www.ambest.com Page 1 of 24 Printed June 15, 2018 BEST’S RATING REPORT BEST’S RATING REPORT A M BEST A Excellent Financial Strength Rating Odyssey Re Holdings Corp. Wilmington, Delaware, United States 19801 AMB #: 050722 NAIC #: N/A FEIN#: 52-2301683 Phone: Fax: Website: www.odygroup.com Odyssey Reinsurance Company A 300 First Stamford Place, Stamford, Connecticut, United States 06902 AMB #: 000539 NAIC #: 23680 FEIN#: 47-0698507 Phone: 203-977-8000 Fax: 203-965-7960 Website: www.odysseyre.com Hudson Excess Insurance Company A Wilmington, Delaware, United States 19801 AMB #: 014995 NAIC #: 14484 FEIN#: 45-5271776 Phone: 212-978-2800 Fax: Website: www.hudsoninsgroup.com Hudson Insurance Company A Wilmington, Delaware, United States 19801 AMB #: 003081 NAIC #: 25054 FEIN#: 13-5150451 Phone: 212-978-2800 Fax: 212-344-2973 Website: www.hudsoninsgroup.com Hudson Specialty Insurance Company A 100 William St., 5th Floor, New York, New York, United States 10038 AMB #: 012631 NAIC #: 37079 FEIN#: 75-1637737 Phone: 212-978-2800 Fax: 212-344-2973 Website: www.hudsoninsgroup.com Newline Insurance Company Limited A Corn Exchange, 55 Mark Lane, London EC3R 7NE, United Kingdom AMB #: 078187 NAIC #: N/A AIIN#: AA-1120062 Phone: 44-20-7090-1700 Fax: 44-20-7090-1701 Website: www.newlinegroup.com
Transcript
www.ambest.com
Page 1 of 24 Printed June 15, 2018
XXXXX Company Name Here XXXXXBEST’S RATING REPORT
BEST’S RATING REPORTBEST’S RATING REPORT
AM BEST
A Excellent
Financial Strength Rating
Odyssey Re Holdings Corp.Wilmington, Delaware, United States 19801AMB #: 050722 NAIC #: N/A FEIN#: 52-2301683Phone: Fax: Website: www.odygroup.com
Odyssey Reinsurance Company A300 First Stamford Place, Stamford, Connecticut, United States 06902
A.M. Best Rating Unit: 050722 - Odyssey Re Holdings Corp.
RATING RATIONALE:The consolidated results for AMB #50722 Odyssey Re Holdings Corp. are used for the determination of the ratings for the operatingentities outlined below in the "Best's Credit Ratings for Group Members" section. All financial results within this report are for AMB#50722 Odyssey Re Holdings Corp. consolidated financial statements.
Best's Credit Ratings for Group Members:Rating Effective Date: February 28, 2018
Best's Financial Best's Issuer
Strength Ratings Credit Ratings
AMB# Company Rating Outlook Action Rating Outlook Action
050722 Odyssey Re Holdings Corp. Rating Unit
000539 Odyssey Reinsurance Company A Stable Affirmed a+ Stable Affirmed
014995 Hudson Excess Insurance Co A Stable Affirmed a+ Stable Affirmed
003081 Hudson Insurance Company A Stable Affirmed a+ Stable Affirmed
012631 Hudson Specialty Ins Co A Stable Affirmed a+ Stable Affirmed
078187 Newline Insurance Company Ltd A Stable Affirmed a+ Stable Affirmed
Refer to the following company profile page to view Issue Ratings, Odyssey Re Holdings Corp. (AMB#50722).
Rating Rationale:
Balance Sheet Strength: Strongest
• Odyssey Group's BCAR measures in the strongest category and its balance sheet benefits from a consistently strong reserveposition, favorable liquidity measures and adequate reinsurance protection.
• Reserves have historically developed favorably on both a calendar and accident year basis.
www.ambest.com
Page 3 of 24 Printed June 15, 2018
BEST’S RATING REPORT Odyssey Re Holdings Corp.
• Liquidity measures are favorable and are enhanced by positive cash flows.
• The group benefits from favorable financial flexibility of its parent, Fairfax Financial Holdings and its sizable cash and marketablesecurities position.
Operating Performance: Strong
• Odyssey Group’s operating performance is strong and supported mainly by consistently profitable underwriting performance,which compares favorably to its reinsurance and commercial lines peers.
• The group has generated a lower than average investment yield over the past five years relative to its peers due in large part tothe investment strategy which takes a long-term value-oriented total return approach.
• The group benefits from the strong operational and financial support of its ultimate holding company, Fairfax Financial Holdings.
Business Profile: Neutral
• Odyssey Group operates in both the traditional reinsurance and specialty insurance sectors, affording it diversification that hasbeen increasingly important to reinsurers. While US based, it has global operations. Within the US its business is diversifiedgeographically and by line of business.
