October 30, 2009 / 1:51 PM / 9 years ago

UPDATE 1-Fairfax says insurance market still soft

* Says no sign of hardening insurance market

* Says priority is to keep financial position strong

* Acquisitions, buybacks, dividend hike all options (In U.S. dollars unless noted)

TORONTO, Oct 29 (Reuters) - Fairfax Financial Holdings Ltd (FFH.TO) said on Friday the insurance market remains soft and that the company continues to put a priority on maintaining a strong financial position rather than on expending capital.

Fairfax, which deals in property and casualty insurance and reinsurance, said it would consider all options when it comes time to deploy capital — including share buybacks, a dividend increase or acquisitions — but for now it is guarding its financial position.

“The first option is to always keep our financial conditions strong, so we won’t do anything at the expense of our financial condition and that also means keeping capital available for a hard market, whenever it comes,” Chief Executive Prem Watsa told analysts during a conference call.

“But after that we can buy stock, buy stock back, we can make some acquisitions as and when they come — we have no plans to make any but we could — and, of course, we could continue to hold significant amount of cash if we decide to pay some dividends out, continue to build our cash in the holding company,” Watsa added.

Fairfax reported a 20 percent jump in quarterly profit on Thursday, mostly due to improved underwriting profit. The Toronto-based financial services company said its profit was $562.4 million in the third quarter, or $30.88 per diluted share.

In the year-earlier quarter, when the company suffered significant underwriting losses due primarily to damaging hurricanes, Fairfax reported $467.6 million in profit, or $25.27 per diluted share.

Watsa said there are no signs yet of a hardening insurance market, noting that the company’s underwriting results were positive, but only modestly so.

“We know (conditions) will change but we don’t know when, so we have to wait and be patient,” he said.

Watsa said he was also concerned that the only part of the U.S. economy that was growing was the 20 percent represented by the various governments, which were doing all the stimulus spending. The other 80 percent that comprised the private sector was still saving, keeping growth in check.

Stock in the company was up 5.6 percent at C$398.00 in early Toronto trade on Friday.

$1=$1.08 Canadian Reporting by Andrea Hopkins; editing by Peter Galloway

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