Fairfax Financial Holdings Ltd. announced that it net earnings of in the first quarter of 2007 declined to US$110.9 million compared to US$198.4 million for the first quarter of 2006.

The combined ratio of the company’s insurance and reinsurance operations for Q1 was 95.7% on a consolidated basis, and on an individual company basis was as follows: Northbridge – 93.5%, Crum & Forster – 95.9%, Fairfax Asia – 97.3%, OdysseyRe – 96.3% and Group Re – 96.6% .

Underwriting profit at the company’s insurance and reinsurance operations for the first quarter of 2007 was US$49.5 million compared to underwriting profit of US$55.7 million for the first quarter of 2006.

Total interest and dividend income earned increased to US$198.6 million in the first quarter of 2007 from US$149.2 million in the first quarter of 2006, primarily as a result of higher interest rates and an increased investment portfolio.

Operating income of the company’s insurance and reinsurance operations (excluding net gains on investments) for the first quarter of 2007 was US$203.8 million compared to US$172.5 million for the first quarter of 2006.

Net premiums written during the first quarter of 2007 declined by 7.6% to about US$1.1 billion from US$1,2 billion in the first quarter of 2006, reflecting increasingly competitive conditions in global insurance and reinsurance markets.

Net gains on investments in the first quarter of 2007 were US$98.8 million compared to US$289.6 million in the first quarter of 2006 (which included net investment gains of US$137.3 million on the sale of the company’s remaining investment in Zenith National Insurance Corp.).

The company’s runoff operations (now reported without the inclusion of Group Re results) produced pre-tax income of US$9.8 million for the first quarter of 2007, compared to a pre-tax loss of US$3.8 million for the first quarter of 2006.

The company held US$774.3 million of cash, short term investments and marketable securities at the holding company level at March 31, 2007, compared to US$767.4 million at December 31, 2006.

Holding company debt declined during the first quarter by US$73.4 million (excluding the reduction arising from the adoption of new accounting standards) to US$1,305.6 million following the repayment of maturing debt and open market bond repurchases during the quarter.

– Subsidiary portfolio cash and investments at March 31, 2007 totaled US$17.0 billion at carrying value, or US$16.3 billion net of short sale and derivative obligations. As a result of new accounting standards adopted on a prospective basis by the company on Jan. 1 pursuant to which the company’s portfolio investments at March 31, 2007 are generally carried at fair value (except for equity-accounted investments, whose fair value exceeded their carrying value at March 31 by US$303.6 million), the reporting of the carrying value of portfolio investments at March 31 is not comparable to the reporting of that carrying value at Dec. 31.

Reinsurance recoverable declined to US$5,326.9 million at March 31 from US$5,506.5 million at December 31, 2006, primarily as result of continued progress by the runoff operations.