• Odyssey's management is long tenured and has a track record of producing solid underwriting profitability. The group's exposureto (re)insurance markets and event risk is well defined, dispersed and managed.
• An offsetting consideration in evaluating the group's business profile is its relatively modest market share within the globalreinsurance market, ranking about 29th in the world. While a solid position Odyssey is not viewed as a market leader.
Enterprise Risk Management: Appropriate
• The group has a comprehensive risk management framework, which has been developed over the past several years.
• Management team is experienced and knowledgeable.
• Risk management capabilities generally meet or exceed its risk profile.
Outlook
The group's rating outlook reflects A.M. Best's expectation that the group's strongest balance sheet strength will continue to besupported by strong and stable operating performance, favorable reserve development, diverse business profile and well definedEnterprise Risk Management program.
Rating Drivers
Factors that could lead to negative rating actions include the following: a reduction in the current favorable financial and liquidityposition at the group's parent, Fairfax Financial.
A significant reduction in underwriting income due to a deterioration in calendar year performance given less favorable accident yearresults as well as less favorable reserve development.
A significant reduction in the group's investment returns given losses associated with the group's investment strategy.
Financial Data Notes:
Time Period: Annual - 2017 Status: N/A Data as of: 05/21/2018
www.ambest.com
Page 4 of 24 Printed June 15, 2018
BEST’S RATING REPORT Odyssey Re Holdings Corp.
Key Financial Indicators:
Key Financial Indicators (000)Year End
2017 2016 2015 2014 2013
Premiums Written
Direct Premiums Written 1,289,551 1,086,119 1,089,892 1,185,239 1,043,864
Gross Premiums Written 2,783,105 2,380,747 2,403,985 2,739,511 2,715,546
Net Premiums Written 2,495,887 2,100,177 2,094,985 2,393,833 2,376,942
Net Income 325,254 160,908 299,294 590,684 136,944
Total Assets 11,207,642 10,182,463 10,396,442 11,021,629 11,025,997
Total Equity 4,012,533 3,833,179 3,958,192 3,983,217 3,730,734Source: Bestlink - Best's Statement File - GlobalLocal Currency: US Dollar
Key Financial Indicators - A.M. Best Ratios (%)Year End
2017 2016 2015 2014 2013
Combined Ratio 97.6 88.9 84.9 84.8 84.2
Net Premiums Written to Equity 62.2 54.8 52.9 60.1 63.7
Liquidity
Liquid assets to total liabilities 98.0 104.1 109.6 113.5 103.7
Total investments to total liabilities 110.2 117.4 123.6 125.0 117.0Source: Bestlink - Best's Statement File - Global
Best's Capital Adequacy Ratio Summary -AMB Rating Unit (%)Confidence Level 95.0 99.0 99.5 99.6
BCAR Score 66.5 52.0 45.7 44.1Source: Best's Capital Adequacy Ratio Model - Universal
Credit Analysis:Balance Sheet Strength: Strongest
ORC's surplus has risen modestly over the past five year period, even after sizable dividend payments to its parent, ORH. Thecompany's capital position remains solid and is supportive of the group's premium writings and natural catastrophe losses during themost recent five year period. ORC maintains the strongest overall risk-adjusted capital position, as measured by its Best's CapitalAdequacy Ratio ("BCAR") analysis. The benefits of surplus generation and moderating premium growth, as well as the divestiture ofsignificant affiliated investments, have led to improved and sustainable capitalization over the five-year period. Odyssey Re's total returnoperating philosophy has historically supported surplus growth. The fixed income portfolio consists of conservative holdings with solidcredit quality and liquidity that further support the group's capitalization. The group's credit risk from reinsurance recoverables ismitigated, due to collateral held in the form of letters of credit and funds held. However, not all recoverables are backed by collateral. Asignificant risk relating to the capitalization of the group is catastrophe exposure. Management addresses these risks by managing to a1-in-250-year probable maximum loss and attempts to limit the net after-tax occurrence to any geographic zone to less than 25% ofconsolidated GAAP equity. The significant financial resources of its ultimate parent company, Fairfax, further enhance Odyssey Re'sfinancial flexibility.
www.ambest.com
Page 5 of 24 Printed June 15, 2018
BEST’S RATING REPORT Odyssey Re Holdings Corp.
The group has experienced favorable loss reserve development in each of the past five years. Odyssey Re discounts reserves relatingto the indemnity portion of workers' compensation reserves of ORC.
Capitalization:
Capital Generation Analysis (000)Year End
2017 2016 2015 2014 2013
Common shares, ending balance 492 492 492 477 535
Paid-in capital - End bal 1,738,968 1,746,290 1,747,017 1,639,236 587,994
Fairfax Financial is the ultimate parent of Odyssey as well as several other insurance and non-insurance operations. Fairfax maintainsfavorable financial flexibility with debt to total capital at 4q17 of 25.6 and interest coverage of -0.4. The lower level of interest coverage ismoderated by Fairfax's practice of maintaining sizable amounts of cash and marketable securities at the holding company level.
