Fairfax Financial Holdings Ltd. FFH-T finished last year with strong fourth-quarter profit and underwriting results, helping prop up full-year earnings that sagged as soaring interest rates compelled the company to mark down the value of its bond portfolio.
The Toronto-based insurer and asset manager reported quarterly profit of US$1.98-billion, or US$78.33 per share, compared with US$931-million, or US$33.64 per share, in the prior year. Results were better than analysts expected, and boosted by an anticipated US$1.2-billion gain on the sale of its pet insurance business to the German private investment company JAB Holding last October.
Fairfax’s core insurance and reinsurance business showed good gains, with fourth-quarter profit of US$496-million up 5.4 per cent from a year earlier. Fairfax is able to charge higher premiums with the insurance industry in what is known as a “hard market” – a period of high demand for insurance but weaker supply of affordable coverage because of outside factors that put pressure on insurers such as low investment returns or high claims.
After Fairfax increased prices by about 7 per cent on average last year, the company’s leaders expect those hard-market conditions could continue through 2023 or longer, with interest rates still running high and risks for insurers elevated.
“Broadly speaking, rate increases will exceed loss costs,” said Prem Watsa, Fairfax’s chairman and chief executive officer, on a Friday conference call.
The company’s full-year profit from underwriting was its best ever at US$1.1-billion, despite recording high losses from catastrophes of US$1.3-billion, a large share of which was from Hurricane Ian, which battered Florida.
Gross premiums written rose 15.8 per cent to US$27.6-billion, and the company’s book value per basic share increased, ending the year at US$657.68, compared with US$630.60 a year earlier.
In 2022, however, Fairfax’s profit fell by two thirds to US$1.15-billion, from US$3.4-billion in 2021, as it marked down the value of its bonds. Surging interest rates drove net losses on investments of US$1.7-billion, most of which were the result mark-to-market changes in the value of the company’s bond portfolio. But those losses are largely unrealized.
“We expect much of this will reverse over the short term,” Mr. Watsa said.
Mark Dwelle, an analyst at RBC Dominion Securities Inc., said Fairfax “delivered a strong fourth quarter to cap off a fairly lumpy 2022,” in a note to clients. “Overall a decidedly good result and the company heads into 2023 with a very strong financial position and a nice investment tailwind on top of favorable insurance underwriting conditions.”
Mr. Watsa said Fairfax, which controls an Indian subsidiary, Fairfax India Holdings Corp., has no exposure to the Adani Group, the empire controlled by billionaire Gautam Adani that saw its stock price plunge after a short-seller alleged it had engaged in stock-price manipulation and fraud.
“I think India will continue to do extremely well,” Mr. Watsa said, “notwithstanding the Adani events that took place recently.”
After Fairfax repurchased about US$348-million of shares in 2022, on top of nearly US$1.2-billion in 2021, Mr. Watsa said he expects further stock buybacks will be “the right way to go forward for our shareholders,” he said on Friday’s conference call. With the company’s stock trading at about 6.5 times earnings, be believes “the intrinsic value’s much, much higher than where the book value is.”
TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.
The S&P/TSX composite index was down 239.24 points at 22,749.04.
In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.
The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.
The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.
The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.
This report by The Canadian Press was first published Sept. 6, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in technology, financial and energy stocks, while U.S. stock markets also pushed higher.
The S&P/TSX composite index was up 171.41 points at 23,298.39.
In New York, the Dow Jones industrial average was up 278.37 points at 41,369.79. The S&P 500 index was up 38.17 points at 5,630.35, while the Nasdaq composite was up 177.15 points at 17,733.18.
The Canadian dollar traded for 74.19 cents US compared with 74.23 cents US on Wednesday.
The October crude oil contract was up US$1.75 at US$76.27 per barrel and the October natural gas contract was up less than a penny at US$2.10 per mmBTU.
The December gold contract was up US$18.70 at US$2,556.50 an ounce and the December copper contract was down less than a penny at US$4.22 a pound.
This report by The Canadian Press was first published Aug. 29, 2024.
The crypto market has recently experienced a significant downturn, mirroring broader risk asset sell-offs. Over the past week, Bitcoin’s price dropped by 24%, reaching $53,000, while Ethereum plummeted nearly a third to $2,340. Major altcoins also suffered, with Cardano down 27.7%, Solana 36.2%, Dogecoin 34.6%, XRP 23.1%, Shiba Inu 30.1%, and BNB 25.7%.
The severe downturn in the crypto market appears to be part of a broader flight to safety, triggered by disappointing economic data. A worse-than-expected unemployment report on Friday marked the beginning of a technical recession, as defined by the Sahm Rule. This rule identifies a recession when the three-month average unemployment rate rises by at least half a percentage point from its lowest point in the past year.
Friday’s figures met this threshold, signaling an abrupt economic downshift. Consequently, investors sought safer assets, leading to declines in major stock indices: the S&P 500 dropped 2%, the Nasdaq 2.5%, and the Dow 1.5%. This trend continued into Monday with further sell-offs overseas.
The crypto market’s rapid decline raises questions about its role as either a speculative asset or a hedge against inflation and recession. Despite hopes that crypto could act as a risk hedge, the recent crash suggests it remains a speculative investment.
Since the downturn, the crypto market has seen its largest three-day sell-off in nearly a year, losing over $500 billion in market value. According to CoinGlass data, this bloodbath wiped out more than $1 billion in leveraged positions within the last 24 hours, including $365 million in Bitcoin and $348 million in Ether.
Khushboo Khullar of Lightning Ventures, speaking to Bloomberg, argued that the crypto sell-off is part of a broader liquidity panic as traders rush to cover margin calls. Khullar views this as a temporary sell-off, presenting a potential buying opportunity.
Josh Gilbert, an eToro market analyst, supports Khullar’s perspective, suggesting that the expected Federal Reserve rate cuts could benefit crypto assets. “Crypto assets have sold off, but many investors will see an opportunity. We see Federal Reserve rate cuts, which are now likely to come sharper than expected, as hugely positive for crypto assets,” Gilbert told Coindesk.
Despite the recent volatility, crypto continues to make strides toward mainstream acceptance. Notably, Morgan Stanley will allow its advisors to offer Bitcoin ETFs starting Wednesday. This follows more than half a year after the introduction of the first Bitcoin ETF. The investment bank will enable over 15,000 of its financial advisors to sell BlackRock’s IBIT and Fidelity’s FBTC. This move is seen as a significant step toward the “mainstreamization” of crypto, given the lengthy regulatory and company processes in major investment banks.
The recent crypto market downturn highlights its volatility and the broader economic concerns affecting all risk assets. While some analysts see the current situation as a temporary sell-off and a buying opportunity, others caution against the speculative nature of crypto. As the market evolves, its role as a mainstream alternative asset continues to grow, marked by increasing institutional acceptance and new investment opportunities.
