Fairfax Financial Holdings warned it is dealing with an estimated $1.4 billion net loss in the 2020 first quarter, largely because of COVID-19 and its adverse impact on the global financial market.

The property/casualty insurance and reinsurance holding company led by Prem Watsa also expects an approximate 12 percent drop in book value adjusted for the $10 per common share dividend it paid in first-quarter 2020.

Watsa explained in prepared remarks that the company’s estimated $1.5 billion net investment losses for the first quarter stem from “unrealized losses in the fair value of our common stock and bond portfolio from the sudden shock of COVID -19.” That stark result reverses a significant amount of the $1.7 billion net gains on investments the company reported in 2019.

Despite that major investment hit, Watsa said that Fairfax still has some strong indicators in play.

“Our insurance companies continued to have strong underwriting performance in the first quarter of 2020 with a consolidated combined ratio below 100 percent, favorable reserve development and strong growth in gross premiums written of approximately 12 percent,” Watsa noted.

He added that the company is focused on keeping its finances stable and has drawn on its credit facility to ensure Fairfax keeps its liquidity high “during these uncertain times.” Fairfax has approximately $2.5 billion in cash and marketable securities in its holding company as of March 31, 2020, he said.

Beyond Fairfax, other P/C insurance-related COVID-19 losses for the first quarter of 2020 are starting to trickle in.

Arch Capital Group Ltd. also recently disclosed estimated pretax losses relating to the pandemic that could reach $145 million for the quarter, but the numbers in this case largely connect to claims. Arch said COVID-19 claims across its P/C insurance and reinsurance segments ranged from $85 million to $95 million as of March 31, net of reinsurance recoveries and reinstatement premiums.

For its mortgage segment, Arch said it would experience a range of pretax net losses of $40 million to $50 million stemming from the financial stress created by the global pandemic.

Source: Fairfax Financial Holdings