Operating Performance: Strong
Odyssey Group has historically generated positive operating performance, driven by favorable underwriting results which compares wellwith its peer industry composite. The group generates a low investment yield relative to its peers due to the investment strategy. Whilethe defensive investment approach does not impair the group's liquidity or risk adjusted capital position, investment returns are affectedby the nature of the investments. The investment portfolio is managed by Hamblin Watsa Investment Counsel Ltd. ("Hamblin Watsa"),which is the investment management subsidiary of Fairfax, the group's ultimate parent.
The group's underwriting performance outperforms its US and global peers by a modest margin on a five year average basis. Thegroup's business mix has shifted over the past ten years from a predominantly long-tail portfolio of assumed liability reinsurance to aportfolio with a greater weighting of short-tail classes of business. Growth in the primary specialty insurance operations has led to anincreasing share of premiums from the insurance platform compared to prior years. The company has the benefit of adjusting itsbusiness mix between primary and reinsurance platforms, which provides increased flexibility as the market changes.
The group's underwriting performance remained generally consistent with a slight uptick in expense measures, given the declines inwritten and earned premium. The decreases are primarily due to a termination of a large Florida property contract and softening marketconditions. The provision for incurred losses and loss adjustment expenses benefited from favorable loss activity on business written inthe Other Liability Occurrence, Nonproportional Assumed Property, and Nonproportional Assumed Liability lines of business.
www.ambest.com
Page 6 of 24 Printed June 15, 2018
BEST’S RATING REPORT Odyssey Re Holdings Corp.
In general, the investment strategy has negatively impacted the group's statutory results with a five year operating ratio in excess of theindustry's. The comparative performance is driven in part by statutory accounting rules, which require bonds to be held at cost versusmark to market. Although the value of the bonds would have been somewhat volatile under mark to market valuations, returns wouldhave been more favorable. Another reason is the increase in the financially distressed investments purchased by Fairfax and allocatedin part to Odyssey.
Financial Performance Summary (000)
Year End
2017 2016 2015 2014 2013
Pre-Tax Income 618,301 165,323 418,968 900,179 150,866
Net Income 325,254 160,908 299,294 590,684 136,944
Source: Bestlink - Best's Statement File - GlobalLocal Currency: US Dollar
A.M. Best Ratios (%)Year End
2017 2016 2015 2014 2013
Overall Performance:
Return on Assets 3.0 1.6 2.8 5.4 1.2
Return on Equity 8.3 4.1 7.5 15.3 3.7
Non-Life Performance:
Loss & LAE Ratio 66.0 56.5 53.8 54.5 55.2
Expense Ratio 31.7 32.4 31.1 30.4 29.0
Combined Ratio 97.6 88.9 84.9 84.8 84.2
Combined less Investment Ratio 91.4 79.7 75.5 76.8 75.8Source: Bestlink - Best's Statement File - Global
Combined Ratio (%)
0
20
40
60
80
100
2013 2014 2015 2016 2017
55.2 54.5 53.8 56.566.0
29.0 30.4 31.1 32.4 31.7
84.2 84.8 84.988.9
97.6
- Combined Ratio - Loss & LAE Ratio - Expense Ratio
www.ambest.com
Page 7 of 24 Printed June 15, 2018
BEST’S RATING REPORT Odyssey Re Holdings Corp.
Business Profile: Neutral
Odyssey Group includes the U.S. reinsurance and insurance operations of ORH as well as a Lloyd's syndicate ("Newline Syndicate1218") and Newline Insurance Company Limited ("Newline") which is a UK-based insurance company. Reinsurance operations are ledby Odyssey Reinsurance Company ("ORC"), which provides treaty casualty and property reinsurance as well as facultative reinsurancefor small to medium-sized regional companies and specialized departments of major insurance companies. Products are providedprimarily through the broker market in the U.S. and through brokers and directly with insurers and reinsurers internationally. Specificlines of business include specialty casualty and general casualty; commercial and personal property; marine; aviation and space;accident and health; crop; and surety lines. Facultative casualty reinsurance is also provided for general liability; umbrella liability;directors' and officers' liability; professional liability and commercial automobile in the U.S. and facultative property reinsurance in LatinAmerica.
The U.S. insurance operations of Odyssey Group are conducted through Hudson Insurance Company ("Hudson"), Hudson SpecialtyInsurance Company ("Hudson Specialty") and Hudson Excess Insurance Company ("Hudson Excess"). The insurance operationsprovide coverage on both an admitted and non-admitted basis through in-house underwriting facilities and program administrators.Lines of business include professional liability; multi-peril crop; directors' and officers' liability; marine and energy; personal umbrella;specialty property; personal liability; personal and commercial auto and surety. Where program administrator relationships are used,the group seeks organizations that have a long and successful track record in their particular areas of expertise. Odyssey Group'smanagement has established strong control systems to monitor program administrators, including incentives to produce profitablebusiness.
