23.8 billion, our gross
premium grew by 25.4% in 2021 or $4.8 billion - essentially all
organic and the most in any one year in our history. All of our
major insurance and reinsurance companies achieved a combined ratio
below 100% for a consolidated combined ratio of 95.0%, despite
significant catastrophe losses of $1.1 billion or 7.2 combined
ratio points. Core underwriting performance was exceptionally
strong with a combined ratio excluding catastrophe losses of 87.8%
with continued strong reserving.
"Our net gains on investments of $3.4 billion included net gains
of $2.3 billion on equity exposures and net gains of $1.5
billion on Digit compulsorily convertible preference shares,
partially offset by losses on the bond portfolio of $287
million.
"We ended 2021 in a strong financial position with $1.5 billion
in cash and investments in the holding company, our debt to capital
ratio reduced to 24.1%, and no significant holding company debt
maturities until 2024.
"Throughout 2020 and 2021, I stated publicly that the market
price of Fairfax shares was ridiculously cheap. We were able to
take advantage of this opportunity and on December 29, 2021 we
successfully completed a substantial issuer bid, purchasing and
cancelling 2 million shares at a price of $500.00 per share," said
Prem Watsa, Chairman and Chief Executive Officer.
The table below presents the sources of the company's net
earnings in a segment reporting format which the company has
consistently used as it believes it assists in understanding
Fairfax:
|
Fourth quarter |
|
Year ended December 31, |
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
|
($ millions) |
Gross premiums written |
6,533.6 |
|
|
4,904.3 |
|
|
23,910.2 |
|
|
19,125.9 |
|
Net premiums written |
4,856.3 |
|
|
3,727.4 |
|
|
18,278.1 |
|
|
14,864.5 |
|
Net premiums earned |
4,374.0 |
|
|
3,695.6 |
|
|
16,558.0 |
|
|
13,988.7 |
|
|
|
|
|
|
|
|
|
Operating income - Property
and casualty insurance and reinsurance: |
|
|
|
|
|
|
|
Underwriting profit |
470.8 |
|
|
166.8 |
|
|
801.2 |
|
|
309.0 |
|
Interest and dividends |
100.5 |
|
|
120.3 |
|
|
441.7 |
|
|
560.6 |
|
Share of profit of associates |
54.5 |
|
|
27.9 |
|
|
324.1 |
|
|
46.2 |
|
|
625.8 |
|
|
315.0 |
|
|
1,567.0 |
|
|
915.8 |
|
Operating income (loss) - Life
insurance and Run-off |
(229.7 |
) |
|
(147.0 |
) |
|
(272.9 |
) |
|
(194.6 |
) |
Operating income (loss) -
Non-insurance companies |
96.6 |
|
|
(65.0 |
) |
|
(7.0 |
) |
|
(178.7 |
) |
Interest expense |
(120.3 |
) |
|
(117.1 |
) |
|
(513.9 |
) |
|
(475.9 |
) |
Corporate overhead and other
income (expense) |
(183.5 |
) |
|
15.5 |
|
|
(89.7 |
) |
|
(252.7 |
) |
Net gains on investments |
938.3 |
|
|
1,235.8 |
|
|
3,445.1 |
|
|
313.1 |
|
Gain on sale and consolidation
of insurance subsidiaries |
17.1 |
|
|
— |
|
|
264.0 |
|
|
117.1 |
|
Pre-tax income |
1,144.3 |
|
|
1,237.2 |
|
|
4,392.6 |
|
|
244.1 |
|
Provision for income
taxes |
(156.6 |
) |
|
(278.8 |
) |
|
(726.0 |
) |
|
(206.7 |
) |
Non-controlling interests |
(56.4 |
) |
|
(49.3 |
) |
|
(265.5 |
) |
|
181.0 |
|
Net earnings attributable to
shareholders of Fairfax |
931.3 |
|
|
909.1 |
|
|
3,401.1 |
|
|
218.4 |
|
Highlights for fiscal year 2021 (with comparisons to fiscal year
2020 except as otherwise noted) include the following:
- Net premiums written by the property
and casualty insurance and reinsurance operations increased by
21.0% (25.8% adjusted for loss portfolio transfers completed at
Crum & Forster and Brit in the fourth quarter of 2021) to
$17,809.4 million from $14,717.7 million, while gross premiums
written increased by 25.4%.
- The consolidated combined ratio of
the property and casualty insurance and reinsurance operations was
95.0%, producing an underwriting profit of $801.2 million despite
catastrophe losses of $1,148.1 million (representing 7.2
combined ratio points), compared to a combined ratio of 97.8% and
an underwriting profit of $309.0 million in 2020. The property and
casualty insurance and reinsurance operations continued to
experience net favourable prior year reserve development, with a
benefit of $355.6 million or 2.2 combined ratio points.
- Operating income of the property and
casualty insurance and reinsurance operations increased to $1,567.0
million from $915.8 million, reflecting higher underwriting profit
and share of profit of associates, partially offset by lower
interest and dividends.
- Float of the property and casualty
insurance and reinsurance operations increased by 14.2% to
$25,936.8 million at December 31, 2021 from $22,705.0 million
at December 31, 2020.
