2020 ANNUAL REPORT
2020 ANNUAL REPORT
It gives me great pleasure to present Odyssey Group’s 2020 Annual Report, aptly titled The World Never Stops. Neither Do We. 2020 was a year most of us would like to forget, but never will and definitely shouldn’t as many important lessons have been learned. With the devastating impact of COVID-19 and the ensuing lockdowns affecting nearly every aspect of life, we faced major challenges over the last 12 months serving the needs of our expanding customer base while ensuring the safety of our employees. The fact that our offices were closed and staff were sheltered at home didn’t mean we could stop quoting business, issuing policies or paying claims. The world of (re)insurance didn’t pause in 2020, we needed to radically adapt our service delivery quickly and we did it with resounding success thanks to the hard work and resilience of our employees.
From a business perspective, 2020 was an outstanding year for Odyssey. Our team’s admirable response to the pandemic was, undoubtedly, the highlight of the year, but not far behind was the fact that we generated an underwriting profit for the 9th year in a row. Our combined ratio in 2020 was 95.8% and if you exclude the claims impact from COVID-19, it would have been below 92%.
“Our team’s admirable response to the pandemic was, undoubtedly, the highlight of the year, but not far behind was the fact that we generated an underwriting profit for the 9th year in a row.”
We are an underwriting company, and the number on the scorecard that matters most to us is the combined ratio. I am not shy about expressing, repeatedly, to our employees that our number one priority in this business is to make an underwriting profit, not just over time, but every year. Sometimes we won’t, as (re)insurance is a volatile, highly-competitive industry, but we have always been driven by the underwriting bottom line. We pride ourselves on our discipline and our patience for growth, and it’s been validated by our consistently profitable performance over many years.
This is a market to grow in, and we have, quite dramatically in fact, over the last few years. Conditions have been improving broadly around the world, nowhere more so than in the U.S., and we are trying to make the most of it. Odyssey finished 2020 with $4.4 billion of gross premiums written, which is up 17% on the prior year and 60% over the last three years. Growth was solid across our global network, but was particularly robust in the U.S. and London. Will we reach $5 billion in gross premiums written next year? Frankly, it would be nice if we did, as it would give us one more reason to celebrate our 25th anniversary as a Fairfax company in 2021. (More to come on this!) Our business pipeline is strong, we had a solid 1/1 renewal season, and market conditions remain primed for us to get close, if not over, that line. Again, we are not driven by top-line concerns, so let’s see what happens.
As we continue to grow, so does our float and invested asset base. Float increased $800 million in 2020, and invested assets grew by about $1 billion to just under $11 billion, despite the lack of appreciation in our portfolio over the last 12 months. Net income was $260 million, down from $405 million in 2019, while GAAP equity increased 4% to $4.8 billion over the last 12 months. Both our net income and GAAP equity growth were constrained by the pandemic, which not only impacted our underwriting results, but hindered our investment performance as well. While COVID-19 tested our financial resilience, our balance sheet has never been stronger, our invested assets are well positioned for a post-pandemic recovery and our reserve base remains rock solid. It’s worth mentioning that for the 13th consecutive year Odyssey experienced favorable prior year loss development in 2020 while continuing to maintain a cautious reserve posture. Our reserving ethos has always been to react to bad news early and good news late. It’s a simple strategy that has been effective for us, and we plan to stick to it.
“It’s been a privilege to run Odyssey the last 10 years, and I’m grateful to my management team and business leaders who have done the heavy lifting and deserve most of the credit.”
Please take a few moments to explore our Business Operations and Financials, which include detailed information for each of our three operating platforms. We hope you find this information helpful.
Compassion flows deeply through the veins of our organization, and never was that more evident or needed than in 2020. We care deeply about the well-being of our workforce and, in June, out of empathy for their struggles dealing personally with the pandemic as well as our appreciation for the way they adapted to a work-from-home environment, we paid each of our employees an extra two weeks salary. It was a small cost in the grand scheme of things and the least we could do to show our appreciation for their efforts to keep the trains running on time. I’ve learned many lessons leading Odyssey; one of the most important is if you want your company to provide quality service then your employees have to be happy, motivated and trust that the company they work for will always do right by them. I thank Prem Watsa for inspiring all of us within Fairfax to lead our organizations with grace and to treat our employees as if they were members of our own family. Not every business is run that way, but that’s how we choose to run ours and it works for us.
When we do well, it is imperative that we give back to the communities in which we live and work. Every year, we pledge 1% of our pre-tax earnings to charity and based on our 2020 results, we are adding another $3 million to the Odyssey Group Foundation. Since the Foundation’s formation in 2007, Odyssey has pledged over $55 million to more than 400 charities around the world. In 2020, the Foundation distributed $3.6 million, a third of which was earmarked to help those impacted by COVID-19. For more information about our philanthropic endeavors, visit the Giving Back section of this report.
“…if you want your company to provide quality service then your employees have to be happy, motivated and trust that the company they work for will always do right by them.”
While we have put our charitable dollars to work in the battle against the pandemic, it’s worth highlighting that Newline has provided coverage for many of the COVID-19 diagnostic, therapeutic and vaccination clinical trials around the world, including the vaccines that are being widely administered today and bringing us ever closer to the end of this pandemic. Kudos to Martin Hawkins and his Life Sciences team at Newline for leading our underwriting efforts in the fight against COVID-19.
The tragic deaths of George Floyd and others this past summer garnered worldwide attention, shining the spotlight ever more brightly on the issues of racial inequality and social injustice. Clearly, more needs to be done, and we plan to do our part by stepping up our recruiting efforts to hire more people of color and providing greater scholarship funding for students from lower-income backgrounds. One of the latest initiatives we are excited about is Hudson’s Education and Leadership Program (HELP). Established in January 2021, HELP’s mission is to recruit graduating high school seniors to work part-time for Hudson while we pay for their college education. When they graduate, we hope to hire them full-time. We just recruited four students and plan to add many more in the years ahead. Thanks to Chris Gallagher and his team for establishing HELP and investing in the program.
We humbly recognize that we would not have a successful business without the loyalty and support of our valued clients and business partners. You have helped us immensely to develop and flourish for nearly a quarter of a century and, I might add, graciously tolerated a few hiccups along the way. We can’t thank you enough for all that you have done for us through the years, and we look forward to continuing to expand our business relationship in the years to come.
As always, we are forever grateful to Prem Watsa, Andy Barnard and the Fairfax Board for their compassionate leadership and the faith they have placed in us for nearly 25 years. We are blessed to be part of the Fairfax family and the cherished working culture that Prem has created.
It’s been a privilege to run Odyssey the last 10 years, and I’m grateful to my management team and business leaders who have done the heavy lifting and deserve most of the credit. Our success is a testament to them and the dedicated leadership and skill they bring to their jobs every day.
To my 1,151 colleagues around the world, what can I say, but bravo, way to go! It was a great team effort and our culture carried us to new heights in 2020. We should all take great pride in what we have achieved, but, as we all well know, we can’t rest on our laurels. The world is not going to stop, and neither will we. Let’s make sure to keep our eye on the prize.
Brian D. Young
President & Chief Executive Officer