Specialty insurance is offered in London through Newline Syndicate 1218 and Newline Insurance Company Limited. Business is writtenprimarily in non- U.S. liability lines, including professional indemnity, directors' and officers' liability, medical professional liability,financial institutions, cargo and specie, space and liability.
Enterprise Risk Management: Appropriate
Odyssey Group's enterprise risk management program incorporates the identification of major financial and operational risks,articulation of risk appetite through established upside aims and downside risk tolerances, formulation of risk governance at the Boardlevel, a Chief Risk Officer, development of a stochastic risk management model and the development of an enterprise risk controlframework. Core principles of Odyssey Group's enterprise risk management program include a long-term orientation, operatingprofitability valued over market share, value oriented investing and a compensation structure that supports a long term focus. Thegroup establishes acceptable exposures before risks are assumed. This is done through underwriting and investment guidelines, theestablishment of limits and underwriting authority levels and an integrated planning process. Internal audit is responsible for regularlytesting and validating key risk controls embedded in the business units. The risk management program includes a framework of severalcommittees including an enterprise risk management committee, reinsurance security committee, investment committee, underwritingrisk committees, a Fairfax Financial Holdings Limited ("Fairfax") global risk committee and a Board audit committee. Four full ERMreviews and meetings are conducted annually, with Board briefings throughout the year.
Financial Statements:
www.ambest.com
Page 8 of 24 Printed June 15, 2018
BEST’S RATING REPORT Odyssey Re Holdings Corp.
Balance Sheet:
Balance Sheet:
Assets 12/31/2017 12/31/2017 12/31/2016
USD(000) % of total USD(000)
Cash And Equivalents 1,940,559 17.3 823,521
Long Term Fixed Maturity Investments 1,940,693 17.3 2,854,070
Accumulated Other Comprehensive Income 37,222 0.3 67,581
Retained Earnings 2,206,552 19.7 1,989,517
Other Equity 29,299 0.3 29,299
Total Equity 4,012,533 35.8 3,833,179
Total Liabilities & Equity 11,207,642 100.0 10,182,463Source: Bestlink - Best's Statement File - GlobalLocal Currency: US Dollar
www.ambest.com
Page 9 of 24 Printed June 15, 2018
BEST’S RATING REPORT Odyssey Re Holdings Corp.
Summary of Operations:
Statement of Income (000)
Statement of Income
12/31/2017 12/31/2016
USD(000) USD(000)
Direct Premiums Written 1,289,551 1,086,119
Reins Assumed 1,493,554 1,294,628
Gross Premiums Written 2,783,105 2,380,747
Reins Ceded 287,218 280,570
Net Premiums Written 2,495,887 2,100,177
Change In Unearned Premiums 162,486 26,081
Net Premiums Earned 2,333,401 2,074,096
Net Investment Income 145,111 192,183
Net Realized Gains/(Losses) 378,081 -201,915
Total Revenue 2,856,593 2,064,364
Benefits & Reserves 1,539,522 1,171,825
Operating Expenses 742,189 747,305
Total Benefits & Expenses 2,281,711 1,919,130
Earnings before interest & taxes (EBIT) 574,882 145,234
Equity In Income Of Unconsolidated Subsidiaries 46,679 22,890
Interest Expense 3,260 2,801
Pre-Tax Income/(Loss) From Continuing Operations 618,301 165,323
Total Taxes 293,047 4,415
Net Income/(Loss) Before Minority Interest 325,254 160,908
Net Income/(Loss) From Continuing Operations 325,254 160,908
Net Income 325,254 160,908Source: Bestlink - Best's Statement File - GlobalLocal Currency: US Dollar
www.ambest.com
Page 10 of 24 Printed June 15, 2018
BEST’S RATING REPORT Odyssey Re Holdings Corp.
Odyssey Re Holdings Corp.Report Revision Date:June 13, 2018
Company Attributes:
Industry: InsuranceBusiness Type: Property/CasualtyEntity Type: Intermediate Holding CompanyBusiness Status: In Business - Non-Insurer
Company History:
Date Incorporated: N/A Date Commenced: N/A Domicile: United States: Delaware
Insurance subsidiaries of Odyssey Re Holdings Corp. ("ORH") currently include Odyssey Reinsurance Company, Hudson InsuranceCompany, Hudson Specialty Insurance Company, Hudson Excess Insurance Company, Clearwater Select Insurance Company, NewlineInsurance Company Limited and Lloyd's Syndicate 1218.
In February 2011, the name of Odyssey America Reinsurance Corporation ("Odyssey America") was changed to Odyssey ReinsuranceCompany. In the text that follows, information concerning the history of current and former subsidiaries of ORH will be presented. Thename of Odyssey America will appear when applicable from a historical perspective.
