Daniel Baldini

Daniel Baldini asked if there is an anticipated end to the losses from Fairfax's runoff business, which have accumulated to approximately $1.6 billion over the past decade, and whether this magnitude of losses was initially expected.

Answer

Peter S. Clarke, President and COO of Fairfax Financial, clarified that these liabilities, primarily asbestos and environmental pollution claims, were inherited through acquisitions in the late 1990s and early 2000s. He noted that a specialized team manages these difficult, litigious, and often decades-old claims, which cannot be reserved using general actuarial techniques but rather by reacting to ongoing developments.

Daniel Baldini of Oberon Asset Management questioned the ongoing losses from Fairfax Financial's runoff business, noting cumulative losses of almost $1.6 billion over the last decade, and asked if there was an end in sight and whether such magnitudes of losses were anticipated when entering these deals.

Answer

Peter S. Clarke, President and COO of Fairfax Financial, explained that many of these liabilities were inherited through acquisitions in the late 1990s and early 2000s, primarily latent liabilities like asbestos and environmental pollution claims. He noted that a specialized, 'best in class' team manages these difficult claims, which are particularly challenging due to the litigious environment in the United States and the long-tail nature of some claims (30-40 years old). Clarke stated that general actuarial techniques are often insufficient, and the team reacts to developments.

Daniel Baldini of Oberon questioned the performance of Odyssey Group, noting its net premiums written were down despite a seemingly strong global reinsurance market, and contrasted this with a competitor's strong growth.

Answer

Peter Clarke, President and COO, acknowledged the reinsurance market remains strong but clarified that Odyssey's recent performance reflects its significant growth from 2019-2022, which established a higher premium base. He attributed the recent figures partly to business mix and the non-renewal of a large quota share contract, stating that excluding this item, the reinsurance business continues to grow and see opportunities.

Daniel Baldini of Oberon noted the strong performance of competitors in the reinsurance market and questioned why Odyssey Group's net premiums written were down, asking for Odyssey's perspective on the current reinsurance market.

Answer

Peter Clarke, President and COO, acknowledged that the reinsurance market remains strong, though not as robust as in 2023. He attributed Odyssey's performance to its specific mix of business and its significant growth from 2019-2022, which established a higher premium base compared to some peers. He affirmed that Fairfax's reinsurance operations, including Odyssey, continue to identify and pursue growth opportunities.