- Operating loss of the Life insurance
and Run-off operations increased to $272.9 million from $194.6
million, principally reflecting net adverse prior year reserve
development at Run-off of $224.6 million, primarily recorded in the
fourth quarter and related to exposures in U.S. asbestos, pollution
and other of $212.0 million.
- Excluding the impact of Fairfax
India’s $85.2 million of performance fees to Fairfax in 2021
(principally recorded in the first half of 2021), which are offset
upon consolidation, operating income of the non-insurance companies
was $78.2 million, an improvement of $256.9 million that reflected
a strong fourth quarter, principally related to the Restaurants and
retail segment (which benefited from reduced COVID-19-related
lockdown restrictions in 2021 compared to 2020) and the Other
segment (reflecting deconsolidation of Fairfax Africa on December
8, 2020, producing an operating profit in 2021 compared to an
operating loss in 2020).
- Consolidated interest and dividends
of $640.8 million decreased from $769.2 million, primarily
reflecting our strategy to invest in shorter term debt and not
reach for yield, which resulted in lower interest income earned,
principally due to a general decrease in sovereign bond yields,
sales of U.S. treasury bonds throughout 2020 and net sales of U.S.
corporate bonds in 2021, partially offset by higher interest income
earned on first mortgage loans purchased in 2021 and increased
dividend income from common stocks.
- Consolidated share of profit of
associates of $402.0 million principally reflected share of profit
of $162.3 million from Eurobank, $75.9 million from Resolute, $69.5
million from Atlas Corp. and $55.5 million from Gulf
Insurance.
- Interest expense of $513.9 million
(inclusive of $57.9 million on leases) was primarily comprised of
$356.8 million incurred on borrowings by the holding company and
the insurance and reinsurance companies (inclusive of a loss of
$45.7 million related to early redemption of debt) and $99.2
million incurred on borrowings by the non-insurance companies
(which are non-recourse to the holding company).
- At December 31, 2021 the
company's insurance and reinsurance companies held $24.9 billion in
cash and short-dated investments representing 50.3% of portfolio
investments, comprised of $21.8 billion of subsidiary cash and
short-term investments and $3.1 billion of short-dated U.S.
treasuries.
- Net gains on investments of $3,445.1
million ($938.3 million in the fourth quarter) consisted of the
following:
|
Fourth quarter of 2021 |
|
($ millions) |
|
Realized gains (losses) |
|
Unrealized gains (losses) |
|
Net gains (losses) |
Net gains (losses) on: |
|
|
|
|
|
Equity exposures |
20.9 |
|
|
347.5 |
|
|
368.4 |
|
Bonds |
126.6 |
|
|
(243.0 |
) |
|
(116.4 |
) |
Other |
(33.9 |
) |
|
720.2 |
|
|
686.3 |
|
|
113.6 |
|
|
824.7 |
|
|
938.3 |
|
|
|
|
|
|
|
|
Year ended December 31, 2021 |
|
($ millions) |
|
Realized gains (losses) |
|
Unrealized gains (losses) |
|
Net gains (losses) |
Net gains (losses) on: |
|
|
|
|
|
Equity exposures |
992.2 |
|
|
1,319.9 |
|
|
2,312.1 |
|
Bonds |
338.0 |
|
|
(624.6 |
) |
|
(286.6 |
) |
Other |
(63.8 |
) |
|
1,483.4 |
|
|
1,419.6 |
|
|
1,266.4 |
|
|
2,178.7 |
|
|
3,445.1 |
|
- Net gains on equity exposures of
$2,312.1 million was primarily comprised of realized and unrealized
appreciation of common stocks and equity total return swaps and net
unrealized gains from convertible bonds and equity warrants. Net
gains on Other of $1,419.6 million primarily reflected unrealized
gains of $1,490.3 million ($668.3 million recorded in the fourth
quarter) on Digit compulsorily convertible preference shares.
- At December 31, 2021 the excess
of fair value over adjusted carrying value of investments in
non-insurance associates and consolidated non-insurance
subsidiaries was approximately $346 million. The company
anticipates recording additional gains of approximately $400
million upon consolidating its investment in Digit, which is
subject to regulatory approvals permitting the company to increase
its 49.0% equity interest in Digit to a control position.
- At December 31, 2021 the
company continued to hold equity total return swaps on 1,964,155
Fairfax subordinate voting shares with an original notional amount
of $732.5 million (Cdn$935.0 million) or $372.96 (Cdn$476.03) per
share.
- On December 15, 2021 Odyssey Group
issued shares representing an aggregate of 9.99% equity interest to
a subsidiary of the Canada Pension Plan Investment Board ("CPPIB")
and OMERS, the pension plan for Ontario's municipal employees, for
cash consideration of $900.0 million, which resulted in the company
recording an aggregate increase to common shareholders’ equity of
$429.1 million.
- The company held $1,478.3 million of
cash and investments at the holding company level at
December 31, 2021, compared to $1,252.2 million at
December 31, 2020.
- The company's total debt to total
capital ratio, excluding non-insurance companies, decreased to
24.1% at December 31, 2021 from 29.7% at December 31,
2020, primarily reflecting higher total capital, due principally to
net earnings and increased non-controlling interests, and decreased
total debt, due principally to lower borrowings at the holding
company and the insurance and reinsurance companies.