ORH was incorporated on March 21, 2001, to serve as the holding company for the U.S.-based reinsurance subsidiaries of Fairfax. Inconnection with ORH's initial public offering in June 2001, two wholly-owned subsidiaries of Fairfax transferred 100% of the outstandingshares of Odyssey America to ORH in exchange for common stock of ORH, cash and term notes. Immediately following the initialpublic offering, approximately 26% of ORH was owned by public shareholders and 74% was owned by Fairfax subsidiaries.
In October 2009, then-majority shareholder Fairfax, which at the time owned 72.5% of ORH's common shares, completed a tender offerpursuant to which it acquired all of the outstanding shares of ORH common stock that it did not already own. Fairfax paid minorityshareholders of ORH $65 per share, for a total transaction value of approximately $1.1 billion. Upon completion of the tender offer,ORH de-listed its common stock from the New York Stock Exchange, where it had previously traded under the ticker symbol: ORH.
Odyssey Reinsurance Corporation was renamed Clearwater Insurance Company effective December 4, 2003. The company is theformer Skandia America Reinsurance Corporation, now a Delaware corporation, which was incorporated on May 15, 1974, under thelaws of New York to serve as the United States Branch of Skandia Insurance Company Ltd., Stockholm, Sweden. On May 31, 1996,Skandia America Reinsurance Corporation and its subsidiaries, including Hudson Insurance Company, were sold to Fairfax forapproximately $230 million.
Effective January 1, 2011, Odyssey America distributed all of the issued and outstanding shares of common stock of Clearwater toORH, which in turn exchanged the shares with TIG Insurance Group, Inc., a Fairfax subsidiary, in return for the redemption by TIG ofORH common shares of equal value. Prior to these transactions, Clearwater distributed (by means of a dividend) to Odyssey Americaall of the issued and outstanding shares of common stock of Hudson (which owned all of the issued and outstanding shares of HudsonSpecialty) and Clearwater Select. Hudson and Clearwater Select are now direct subsidiaries of Odyssey Reinsurance Company, andHudson Specialty remains a direct subsidiary of Hudson. Hudson continues to write business, principally primary property and casualtyinsurance.
On December 29, 2010, prior to the effectiveness of the transaction noted in the previous paragraph, Hudson issued 23,807 shares ofnewly created 5.5% Series A preferred stock (paying an annual dividend of 5.5% or $55 per share annually) and distributed theseshares to Clearwater as a dividend, and Clearwater Select issued 5,492 shares of newly created 5.5% Series A preferred stock (payingan annual dividend of 5.5% or $55 per share annually) and distributed these shares to Clearwater as a dividend.
Also in connection with these transactions, effective January 1, 2011, (a) the existing reinsurance agreement between Clearwater (as areinsurer) and Clearwater Select (as reinsured) was novated to Odyssey America (as reinsurer), (b) Clearwater entered into a ClaimsAdministration Services Agreement with Odyssey America, (c) Clearwater entered into a Management Services Agreement withRiverstone Resources LLC, a Fairfax subsidiary and (d) Clearwater entered into a Financial Support Agreement with Fairfax Inc., aFairfax subsidiary.
www.ambest.com
Page 11 of 24 Printed June 15, 2018
BEST’S RATING REPORT Odyssey Re Holdings Corp.
Company History: (Continued...)TIG Reinsurance Company ("TIG Re") was incorporated in Nebraska on September 10, 1986. Effective January 2, 1992, the companywas re-domesticated to Connecticut. TIG Re was acquired by Fairfax in April of 1999, and subsequently became the parent company ofClearwater, as of October 26, 1999, and adopted the name Odyssey America Reinsurance Corporation before being subsequentlyrenamed Odyssey Reinsurance Company. As a result of this reorganization, Odyssey Reinsurance Company is now the flagship of thegroup and continues to actively write reinsurance business.
Odyssey Reinsurance Company, through its direct ownership of Newline UK Holdings Limited, operates its UK-based subsidiaries,including Newline Underwriting Management Limited, Lloyd's Syndicate 1218 and Newline Insurance Company Limited.
On October 28, 2003, Odyssey America purchased General Security Indemnity Company, a shell excess and surplus lines company,which was renamed Hudson Specialty Insurance Company. This company provides the group with the ability to write property andcasualty insurance on an excess and surplus lines basis. In December 2003, Odyssey America contributed all of the shares of HudsonSpecialty to Clearwater. In July 2010, Clearwater contributed all of the shares of common stock of Hudson Specialty to Hudson.
On November 15, 2004, ORH purchased Overseas Partners U.S. Reinsurance Company, a Delaware-domiciled reinsurance companythat had been in run-off since 2002, from Overseas Partners Limited. The company was renamed Clearwater Select InsuranceCompany and was contributed to Clearwater on November 30, 2004. In December 2010, Clearwater contributed all of the shares ofcommon stock of Clearwater Select to Odyssey America. On April 25, 2013, Clearwater Select redomesticated to Connecticut andbecame a Connecticut domiciled company. As of July 1, 2013, Clearwater Select's principal activity is to provide reinsurance toOdyssey Re group companies.
