Fairfax Financial Holdings Limited: Financial Results for the Year Ended December 31, 2007
Fairfax Financial Holdings Limited: Financial Results for the Year Ended December 31, 2007 Thursday February 21, 4:59 pm ET
TORONTO, ONTARIO--(MARKET WIRE)--Feb 21, 2008 -- (Unaudited - All dollar amounts are expressed in U.S. dollars, except as otherwise indicated.) Fairfax Financial Holdings Limited (Toronto:FFH.TO - News)(NYSE:FFH - News) announces net earnings of $563.6 million for the fourth quarter of 2007 and $1,095.8 million for the 2007 year ($30.15 and $58.38 per diluted share, respectively), reflecting record investment income as well as increased underwriting profit generated by the company's insurance and reinsurance operations.
"Our results in 2007 were the best in our twenty-two year history," said Prem Watsa, Chairman and Chief Executive Officer. "As a result of exceptional performance by our operating and investment teams, we achieved record earnings in excess of $1 billion, driven by $281 million of underwriting profit produced by our insurance and reinsurance operations and record investment income, resulting in a 49% increase in our book value per share to $230.01. Also, we ended the year with almost $1 billion in cash and marketable securities at the holding company."
Fairfax's insurance and reinsurance operations generated favourable underwriting results in 2007, including the positive effect of net favourable development of prior years' claims reserves, notwithstanding the anticipated continued broad softening in 2007 in commercial insurance and reinsurance classes and lines of business. The combined ratios of Fairfax's insurance and reinsurance operations were 93.0% and 94.0% for the 2007 fourth quarter and year respectively, compared to 89.0% and 95.5% for the 2006 fourth quarter and year respectively. Fairfax's insurance and reinsurance operations produced an aggregate underwriting profit of $281.3 million in 2007, compared to an aggregate underwriting profit of $212.6 million in 2006.
Record investment income of $1,104.9 million in the fourth quarter of 2007 and $2,400.4 million for the year, compared to $234.5 million in the fourth quarter of 2006 and $1,512.1 million in 2006, included fourth quarter net gains of $705.2 million related to credit default swaps, and for the 2007 year included net gains of $1,145.0 million related to credit default swaps and the previously reported $220.5 million gain on the sale of the company's investment in Hub International Limited in the second quarter of 2007.
During the year ended December 31, 2007, Fairfax sold $965.5 million notional amount of credit default swaps for proceeds of $199.3 million and net gains on sale of $184.7 million. The net mark-to-market gain recorded for the year ended December 31, 2007 on the remaining $18.5 billion notional amount of credit default swaps was $960.3 million. In the first quarter of 2008, up to February 15, Fairfax sold an additional $2.7 billion notional amount of credit default swaps (including virtually all of its credit default swaps referenced to U.S. monoline bond insurers) for proceeds of $651.1 million and net gains on sale (being gains in excess of the mark-to-market value as at December 31, 2007) of $150.9 million. The net mark-to-market gain for the January 1 to February 15, 2008 period on the $18.0 billion notional amount of credit default swaps remaining at February 15, 2008 (including 2008 purchases of $2.2 billion notional amount of credit default swaps for $62.1 million) was $596.5 million, bringing total net gains related to credit default swaps for this period to $747.4 million. The fair value of the $18.0 billion notional amount of credit default swaps remaining at February 15, 2008 was $1,277.6 million. The
(...HARTFORD, Conn. (AP) -- A Connecticut jury found five former insurance company executives guilty Monday of a scheme to manipulate the financial statements of the world's largest insurance company.
The verdict came in the seventh day of jury deliberations following a monthlong trial in federal court.
The defendants, four former executives of General Re Corp. and a former executive of American International Group Inc., sat stone-faced as the verdict was read. They were accused of inflating AIG's (NYSE:AIG) reserves through reinsurance deals by $500 million in 2000 and 2001 to artificially boost its stock price.
The defendants were former General Re CEO Ronald Ferguson; former General Re Senior Vice President Christopher P. Garand; former General Re Chief Financial Officer Elizabeth Monrad; and Robert Graham, a General Re senior vice president and assistant general counsel from about 1986 through October 2005.
Also charged was Christian Milton, AIG's vice president of reinsurance from about April 1982 until March 2005.
Ferguson, Monrad, Milton and Graham each face up to 230 years in prison and a fine of up to $46 million. Garand faces up to 160 years in prison and a fine of up to $29.5 million...
...In their closing statements, defense attorneys repeatedly invoked the name of widely admired billionaire investor Warren Buffett in arguing there was no wrongdoing and only a routine deal between AIG and Berkshire Hathaway Inc.'s (OOTC:HWYI) (NYSE:BRK A) Gen Re.."