- During 2021 the company purchased
293,197 subordinate voting shares for treasury and 2,137,923 for
cancellation at an aggregate cost of $1,190.7 million. Purchases
for cancellation included 2,000,000 subordinate voting shares
acquired under the company's $1.0 billion substantial issuer bid
("SIB") at $500.00 per share completed on December 29, 2021, which
reduced common shareholders’ equity by $1.0 billion. From the
fourth quarter of 2017 up to December 31, 2021, the company
has purchased 1,414,282 subordinate voting shares for treasury and
3,102,998 subordinate voting shares for cancellation, an aggregate
of 4,517,280 subordinate voting shares purchased at a cost of
$2,065.6 million.
There were 26.0 million and 26.4 million weighted average common
shares effectively outstanding during 2021 and 2020 respectively.
At December 31, 2021 there were 23,865,600 common shares
effectively outstanding.
Unaudited consolidated balance sheet, earnings and comprehensive
income information, together with segmented premium and combined
ratio, prior year reserve development and catastrophe and COVID-19
loss information, follow and form part of this news release.
As previously announced, Fairfax will hold a conference call to
discuss its 2021 year-end results at 8:30 a.m. Eastern time on
Friday February 11, 2022. The call, consisting of a
presentation by the company followed by a question period, may be
accessed at 1 (888) 390-0867 (Canada or U.S.) or 1 (212) 547-0141
(International) with the passcode “FAIRFAX”. A replay of the call
will be available from shortly after the termination of the call
until 5:00 p.m. Eastern time on Friday, February 25, 2022. The
replay may be accessed at 1 (888) 566-0439 (Canada or U.S.) or 1
(203) 369-3045 (International).
Fairfax Financial Holdings Limited is a holding company which,
through its subsidiaries, is primarily engaged in property and
casualty insurance and reinsurance and the associated investment
management.
For further
information, contact: |
John
Varnell |
|
Vice President, Corporate Development |
|
(416) 367-4941 |
Information onCONSOLIDATED BALANCE SHEETSas at
December 31, 2021 and December 31, 2020 (unaudited - US$
millions)
|
|
December 31, 2021 |
|
December 31, 2020 |
Assets |
|
|
|
|
|
|
Holding company cash and investments (including assets pledged for
derivative obligations – $111.0; December 31, 2020 – $79.5) |
|
|
1,478.3 |
|
|
|
1,252.2 |
|
Insurance contract receivables |
|
|
6,883.2 |
|
|
|
5,816.1 |
|
|
|
|
|
|
|
|
Portfolio investments |
|
|
|
|
|
|
Subsidiary cash and short term investments (including restricted
cash and cash equivalents – $1,246.4; December 31, 2020 –
$751.9) |
|
|
21,799.5 |
|
|
|
13,197.8 |
|
Bonds (cost $13,836.3; December 31, 2020 – $14,916.1) |
|
|
14,091.2 |
|
|
|
15,734.6 |
|
Preferred stocks (cost $576.6; December 31, 2020 – $268.3) |
|
|
2,405.9 |
|
|
|
605.2 |
|
Common stocks (cost $4,717.2; December 31, 2020 – $4,635.5) |
|
|
5,468.9 |
|
|
|
4,599.1 |
|
Investments in associates (fair value $5,671.9; December 31, 2020 –
$4,154.3) |
|
|
4,755.1 |
|
|
|
4,381.8 |
|
Investment in associate held for sale (fair value nil; December 31,
2020 – $729.5) |
|
|
— |
|
|
|
729.5 |
|
Derivatives and other invested assets (cost $888.2; December 31,
2020 – $944.4) |
|
|
991.2 |
|
|
|
812.4 |
|
Assets pledged for derivative obligations (cost $119.6; December
31, 2020 – $196.1) |
|
|
119.6 |
|
|
|
196.4 |
|
Fairfax India cash, portfolio investments and associates (fair
value $3,336.4; December 31, 2020 – $2,791.0) |
|
|
2,066.0 |
|
|
|
1,851.8 |
|
|
|
|
51,697.4 |
|
|
|
42,108.6 |
|
|
|
|
|
|
|
|
Deferred premium acquisition costs |
|
