August 8, 2017 by Canadian Underwriter
Northbridge Insurance had a 0.3-point in its second-quarter combined ratio, from 100% last year to 99.7% this year, while OdysseyRe’s combined ratio improved 3.9 points, the insurers’ parent firm, Fairfax Financial Holdings Ltd., reported recently.
Toronto-based Northbridge Insurance had an underwriting profit of $1.1 million in the three months ending June 30, compared to essentially no underwriting profit during the same period in 2016, when the Alberta wildfires cost the company $21 million in current period catastrophe losses, Fairfax Financial said in its management discussion and analysis of its financial results for second quarter of the year.
Gross written premiums for Northbridge increased 9.7%, from $394.8 million in Q2 2016 to $432.9 million in the latest quarter, Fairfax said Aug. 3, adding that increase primarily reflects “increased renewal and new business writings, and modest price increases across the group.” Northbridge’s net premiums written increased from $366.8 million in Q2 2016 to $401.6 million in the latest quarter.
In addition to Northbridge, Toronto-based Fairfax also owns Woodland Hills, Calif.-based Zenith National, which write workers compensation, Morristown, N.J.-based Crum & Forster, a commercial specialty insurer, London-based Brit PLC and Stamford, Conn,-based OdysseyRe, among others.
After the end of the second quarter, Fairfax also closed its acquisition of the majority of Zug, Switzerland-based Allied World Assurance Company Holdings AG. That deal – which includes US$1.9 billion in cash and US$2.1 billion worth of shares – closed July 6. Other investors – including Ontario Municipal Employees Retirement System and Alberta Investment Management Corporation (AIMCo) – invested US$1.58 billion to acquire an indirect equity interest in Allied World, Fairfax noted Aug. 3 in its MD&A.
In the second quarter, OdysseyRe’s combined ratio improved 3.9 points, from 94.4% in 2016 to 90.5% this year. Underwriting profit was up from US$29.7 million in Q2 2016 to US$55.6 million in the latest quarter. For the six months ending June 30, OdysseyRe’s underwriting profit increased from US$74.4 million in Q2 2016 to US$103.7 million in the latest quarter.
“The increase in underwriting profit in the second quarter and first six months of 2017 principally resulted from lower current period catastrophe losses and lower current year extraordinary losses, partially offset by lower net favourable prior year reserve development and continued rate pressure,” Fairfax reported.
OdysseyRe had 4.2 and 5.0 combined ratio points, in the second quarter and first six months of the year respectively, of attritional current period catastrophe losses, net of reinstatement premiums. In 2016, OdysseyRe had 14.1 and 10.2 combined ratio points, in the second quarter and first half of the year respectively, of current period catastrophe losses, net of reinstatement premiums, “principally comprised of flooding in France, the Fort McMurray wildfires and other attritional losses,” Fairfax reported.
In the most recent quarter, OdysseyRe had 5.3 combined ratio points of net favourable prior year reserve development, principally related to property catastrophe loss reserves, Fairfax noted.
Net premiums written for OdysseyRe were up 4.7%, from US$631.1 million in the second quarter of 2016 to US$660.6 million in the latest quarter, “principally reflecting increases in the U.S. Insurance division (automobile and liability lines), London Market division (liability insurance lines), North America division (accident and health and casualty reinsurance lines), and EuroAsia division (crop and automobile reinsurance lines), partially offset by decreases in the Latin America division,” Fairfax stated.
Company-wide, Fairfax reported a combined ratio in insurance and reinsurance operations of 94.9% in the latest quarter, a 0.8-point improvement from 95.7% in Q2 2016.
Net premiums written, company-wide, were $2.21 billion in Q2 2017, compared to $2.14 billion in Q2 2016. Fairfax’s underwriting profit increased from US$82.3 million in Q2 2016 to US$108.4 million in the second quarter of this year.
Net earnings attributable to Fairfax increased from US$238.7 million in Q2 2016 to US$311.6 million in the latest quarter.
Brit PLC – which had net premiums written of US$374.4 million in the latest quarter – saw a 2.9-point improvement in its combined ratio, from 99.9% in Q2 2016 to 97% in the latest quarter.
Fairfax reported that Brit had net favourable prior year reserve development of 2 combined ratio points in Q2, which “primarily reflected better than expected emergence on casualty and property reinsurance and energy lines of business, partially offset by net reserve strengthening of $13.1 resulting from a change in the Ogden discount rate that was effective from March 2017.”
The Ogden discount rate is used by British courts to assess lump sum awards for personal injury claimants, Fairfax noted.
Brit had no current period catastrophe losses in the latest quarter but had US$32.4 current period catastrophe losses in Q2 2016 “principally related to the Fort McMurray wildfires,” Fairfax added.
Crum & Forster had net premiums written of US$475.2 million in Q2 2016.
Fairfax’s total revenue – including non-insurance operations – was US$3.26 billion in Q2 2017, up from US$2.91 billion in Q2 2016. Outside of insurance, Fairfax has holdings in retailing (including William Ashley, Sporting Life and Golf Town), The Keg chain of steak restaurants and a majority interest in Cara Operations Ltd., whose restaurant chains include Swiss Chalet, Harvey’s, Milestones, Montana’s, Kelsey’s, East Side Mario’s, New York Fries and Bier Markt, among others.