Fairfax Financial Holdings Limited (TSX:FFH) swung to a profit in the fourth quarter, capping what the company described as its "best" year ever.
The Toronto-based property and casualty insurer said net income attributable to shareholders in the three months ended Dec. 31 was US$23.7 million or 49 cents per diluted share. That compared with a net loss of $5.5 million or 98 cents per share in the same 2013 quarter.
For the full year, Fairfax says net profit attributable to shareholders was US$1.63 billion or $73.01 per diluted share, a reversal of the previous year's net loss of US$573.4 million or $31.15 per share.
The change reflected net gains on its investment portfolio and improved underwriting results, the company said in an earnings report issued Thursday after markets closed.
"Our results in 2014 were the best in our 29-year history, with record underwriting profit of $552 million and record net earnings," chairman and CEO Prem Watsa said.
Watsa said the company also enjoyed a record combined ratio of 90.8 per cent, with its OdysseyRe reinsurance and specialty insurance subsidiary at 84.7 per cent, and all its major insurance companies having combined ratios of less than 100 per cent.
The combined ratio, a measure of profitability of an insurance company, is the sum of incurred losses and operating expenses measured as a percentage of earned premium. A ratio below 100 per cent indicates the company is making an underwriting profit. It does not include income from investments.
Fairfax said its net investment gains were $1.74 billion in 2014, including realized gains of $791 million as well as an investment loss of US$172.6 million in the fourth quarter. The compared with a US$1.56-billion loss on investments in 2013, including a US$329.1-million loss in the fourth quarter of that year.
Watsa said Fairfax was maintaining its defensive equity hedges and deflation protection "as we remain concerned about the financial markets and the economic outlook in this global deflationary environment."
Net premiums earned in the fourth quarter totalled US$1.61 billion versus $1.57 billion in the 2013 period, while net premiums earned for the full year totalled US$6.22 billion versus US$6.08 billion in 2013.
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