|
1,924.1 |
|
|
|
1,543.7 |
|
Recoverable from reinsurers (including recoverables on paid losses
– $884.3; December 31, 2020 – $686.8) |
|
|
12,090.5 |
|
|
|
10,533.2 |
|
Deferred income tax assets |
|
|
522.4 |
|
|
|
713.9 |
|
Goodwill and intangible assets |
|
|
5,928.2 |
|
|
|
6,229.1 |
|
Other assets |
|
|
6,121.3 |
|
|
|
5,857.2 |
|
Total assets |
|
|
86,645.4 |
|
|
|
74,054.0 |
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
Accounts payable and accrued liabilities |
|
|
4,985.4 |
|
|
|
4,996.1 |
|
Derivative obligations (including at the holding company – $32.1;
December 31, 2020 – $22.8) |
|
|
152.9 |
|
|
|
189.4 |
|
Deferred income tax liabilities |
|
|
598.8 |
|
|
|
356.4 |
|
Insurance contract payables |
|
|
4,493.5 |
|
|
|
2,964.0 |
|
Insurance contract liabilities |
|
|
47,346.5 |
|
|
|
39,206.8 |
|
Borrowings – holding company and insurance and reinsurance
companies |
|
|
6,129.3 |
|
|
|
6,614.0 |
|
Borrowings – non-insurance companies |
|
|
1,623.7 |
|
|
|
2,200.0 |
|
Total liabilities |
|
|
65,330.1 |
|
|
|
56,526.7 |
|
|
|
|
|
|
|
|
Equity |
|
|
|
|
|
|
Common shareholders’ equity |
|
|
15,049.6 |
|
|
|
12,521.1 |
|
Preferred stock |
|
|
1,335.5 |
|
|
|
1,335.5 |
|
Shareholders’ equity attributable to shareholders of Fairfax |
|
|
16,385.1 |
|
|
|
13,856.6 |
|
Non-controlling interests |
|
|
4,930.2 |
|
|
|
3,670.7 |
|
Total equity |
|
|
21,315.3 |
|
|
|
17,527.3 |
|
|
|
|
86,645.4 |
|
|
|
74,054.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Book value per basic
share |
|
$ |
630.60 |
|
|
$ |
478.33 |
|
Information onCONSOLIDATED STATEMENTS OF
EARNINGSfor the fourth quarters and years ended
December 31, 2021 and 2020(unaudited - US$ millions except per
share amounts)
|
|
Fourth quarter |
|
|
Year ended December 31, |
|
|
|
|
2021 |
|
|
|
|
2020 |
|
|
|
|
2021 |
|
|
|
|
2020 |
|
|
Income |
|
|
|
|
|
|
|
|
|
|
|
|
Gross premiums
written |
|
|
6,533.6 |
|
|
|
|
4,904.3 |
|
|
|
|
23,910.2 |
|
|
|
|
19,125.9 |
|
|
Net premiums
written |
|
|
4,856.3 |
|
|
|
|
3,727.4 |
|
|
|
|
18,278.1 |
|
|
|
|
14,864.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross premiums
earned |
|
|
6,026.6 |
|
|
|
|
4,791.1 |
|
|
|
|
21,786.8 |
|
|
|
|
17,898.8 |
|
|
Premiums ceded to
reinsurers |
|
|
(1,652.6 |
) |
|
|
|
(1,095.5 |
) |
|
|
|
(5,228.8 |
) |
|
|
|
(3,910.1 |
) |
|
Net premiums
earned |
|
|
4,374.0 |
|
|
|
|
3,695.6 |
|
|
|
|
16,558.0 |
|
|
|
|
13,988.7 |
|
|
Interest and
dividends |
|
|
144.9 |
|
|
|
|
164.5 |
|
|
|
|
640.8 |
|
|
|
|
769.2 |
|
|
Share of profit (loss) of
associates |
|
|
55.0 |
|
|
|
|
64.7 |
|
|
|
|
402.0 |
|
|
|
|
(112.8 |
) |
|
Net gains on
investments |
|
|
938.3 |
|
|
|
|
1,235.8 |
|
|
|
|
3,445.1 |
|
|
|
|
313.1 |
|
|
Gain on sale and consolidation of insurance
subsidiaries |
|
|
17.1 |
|
|
|
|
— |
|
|
|
|
264.0 |
|
|
|
|
117.1 |
|
|
Other revenue |
|
|
1,399.0 |
|
|
|
|
1,417.5 |
|
|
|
|
5,158.0 |
|
|
|
|
4,719.6 |
|
|
|
|
|
6,928.3 |
|
|
|
|
6,578.1 |
|
|
|
|
26,467.9 |
|
|
|
|
19,794.9 |
|
|
Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
Losses on claims,
gross |
|
|
3,893.7 |
|
|
|
|
3,521.1 |
|
|
|
|
14,200.7 |
|
|
|
|
12,234.8 |
|
|
Losses on claims, ceded to
reinsurers |
|
|
(1,254.2 |
) |
|
|
|
(1,015.9 |
) |
|
|
|
(3,460.2 |
) |
|
|
|
(2,910.3 |
) |
|
Losses on claims,
net |
|
|
2,639.5 |
|
|
|
|
2,505.2 |
|
|
|
|
10,740.5 |
|
|
|
|
9,324.5 |
|
|
Operating
expenses |
|
|
898.0 |
|
|
|
|
642.8 |
|
|
|
|
2,946.1 |
|
|
|
|
2,536.5 |
|
|
Commissions,
net |
|
|
779.6 |
|
|
|
|
620.7 |
|
|
|
|
2,787.9 |
|
|
|
|
2,355.0 |
|
|
Interest
expense |
|
|
120.3 |
|
|
|
|
117.1 |
|
|
|
|
513.9 |
|
|
|
|
475.9 |
|
|
Other expenses |
|
|
1,346.6 |
