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Fairfax Financial Q3 profit slumps on lower investment gains

TORONTO – Fairfax Financial Holdings Ltd. (TSX:FFH) has reported lower third-quarter profits compared with last year, citing reduced returns on investments.

In a report issued Thursday after markets closed, Fairfax said it had net earnings of US$424.8 million or $18.16 per diluted share in the quarter compared with US$461.2 million or $20.68 per share in the prior-year period.

That mostly reflected lower net gains on investments, partially offset by increased underwriting profit, it said.

“Our insurance companies continued to have excellent underwriting performance in the third quarter and the first nine months of 2015, with consolidated combined ratios of 90.9 per cent and 91.3 per cent respectively,” chairman and CEO Prem Watsa said in the company’s earnings statement.

Net premiums written by the insurance and reinsurance operations increased by 31.0 per cent to $1.883 billion.

Watsa added that Fairfax had net investment gains, mostly unrealized,of $425.6 million in the quarter, principally deriving from bonds, due to lower interest rates, and CPI-linked derivative contracts.

In the 2014 quarter, the company had reported net investment gains of US$493.7 million.

Meanwhile, Watsa said Fairfax is 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.”