On May 11, 2012, Hudson Excess Insurance Company ("Hudson Excess") was incorporated in the State of Delaware. Hudson Excessis a wholly owned subsidiary of Hudson Specialty Insurance Company and was created to provide property, casualty and marine &transportation business on a non-admitted licensed excess and surplus lines basis in New York. On October 2, 2012, authority to writeproperty and casualty insurance business was granted by the Delaware Insurance Department. Effective July 21, 2015, Hudson Excessconverted from a domestic property and casualty to a domestic surplus lines insurer with the approval of the Delaware InsuranceDepartment.
Company Management:
Last significant update on 06/13/2018
Brian D. Young is the president and chief executive officer of ORH, effective April 1, 2011. Prior to joining the group in 1996, he was avice president of Transatlantic Reinsurance. Jan Christiansen is executive vice president and chief financial officer of ORH. Prior tojoining ORH in 2010, he served as group chief executive officer of Cunningham Lindsey Group Inc. Michael G. Wacek is executive vicepresident and chief risk officer of ORH. Prior to joining the Group in 1998, he was managing director of St. Paul Reinsurance CompanyLtd. in London.
Officers
President and CEO: Brian D. YoungEVP and CFO: Jan ChristiansenEVP and Chief Risk Officer: Michael G. Wacek
Regulatory:
Auditor:
The 2017 annual independent audit of the company was conducted by PricewaterhouseCoopers.
Best's Financial Strength Ratings Best's Issuer Credit RatingsDate Rating Outlook Action Rating Outlook Action02/28/2018 A Stable Affirmed a+ Stable Affirmed10/20/2016 A Stable Affirmed a+ Stable Affirmed05/05/2015 A Stable Affirmed a+ Stable Affirmed04/03/2014 A Stable Affirmed a+ Stable Affirmed03/28/2013 A Stable Affirmed a+ Stable Upgraded
Rating Rationale:The company is part of the group given its integration with the other group members, support of the group's strategy and the explicitsupport provided by the lead member.
For more detail regarding the Rating Rationale and Best's Credit Report for the Rating Unit, view Odyssey Re Holdings Corp. (AMB#050722).
www.ambest.com
Page 13 of 24 Printed June 15, 2018
BEST’S RATING REPORT Hudson Insurance Company
Financial Data Notes:
Time Period: Annual - 2017 Status: A.M. Best Quality Cross Checked Data as of: 06/04/2018
Key Financial Indicators:
Key Financial Indicators (000)Year End - December 31
Source: Bestlink - Best's Statement File - P/C, US
(*) Within several financial tables of this report, this company is compared against the Commercial Casualty Composite.(*) Data reflected within all tables of this report has been compiled from the company-filed statutory statement.
Credit Analysis:Balance Sheet Strength
www.ambest.com
Page 14 of 24 Printed June 15, 2018
BEST’S RATING REPORT Hudson Insurance Company
Capitalization:
Capital Generation AnalysisYear End - December 31
2017 2016 2015 2014 2013
Pre-tax Operating Income ($000) 39,222 36,359 29,464 4,352 3,894Realized Capital Gains ($000) 396 1,634 11,813 6,419 2,164Income Taxes ($000) 8,911 1,237 1,305 1,124 55Unrealized Capital Gains ($000) -6,274 -686 14,127 27,641 12,919Net Contributed Capital ($000) -45,309 -41,309 -44,009 -5,363 -1,309Other Changes ($000) -3,897 529 7,604 -5,699 -2,566Change in Policyholders' Surplus($000)
-24,773 -4,711 17,693 26,226 15,047
Change in Policyholders' Surplus (%) -5.5 -1.0 4.0 6.3 3.8Source: Bestlink - Best's Statement File - P/C, US
Liquidity Analysis (%)Company Industry Composite
Year End - December 31 Year End - December 312017 2016 2015 2014 2013 2017 2016 2015 2014 2013
- Combined Ratio - Loss & LAE Ratio - Expense Ratio
2017 Pure Loss Ratio by Product Line (%)
0
15
30
45
60
75
Allied Lines
Oth Liab O
ccur
Comm'l Auto Liab
Surety
Auto Physica
l
Oth Liab C
M
All Other
74.4
45.353.6
16.6
51.4
15.6
36.5
Source: Bestlink - Best's Statement File - P/C, US
Business ProfileThe following text is derived from Best's Credit Report on Odyssey Re Holdings Corp. (AMB# 050722):
Odyssey Group includes the U.S. reinsurance and insurance operations of ORH as well as a Lloyd's syndicate ("Newline Syndicate1218") and Newline Insurance Company Limited ("Newline") which is a UK-based insurance company. Reinsurance operations are ledby Odyssey Reinsurance Company ("ORC"), which provides treaty casualty and property reinsurance as well as facultative reinsurance
www.ambest.com
Page 18 of 24 Printed June 15, 2018
BEST’S RATING REPORT Hudson Insurance Company
for small to medium-sized regional companies and specialized departments of major insurance companies. Products are providedprimarily through the broker market in the U.S. and through brokers and directly with insurers and reinsurers internationally. Specificlines of business include specialty casualty and general casualty; commercial and personal property; marine; aviation and space;accident and health; crop; and surety lines. Facultative casualty reinsurance is also provided for general liability; umbrella liability;directors' and officers' liability; professional liability and commercial automobile in the U.S. and facultative property reinsurance in LatinAmerica.