|
|
|
|
1,455.1 |
|
|
|
|
5,086.9 |
|
|
|
|
4,858.9 |
|
|
|
|
|
5,784.0 |
|
|
|
|
5,340.9 |
|
|
|
|
22,075.3 |
|
|
|
|
19,550.8 |
|
|
Earnings before income
taxes |
|
|
1,144.3 |
|
|
|
|
1,237.2 |
|
|
|
|
4,392.6 |
|
|
|
|
244.1 |
|
|
Provision for income
taxes |
|
|
156.6 |
|
|
|
|
278.8 |
|
|
|
|
726.0 |
|
|
|
|
206.7 |
|
|
Net
earnings |
|
|
987.7 |
|
|
|
|
958.4 |
|
|
|
|
3,666.6 |
|
|
|
|
37.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Attributable to: |
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders of
Fairfax |
|
|
931.3 |
|
|
|
|
909.1 |
|
|
|
|
3,401.1 |
|
|
|
|
218.4 |
|
|
Non-controlling
interests |
|
|
56.4 |
|
|
|
|
49.3 |
|
|
|
|
265.5 |
|
|
|
|
(181.0 |
) |
|
|
|
|
987.7 |
|
|
|
|
958.4 |
|
|
|
|
3,666.6 |
|
|
|
|
37.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings per
share |
|
$ |
35.66 |
|
|
|
$ |
34.28 |
|
|
|
$ |
129.33 |
|
|
|
$ |
6.59 |
|
|
Net earnings per diluted
share |
|
$ |
33.64 |
|
|
|
$ |
32.68 |
|
|
|
$ |
122.25 |
|
|
|
$ |
6.29 |
|
|
Cash dividends paid per
share |
|
$ |
— |
|
|
|
$ |
— |
|
|
|
$ |
10.00 |
|
|
|
$ |
10.00 |
|
|
Shares outstanding (000) (weighted
average) |
|
|
25,806 |
|
|
|
|
26,194 |
|
|
|
|
25,953 |
|
|
|
|
26,447 |
|
|
Information onCONSOLIDATED STATEMENTS OF COMPREHENSIVE
INCOME for the fourth quarters and years ended
December 31, 2021 and 2020(unaudited - US$ millions)
|
|
Fourth quarter |
|
|
Year ended December 31, |
|
|
|
2021 |
|
|
|
2020 |
|
|
|
2021 |
|
|
|
2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
earnings |
|
987.7 |
|
|
|
958.4 |
|
|
|
3,666.6 |
|
|
|
37.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 |
|
(108.1 |
) |
|
|
231.2 |
|
|
|
(199.5 |
) |
|
|
(139.7 |
) |
|
Losses on hedge of net investment in Canadian
subsidiaries |
|
(6.4 |
) |
|
|
(101.1 |
) |
|
|
(16.7 |
) |
|
|
(38.0 |
) |
|
Gains (losses) on hedge of net investment in European
operations |
|
16.1 |
|
|
|
(37.6 |
) |
|
|
63.9 |
|
|
|
(75.8 |
) |
|
Share of other comprehensive income (loss) of associates, excluding
net gains (losses) on defined benefit
plans |
|
(0.5 |
) |
|
|
66.5 |
|
|
|
(75.1 |
) |
|
|
72.2 |
|
|
|
|
(98.9 |
) |
|
|
159.0 |
|
|
|
(227.4 |
) |
|
|
(181.3 |
) |
|
Net unrealized foreign currency translation losses on foreign
subsidiaries reclassified to net
earnings |
|
— |
|
|
|
3.2 |
|
|
|
6.7 |
|
|
|
114.4 |
|
|
Net unrealized foreign currency translation (gains) losses on
associates reclassified to net
earnings |
|
6.1 |
|
|
|
23.5 |
|
|
|
(45.2 |
) |
|
|
69.5 |
|
|
|
|
(92.8 |
) |
|
|
185.7 |
|
|
|
(265.9 |
) |
|
|
2.6 |
|
|
Items that will not be reclassified to net
earnings |
|
|
|
|
|
|
|
|
|
|
|
|
Net gains (losses) on defined benefit
plans |
|
90.8 |
|
|
|
(39.1 |
) |
|
|
88.2 |
|
|
|
(67.5 |
) |
|
Share of net gains (losses) on defined benefit plans of
associates |
|
53.2 |
|
|
|
(65.4 |
) |
|
|
67.0 |
|
|
|
(51.1 |
) |
|
Other |
|
— |
|
|
|
— |
|
|
|
13.8 |
|
|
|
— |
|
|
|
|
144.0 |
|
|
|
(104.5 |
) |
|
|
169.0 |
|
|
|
(118.6 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss), net of income
taxes |
|
51.2 |
|
|
|
81.2 |
|
|
|
(96.9 |
) |
|
|
(116.0 |
) |
|
Comprehensive income
(loss) |
|
1,038.9 |
|
|
|
1,039.6 |
|
|
|
3,569.7 |
|
|
|
(78.6 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Attributable to: |
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders of
Fairfax |
|
1,012.6 |
|
|
|
900.3 |
|
|
|
3,377.6 |
|
|
|
103.0 |
|
|
Non-controlling
interests |
|
26.3 |
|
|
|
139.3 |
|
|
|
192.1 |
|
|
|
(181.6 |
) |
|
|
|
1,038.9 |
|
|
|
1,039.6 |
|
|
|
3,569.7 |
|
|
|
(78.6 |
) |
|
SEGMENTED INFORMATION (unaudited - US$
millions)
Third party gross premiums written, net premiums written and
