Fairfax shares dive, but CEO Watsa defends result

Fri Feb 17, 2012 2:54pm EST
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By Cameron French

TORONTO (Reuters) - Fairfax Financial's shares dove 6 percent on Friday after the company posted steep quarterly loss, even as CEO Prem Watsa sought to downplay the disappointing result by saying the property and casualty insurer focuses on long-term performance.

"We achieve these results by taking short-term pain for long-term gain. We have always been focused on the long term," said Watsa, whose shrewd direction of the company's investments have earned him comparisons to Warren Buffet.

Speaking on a conference call, he also said the company was hanging on to its equity hedges despite strong stock markets in recent months, citing Europe's fragile financial system and China's property market.

Fairfax's shares dropped to their lowest in about five months after the company said it lost $771.5 million, or $38.47 a share in the fourth quarter, due to catastrophe-related insurance claims and losses on investments.

The results missed analysts' expectations of a net loss of C$2.60 and drew criticism from analysts.

BMO Capital Markets analyst Tom MacKinnon chopped his 12-month target on the stock to C$430 from C$450, calling the results a "huge miss" in a research note.

Jeff Fenwick of Cormark Securities left his C$450 price target intact but cut his rating on the shares to "market perform" from "buy".

The steeper-than-expected loss was due to higher claims stemming from the Japan tsunami and floods in Thailand, as well as to losses on the company's equity hedges, which became unprofitable as stock markets rallied late last year.   Continued...