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Fort McMurray wildfire adds 9.2 points to Northbridge Insurance’s Q2 combined ratio


August 3, 2016   by Canadian Underwriter


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The recent wildfire in and near Fort McMurray, Alberta resulted in net incurred losses of $13.5 million for OdysseyRe and $20.9 million for Northbridge Insurance, the carriers’ parent company reported recently. All figures are in United States dollars.

Fairfax Financial Holdings Ltd. released July 28 its financial results for the quarter and six months ending June 30.

Toronto-based Fairfax’s Northbridge subsidiary had a combined ratio of 100% in the most recent quarter, up 5.5 points from 94.5% during the second quarter of 2015.

Northbridge’s underwriting results in the second quarter and first six months of 2016 included $21 million, “of current period catastrophe losses, principally comprised of the impact of the Fort McMurray wildfires.”

On July 6, Catastrophe Indices and Quantification Inc. said its estimated cost, at the time, of insured losses from the wildfires, was Cdn$3.58 billion. The wildfire, which started in early May, resulted in the evacuation of about 80,000.

The Fort McMurray wildfire added 9.2 points to Northbridge Insurance’s combined ratio in the three months ending June 30, and 4.8 points to Northbridge’s combined ratio for the first six months of this year, net of reinstatement premiums, Fairfax Financial reported. For the six months ending June 30, Northbridge had a combined ratio of 99.3% in 2016, up 3.6 points from 95.7% in 2015.

In addition to Toronto-based Northbridge, Fairfax’s other insurance holdings include: Stamford, Conn.-based OdysseyRe; Morristown, N.J.,-based Crum & Forster; and workers’ compensation insurer Zenith National of Woodland Hills, Calif.

Fairfax also owns several non-insurance companies, including steak restaurant chain The Keg, retail chains William Ashley China and Sporting Life and Boat Rocker Media (formerly known as Temple Street Productions). Fairfax also owns the majority of voting shares of Cara Operations Ltd., whose restaurant chains include Swiss Chalet, Harvey’s, Milestones, Montana’s, Kelsey’s and East Side Mario’s.

OdysseyRe’s operations include Odyssey Reinsurance Company, Hudson Insurance Company and Newline (Lloyd’s Syndicate 1218). OdysseyRe had a combined ratio of 94.4% in the latest quarter, up 6.3 points from 88.1% in Q2 2015. For the first half of the year, OdysseyRe’s combined ratio was 92.5% this year, up 3.9 points from 88.6% in 2015.

The combined ratio in the latest quarter included 12.8 points of net favourable prior reserve development, “principally related to catastrophe losses,” compared to 4.8 points in Q2 2015, Fairfax said in its Q2 financial report.

OdysseyRe had 14.1 combined ratio points, or $75.3 million of current period catastrophe losses in Q2 2016, and 10.2 combined ratio points or $102 million, in the first half of the year. That was “principally comprised of flooding in France, the Fort McMurray wildfires and other attritional losses,” Fairfax reported.

In late May and early June, storm Elvira caused floods in Northern Europe, Aon plc reported earlier.

For OdysseyRe, the Fort McMurray wildfire resulted in net incurred losses of $13.5 million and added 2.6 combined ratio points, during the second quarter, net of reinstatement premiums, Fairfax reported July 28, suggesting that the Fort McMurray disaster added 1.4 combined ratio points, net of reinstatement premiums, to OdysseyRe’s combined ratio for the first six months of the year.

During the second quarter, OdysseyRe reported net premiums written of $631.1 million this year, up 13.9% from $554 million in 2015. That increase “primarily” reflected “the impact of the non-renewal on June 1, 2015 of a Florida property quota share reinsurance contract (following the cedent’s decision to retain all the risk associated with that contract),” Fairfax noted. Excluding the effect of that non-renewal, OdysseyRe’s Q2 net premiums written increased were up 2.4% year over year, “principally reflecting growth in the crop line of business in the U.S insurance division, partially offset be decreases in the Latin America division.”

Northbridge reported net premiums written of $282.2 million in the most recent quarter, up 1.7% from $277.4 million during the second quarter of 2015, “as the impact of the strengthening of the U.S. dollar relative to the Canadian dollar exceeded the underlying increase in net premiums written expressed in Canadian dollars,” Fairfax reported. In Canadian dollars, Northbridge’s Q2 net premiums written increased by 7.4%, from 2015 to 2015, while its net premiums written for the first six months of the year increased 8.6% from 2015 to 2016, “primarily due to increased renewals, new business writing, and modes price increases across the group.”

During the latest quarter, Fairfax reported net premiums earned of $534.4 million for OdysseyRe, $434.1 million for Crum & Forster, $226.9 million for Northbridge, $197.1 million for Zenith National and $348.9 million for London-based Lloyd’s insurer Brit plc. Fairfax announced in 2015 it agreed to acquire 97% of ordinary shares of Brit. On June 29, 2015, Fairfax announced it sold 29.9% of Brit to the Ontario Municipal Employees Retirement System.

Company-wide, Fairfax reported gross written premiums of $2.62 billion in Q2 2016, up from $2.053 billion in Q2 2015. Net earnings were $293.5 million in Q2 2016, compared to a net loss of $178.6 million in Q2 2015. During the three months ending June 30, Fairfax reported $229.2 million in net gains on investments, compared to net losses, of $661.2 million, on investments in Q2 2015.

Total revenue was $2.9 billion in the latest quarter, compared to $1.769 billion in Q2 2015.

For the first six months of the year, Fairfax reported net earnings of $276.8 million on revenue of $5.1 billion, compared to net earnings of $57.5 million on revenue of $4.16 billion in 2015.

On July 6, Fairfax announced it agreed to acquire Zurich Insurance Company South Africa Limited (ZICSA), the South African and Botswana of Zurich Insurance Company Ltd. That agreement is subject to regulatory approval and other conditions.

In 2015, a Fairfax subsidiary completed the acquisition of the general insurance business of Malaysian carrier MCIS Insurance Berhad.