combined ratios 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, 2021 and
2020 were as follows:
Gross Premiums Written
|
|
Fourth quarter |
|
Year ended December 31, |
|
% change year-over-year |
|
|
2021 |
|
|
2020 |
|
2021 |
|
2020 |
|
Fourth quarter |
|
Full year |
Northbridge |
|
575.4 |
|
|
497.2 |
|
2,121.6 |
|
|
1,727.5 |
|
15.7 |
% |
|
22.8 |
% |
Odyssey Group |
|
1,744.1 |
|
|
1,240.2 |
|
5,551.4 |
|
|
4,306.3 |
|
40.6 |
% |
|
28.9 |
% |
Crum &
Forster |
|
1,013.3 |
|
|
811.2 |
|
3,704.8 |
|
|
3,082.4 |
|
24.9 |
% |
|
20.2 |
% |
Zenith
National |
|
134.1 |
|
|
133.5 |
|
718.2 |
|
|
661.7 |
|
0.4 |
% |
|
8.5 |
% |
Brit(1) |
|
940.6 |
|
|
536.2 |
|
3,221.9 |
|
|
2,407.6 |
|
75.4 |
% |
|
33.8 |
% |
Allied World |
|
1,371.7 |
|
|
1,148.1 |
|
5,794.3 |
|
|
4,633.8 |
|
19.5 |
% |
|
25.0 |
% |
Fairfax
Asia(2) |
|
164.2 |
|
|
91.7 |
|
534.4 |
|
|
421.2 |
|
79.1 |
% |
|
26.9 |
% |
Insurance and Reinsurance -
Other |
|
526.8 |
|
|
445.9 |
|
2,149.4 |
|
|
1,738.6 |
|
18.1 |
% |
|
23.6 |
% |
Property and casualty
insurance and
reinsurance |
|
6,470.2 |
|
|
4,904.0 |
|
23,796.0 |
|
|
18,979.1 |
|
31.9 |
% |
|
25.4 |
% |
Net Premiums Written
|
|
Fourth quarter |
|
Year ended December 31, |
|
% change year-over-year |
|
|
2021 |
|
2020 |
|
2021 |
|
2020 |
|
Fourth quarter |
|
Full year |
Northbridge |
|
528.0 |
|
|
449.2 |
|
1,917.4 |
|
|
1,540.4 |
|
17.5 |
% |
|
24.5 |
% |
Odyssey Group |
|
1,528.8 |
|
|
1,020.6 |
|
4,849.4 |
|
|
3,789.6 |
|
49.8 |
% |
|
28.0 |
% |
Crum &
Forster(3) |
|
468.8 |
|
|
654.6 |
|
2,689.3 |
|
|
2,543.0 |
|
(28.4) |
% |
|
5.8 |
% |
Zenith
National |
|
136.6 |
|
|
129.8 |
|
713.0 |
|
|
646.1 |
|
5.2 |
% |
|
10.4 |
% |
Brit(1) |
|
429.7 |
|
|
422.2 |
|
1,998.3 |
|
|
1,775.6 |
|
1.8 |
% |
|
12.5 |
% |
Allied World |
|
860.4 |
|
|
698.9 |
|
3,907.8 |
|
|
3,017.6 |
|
23.1 |
% |
|
29.5 |
% |
Fairfax
Asia(2) |
|
83.1 |
|
|
57.1 |
|
260.6 |
|
|
221.6 |
|
45.5 |
% |
|
17.6 |
% |
Insurance and Reinsurance -
Other |
|
401.0 |
|
|
294.7 |
|
1,473.6 |
|
|
1,183.8 |
|
36.1 |
% |
|
24.5 |
% |
Property and casualty
insurance and
reinsurance(4) |
|
4,436.4 |
|
|
3,727.1 |
|
17,809.4 |
|
|
14,717.7 |
|
19.0 |
% |
|
21.0 |
% |
Combined Ratios
|
|
Fourth quarter |
|
Year ended December 31, |
|
|
2021 |
|
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
Northbridge |
|
93.3 |
% |
|
89.5 |
% |
|
88.8 |
% |
|
|
92.4 |
% |
Odyssey Group |
|
88.1 |
% |
|
|
81.9 |
% |
|
97.8 |
% |
|
|
94.7 |
% |
Crum &
Forster |
|
87.4 |
% |
|
|
94.7 |
% |
|
95.9 |
% |
|
|
97.5 |
% |
Zenith
National |
|
80.8 |
% |
|
|
92.9 |
% |
|
88.4 |
% |
|
|
91.9 |
% |
Brit(1) |
|
63.9 |
% |
|
|
125.8 |
% |
|
96.8 |
% |
|
|
114.0 |
% |
Allied World |
|
90.7 |
% |
|
|
95.9 |
% |
|
93.4 |
% |
|
|
95.4 |
% |
Fairfax
Asia(2) |
|
93.0 |
% |
|
|
89.2 |
% |
|
91.9 |
% |
|
|
96.8 |
% |
Insurance and Reinsurance -
Other |
|
102.4 |
% |
|
|
101.5 |
% |
|
98.5 |
% |
|
|
99.5 |
% |
Property and casualty
insurance and
reinsurance |
|
88.1 |
% |
|
|
95.5 |
% |
|
95.0 |
% |
|
|
97.8 |
% |
(1) |
Excluding Ki Insurance, gross premiums written increased by 46.0%
and 17.4% in the fourth quarter and full year of 2021. Excluding Ki
Insurance and the loss portfolio transfer completed in the fourth
quarter of 2021, net written premiums increased by 49.0% and 12.5%
and Brit's combined ratios were 80.6% and 96.0% in the fourth
quarter and full year of 2021. |
(2) |
Includes Singapore Re which was consolidated on June 17, 2021. |
(3) |
Excluding the loss portfolio transfer completed in the fourth
quarter of 2021, Crum & Forster's net written premiums
increased by 26.3% and 19.8% in the fourth quarter and full year of
2021. |
(4) |