The U.S. insurance operations of Odyssey Group are conducted through Hudson Insurance Company ("Hudson"), Hudson SpecialtyInsurance Company ("Hudson Specialty") and Hudson Excess Insurance Company ("Hudson Excess"). The insurance operationsprovide coverage on both an admitted and non-admitted basis through in-house underwriting facilities and program administrators.Lines of business include professional liability; multi-peril crop; directors' and officers' liability; marine and energy; personal umbrella;specialty property; personal liability; personal and commercial auto and surety. Where program administrator relationships are used,the group seeks organizations that have a long and successful track record in their particular areas of expertise. Odyssey Group'smanagement has established strong control systems to monitor program administrators, including incentives to produce profitablebusiness.
Specialty insurance is offered in London through Newline Syndicate 1218 and Newline Insurance Company Limited. Business is writtenprimarily in non- U.S. liability lines, including professional indemnity, directors' and officers' liability, medical professional liability,financial institutions, cargo and specie, space and liability.
Industry: InsuranceBusiness Type: Property/CasualtyEntity Type: Operating CompanyOrganization Type: StockBusiness Status: In Business - Actively UnderwritingMarketing Type: BrokerFinancial Size: XV ($2 Billion or greater)
Company History:
Date Incorporated: 01/16/1918 Date Commenced: 1918 Domicile: United States: Delaware
This company was incorporated with the temporary title Hudson Insurance Company of Delaware under the laws of Delaware on May1, 1978 to act as the vehicle for the transfer of the corporate domicile of Hudson Insurance Company from New York, New York toWilmington, Delaware, effective as of December 31, 1978. The predecessor company was originally incorporated on January 16, 1918,under the laws of New York and began business on December 14, 1918. The United States branch of Skandia Insurance CompanyLtd., Stockholm, Sweden (the "US branch") acquired complete financial control of that predecessor company on August 25, 1939.
The US branch, concurrent with its domestication in New York on July 1, 1974, passed direct stock ownership to Skandia AmericaReinsurance Corporation (now known as Clearwater Insurance Company), New York, New York. From November 1977 until February1996, Skandia America Reinsurance Corporation was a subsidiary of Skandia America Corporation, a wholly owned holding companyof Skandia US Holding Corporation, which was a wholly owned holding company affiliate of Skandia Insurance Company Ltd. (namedSkandia Insurance Company Ltd. from 1989 to 1993).
On February 21, 1996, Skandia America Corporation entered into an agreement to sell the former Skandia America ReinsuranceCorporation (now known as Clearwater Insurance Company) and its subsidiaries, including Hudson Insurance Company (Hudson), toFairfax Financial Holdings Limited, a Canadian financial services holding company. The acquisition became effective on May 31, 1996.
Effective January 1, 2011, Clearwater dividended the shares of Hudson to Odyssey America Reinsurance Corporation (a company thatwas subsequently renamed Odyssey Reinsurance Company in February 2011), and Hudson is now a direct, wholly owned subsidiaryof Odyssey Reinsurance Company, which is wholly owned by Odyssey Re Holdings Corp. (ORH). Fairfax is the ultimate 100%shareholder of ORH.
Primary insurance business was conducted until 1932. In 1935, the company became a professional reinsurer. In 1981, the companybegan to underwrite excess and special risk business. From 1985 to 1989, the company ceased writing new and renewal business. In1990, the company began writing specialty insurance business.
Paid-up capital of $7.5 million consists of 25,000 common shares at $300 par value each. All authorized shares are outstanding.
Company Operations:
Licensed Territory: (Current since 02/01/2010).The company is licensed in the District of Columbia, Puerto Rico, U.S. Virgin Islandsand all states.
www.ambest.com
Page 23 of 24 Printed June 15, 2018
BEST’S RATING REPORT Hudson Insurance Company
Company Operations: (Continued...)
2017Rank Top 5 Lines of Business by NPW1 Allied Lines 36.4%2 Oth Liab Occur 31.0%3 Comm'l Auto Liab 8.7%4 Surety 7.9%5 Auto Physical 7.5%
2017Rank Top 5 Geographic Distribution by DPW1 Aggregate Alien 50.2%2 United States: CA 10.0%3 United States: TX 6.4%4 United States: TN 5.5%5 United States: FL 3.0%
Source: Bestlink - Best's Statement File - P/C, US
Company Management:
Last significant update on 02/26/2018
The Company's chairman is Brian D. Young, who is also the chairman of the board of Clearwater Select Insurance Company, HudsonSpecialty Insurance Company, Hudson Excess Insurance Company and Odyssey Reinsurance Company. Management of theCompany's affairs is directed by its president and chief operating officer, Christopher L. Gallagher.
