Firming market ‘might have legs,’ Fairfax executive predicts

Insurance premiums are up nearly 14% for carriers owned by Fairfax Financial, and much of that is due to price increases, the holdings company’s president suggests.

“In my career here – 16 years – I haven’t seen anything quite like this. It’s firming,” said Paul Rivett, president of Toronto-based Fairfax Financial Holdings Ltd.

“No one is calling it a hard market yet. No one is ringing the bell but it’s firming,” Rivett said Friday during a conference call discussing the company’s financial results for the period ending Sept. 30.

In addition to Toronto-based commercial insurer Northbridge, Fairfax also owns: the majority of Allied World Assurance Company of Zug, Switzerland; Stamford, Conn.-based reinsurer Odyssey Group; London-based Lloyd’s insurer Brit; and Crum and Forster, a Morristown, N.J.-based commercial insurer.

Fairfax reported Oct. 31 its total revenue for Q3 was US$4.93 billion, up from US$4.44 billion in Q3 2018. For the first nine months, revenue was US $16 billion in 2019 versus US$13.58 billion in 2018.

For Northbridge, net premiums earned increased 13.7% from US$292 million in Q2 2018 to US$332 million in the most recent quarter.

Across Fairfax’s insurance companies, Q3 premiums were up more than 13% year over year.

Roughly 50% of that increase was due to price increases and the other half was due to an increase in volume, Rivett suggested Friday during the earnings call, in a reply to a question from a stock and bond analyst.

“That’s a good mix. We are quite excited,” Rivett said. “I don’t want to predict where it can go from here.  But we think it might have legs.”

At Northbridge – when measured in Canadian currency – net premiums written were up 19.1% from Q3 2018 to Q3 2019, and up 16.9% in the first nine months of 2019 versus the first nine months of 2018, Fairfax chief financial officer Jennifer Allen said. This reflects strong retention of renewal business, growth in new business and price increases, added Allen.

For Odyssey Group and Allied World, net premiums written were up 21% and 18% respectively in the latest quarter over Q3 2018, Rivett said. For Lloyd’s insurer Brit, net premiums written dropped 3%.

“With Brit, they are seeing price increases but have reduced net premiums written in some low margin businesses and have purchased increased reinsurance protection,” said Rivett.

In addition to its insurers, Fairfax also owns a number of restaurants and retailers – among them Toys R Us Canada, Golf Town, The Keg and a significant portion of Recipe Unlimited, the corporate owner of Harvey’s, Swiss Chalet, New York Fries and Milestone’s, among others.