Excluding the loss portfolio transfers completed in the fourth
quarter of 2021 at Crum & Forster of $358.1 million and Brit of
$344.1 million, which decreased net premiums written by $702.2
million, net premiums written for the property and casualty
insurance and reinsurance operations in the fourth quarter and full
year of 2021 increased by 37.9% and 25.8%. |
Prior year reserve development and current period catastrophe
and COVID-19 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, 2021
and 2020 were as follows:
Net (Favourable) Adverse Prior Year Reserve
Development
|
Fourth quarter |
|
Year ended December 31, |
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
Northbridge |
(42.1 |
) |
|
(23.9 |
) |
|
(29.2 |
) |
|
(39.2 |
) |
Odyssey Group |
(97.2 |
) |
|
(128.4 |
) |
|
(120.1 |
) |
|
(219.5 |
) |
Crum &
Forster |
(0.5 |
) |
|
(1.1 |
) |
|
(3.7 |
) |
|
(5.2 |
) |
Zenith
National |
(24.6 |
) |
|
(11.7 |
) |
|
(70.8 |
) |
|
(74.1 |
) |
Brit |
(39.7 |
) |
|
(20.4 |
) |
|
(100.1 |
) |
|
(62.8 |
) |
Allied World |
(0.1 |
) |
|
20.2 |
|
|
18.8 |
|
|
(5.1 |
) |
Fairfax Asia |
(4.4 |
) |
|
(5.5 |
) |
|
(21.5 |
) |
|
(18.5 |
) |
Insurance and Reinsurance -
Other |
(2.5 |
) |
|
(8.7 |
) |
|
(29.0 |
) |
|
(30.5 |
) |
Property and casualty
insurance and
reinsurance |
(211.1 |
) |
|
(179.5 |
) |
|
(355.6 |
) |
|
(454.9 |
) |
Current Period Catastrophe and COVID-19
Losses
|
|
Fourth quarter |
|
|
Year ended December 31, |
|
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
Losses(1) |
|
Combinedratio
impact(2) |
|
Losses(1) |
|
Combinedratio impact(2) |
|
Losses(1) |
|
Combinedratio
impact(2) |
|
Losses(1) |
|
Combinedratio impact(2) |
Hurricane Ida |
|
67.8 |
|
|
|
1.7 |
|
|
|
|
— |
|
|
— |
|
|
|
407.9 |
|
|
2.5 |
|
|
|
— |
|
|
— |
|
U.S. winter
storms |
|
(2.7 |
) |
|
|
(0.1 |
) |
|
|
|
— |
|
|
— |
|
|
|
246.0 |
|
|
1.5 |
|
|
|
— |
|
|
— |
|
European
floods |
|
46.0 |
|
|
|
1.2 |
|
|
|
|
— |
|
|
— |
|
|
|
219.8 |
|
|
1.4 |
|
|
|
— |
|
|
— |
|
Hurricane
Laura |
|
— |
|
|
|
— |
|
|
|
|
36.4 |
|
|
1.0 |
|
|
|
— |
|
|
— |
|
|
|
148.7 |
|
|
1.1 |
|
Hurricane
Sally |
|
— |
|
|
|
— |
|
|
|
|
59.9 |
|
|
1.6 |
|
|
|
— |
|
|
— |
|
|
|
69.9 |
|
|
0.5 |
|
Midwest
Derecho |
|
— |
|
|
|
— |
|
|
|
|
8.8 |
|
|
0.2 |
|
|
|
— |
|
|
— |
|
|
|
55.4 |
|
|
0.4 |
|
Other |
|
83.2 |
|
|
|
2.2 |
|
|
|
|
119.4 |
|
|
3.3 |
|
|
|
274.4 |
|
|
1.8 |
|
|
|
370.3 |
|
|
2.7 |
|
Total catastrophe
losses |
|
194.3 |
|
|
|
5.0 |
|
|
|
|
224.5 |
|
|
6.1 |
|
|
|
1,148.1 |
|
|
7.2 |
|
|
|
644.3 |
|
|
4.7 |
|
COVID-19
losses |
|
14.9 |
|
|
|
0.4 |
|
|
|
|
133.1 |
|
|
3.6 |
|
|
|
55.1 |
|
|
0.3 |
|
|
|
668.7 |
|
|
4.8 |
|
|
|
209.2 |
|
|
|
5.4 |
|
|
|
|
357.6 |
|
|
9.7 |
|
|
|
1,203.2 |
|
|
7.5 |
|
|
|
1,313.0 |
|
|
9.5 |
|
(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: a reduction in net earnings if our loss reserves are
insufficient; underwriting losses on the risks we insure that are
higher or lower than expected; the occurrence of catastrophic
events with a frequency or severity exceeding our estimates;
changes in market variables, including interest rates, foreign
exchange rates, equity prices and credit spreads, which could
negatively affect our investment portfolio; risks associated with
the global pandemic caused by COVID-19, and the related global
reduction in commerce and substantial downturns in stock markets
worldwide; 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 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; 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;
and adverse consequences to our business, our investments and our
personnel resulting from or related to the COVID-19 pandemic.