Officers
CEO: Brian D. YoungPresident and COO: Christopher L. GallagherEVP and Chief Actuary: Elizabeth A. SanderEVP: Jan ChristiansenEVP: Alane Robinson CareyEVP: Christopher T. SuzrezSVP and CFO: Min HuangSVP, Corporate Secretary and General Counsel: Dina G. DaskalakisSVP and Controller: Anthony J. SlowskiSVP: Francis D. CerasoliSVP: James J. DanbrowneySVP: Matthew J. DeneenSVP: James T. DonovanSVP: Daniel J. GasserSVP: Ronald O. HonkenSVP: Margaret M. C. KilleenSVP: Peter H. LovellSVP: Jeffrey M. RubinSVP: William F. SchmidtSVP: Leslie D. ShoreSVP: Anthony TerraccianoSVP: Jean M. Willig
Directors
Jan ChristiansenChristopher L. GallagherMichael G. WacekBrian D. Young (Chairman)
An examination of the financial condition was made as of December 31, 2014, by the insurance department of Delaware. The 2016annual independent audit of the company was conducted by PricewaterhouseCoopers, LLC. The annual statement of actuarial opinionis provided by Elizabeth A. Sander, FCAS, MAAA, Executive Vice President & Chief Actuary.
A Best's Financial Strength Rating opinion addresses the relative ability of an insurer to meet its ongoing insurance obligations. The ratings are not assigned to specific insurance policies or contracts anddo not address any other risk, including, but not limited to, an insurer's claims-payment policies or procedures; the ability of the insurer to dispute or deny claims payment on grounds of misrepresentationor fraud; or any specific liability contractually borne by the policy or contract holder. A Financial Strength Rating is not a recommendation to purchase, hold or terminate any insurance policy, contract orany other financial obligation issued by an insurer, nor does it address the suitability of any particular policy or contract for a specific purpose or purchaser.
A Best's Issue/Issuer Credit Rating is an opinion regarding the relative future credit risk of an entity, a credit commitment or a debt or debt-like security.
Credit risk is the risk that an entity may not meet its contractual, financial obligations as they come due. These credit ratings do not address any other risk, including but not limited to liquidity risk, marketvalue risk or price volatility of rated securities. The rating is not a recommendation to buy, sell or hold any securities, insurance policies, contracts or any other financial obligations, nor does it address thesuitability of any particular financial obligation for a specific purpose or purchaser.
In arriving at a rating decision, A.M. Best relies on third-party audited financial data and/or other information provided to it. While this information is believed to be reliable, A.M. Best does notindependently verify the accuracy or reliability of the information. Any and all ratings, opinions and information contained herein are provided "as is," without any express or implied warranty.
Visit http://www.ambest.com/ratings/notice.asp for additional information or http://www.ambest.com/terms.html for details on the Terms of Use. For current rating visit www.ambest.com/ratings
An examination of the financial condition was made as of December 31, 2014, by the insurance department of Delaware. The 2016annual independent audit of the company was conducted by PricewaterhouseCoopers, LLC. The annual statement of actuarial opinionis provided by Elizabeth A. Sander, FCAS, MAAA, Executive Vice President & Chief Actuary.
A Best's Financial Strength Rating opinion addresses the relative ability of an insurer to meet its ongoing insurance obligations. The ratings are not assigned to specific insurance policies or contracts anddo not address any other risk, including, but not limited to, an insurer's claims-payment policies or procedures; the ability of the insurer to dispute or deny claims payment on grounds of misrepresentationor fraud; or any specific liability contractually borne by the policy or contract holder. A Financial Strength Rating is not a recommendation to purchase, hold or terminate any insurance policy, contract orany other financial obligation issued by an insurer, nor does it address the suitability of any particular policy or contract for a specific purpose or purchaser.
A Best's Issue/Issuer Credit Rating is an opinion regarding the relative future credit risk of an entity, a credit commitment or a debt or debt-like security.
Credit risk is the risk that an entity may not meet its contractual, financial obligations as they come due. These credit ratings do not address any other risk, including but not limited to liquidity risk, marketvalue risk or price volatility of rated securities. The rating is not a recommendation to buy, sell or hold any securities, insurance policies, contracts or any other financial obligations, nor does it address thesuitability of any particular financial obligation for a specific purpose or purchaser.
In arriving at a rating decision, A.M. Best relies on third-party audited financial data and/or other information provided to it. While this information is believed to be reliable, A.M. Best does notindependently verify the accuracy or reliability of the information. Any and all ratings, opinions and information contained herein are provided "as is," without any express or implied warranty.
Visit http://www.ambest.com/ratings/notice.asp for additional information or http://www.ambest.com/terms.html for details on the Terms of Use. For current rating visit www.ambest.com/ratings