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.sedar.com. 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, in various ways. 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 and may not be comparable to similar measures
presented by other companies. Those measures and ratios are
described below.
Underwriting profit (loss) –
This is a measure of underwriting activity in the insurance
industry that is calculated by the company for its insurance and
reinsurance operations as net premiums earned less losses on
claims, net, commissions, net, and operating expenses (excluding
corporate overhead). Corporate overhead, comprised
of the operating expenses of the Fairfax holding company and the
holding companies of the insurance and reinsurance operations, and
the amortization of intangible assets that primarily arose on
acquisition of the insurance and reinsurance subsidiaries, is a
component of operating expenses as presented in the information on
consolidated statements of earnings on page 6 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 gains (losses) on investments, gain on
sale and consolidation of insurance subsidiaries, interest expense
and corporate overhead, 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 underwriting profit (loss) for the
insurance and reinsurance operations and includes other revenue and
other expenses for the non-insurance companies. Refer to the table
on page 2 of this news release for a reconciliation of underwriting
profit (loss) and operating income (loss) to pre-tax income, the
most directly comparable IFRS measure.
Combined ratio – A traditional
performance measure of underwriting results of property and
casualty companies, it is calculated by the company as the sum of
claims losses, loss adjustment expenses, commissions, premium
acquisition costs and other underwriting expenses, expressed as a
percentage of net premiums earned. 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, prior year reserve development or COVID-19 losses, 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 (comprised of provision for losses and loss adjustment
expenses, and provision for unearned premiums) and insurance
contract payables, less the sum of its recoverable from reinsurers,
insurance contract receivables and deferred premium acquisition
costs, all as presented in information on the consolidated balance
sheet. Float of a reporting segment or segments is calculated in
the same manner.
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 expecting to compound book value per
basic share over the long term by 15% annually. 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, 2021 |
|
December 31, 2020 |
|
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 |
7,753.0 |
|
|
1,623.7 |
|
6,129.3 |
|
|
8,814.0 |
|
|
2,200.0 |
|
6,614.0 |
|
Total
equity |
21,315.3 |
|
|
1,998.8 |
|
19,316.5 |
|
|
17,527.3 |
|
|
1,838.9 |
|
15,688.4 |
|
Total
capital |
29,068.3 |
|
|
|
|
25,445.8 |
|
|
26,341.3 |
|
|
|
|
22,302.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total debt to total capital
ratio |
26.7 |
% |
|
|
|
24.1 |
% |
|
33.5 |
% |
|
|
|
29.7 |
% |
Excess (deficiency) of fair value over
adjusted 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 certain
consolidated non-insurance subsidiaries that are considered to be
portfolio investments.The fair values and carrying values of
non-insurance associates used in the determination of this non-GAAP
performance measure are the IFRS fair values and carrying values
included in information on consolidated balance sheets as at
December 31, 2021 and 2020, and excludes investments in
associates held by the company's consolidated non-insurance
companies.
|
December 31, 2021 |
|
December 31, 2020 |
|
Fair value |
|
Carrying value |
|
Fair value |
|
Carrying value |
Investments in associates as
presented in information on consolidated balance
sheets |
5,671.9 |
|
4,755.1 |
|
4,154.3 |
|
4,381.8 |
Less: Insurance and
reinsurance investments in
associates(1) |
1,099.1 |
|
607.4 |
|
812.0 |
|
575.2 |
Less: Associates held by
consolidated non-insurance
companies(2) |
30.9 |
|
30.7 |
|
37.7 |
|
43.5 |
Non-insurance associates
included in the performance
measure |
4,541.9 |
|
4,117.0 |
|
3,304.6 |
|
3,763.1 |
(1) Excludes investment in associate
held for sale at December 31, 2020.(2) Principally
comprised of associates held by Recipe, Thomas Cook India
(including its share of Quess), Dexterra Group and Boat Rocker.
The consolidated non-insurance subsidiaries
included in this performance measure are those that are market
traded - Recipe, Fairfax India, Thomas Cook India, Dexterra Group,
Boat Rocker and Farmers Edge. Their fair values 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 adjusted 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 adjusted carrying value are those included in the
company's information on consolidated balance sheets as at
December 31, 2021 and 2020.
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