RE: RE: RE: RE: word of caution to LT investors You are right about having reinsurance to decrease exposure to large contracts.
Surety, if properly underwritten can be very profitable, that I also admit, since in theory you should be covering all your risk by taking appropriate indemnities and saying no to high risk bonding requests from the client.
What I'm seeing on the field is certain of our competitors, Jevco included, saying yes to certain requests that should normally have been turned down. Second, we are seeing competition steal our business by cutting rates to ridiculous low levels. In the current market, when you say no to a bonding request, the client will go look elsewhere and you will lose the account because someone else is always willing to say yes. It's very competitive right now, not just in surety.
Jevco's strategy, historically, has been to take on a lot of accounts but smaller ones, so you spread your exposure around and treat the product more like typical insurance. You will have more accounts to handle per analyst. Example, where we have about 25 accounts per analyst, Jevco might have 200. In this strategy, you have less time to look at the bonding requests that come in day to day, but because they are smaller in nature its easier to say yes. In the last few years Jevco has started to take on bigger accounts to grow revenue but has kept the same strategy when looking at requests. Where our revenue has been up very little in the past 5 years, Jevco has increased at a very fast pace and part of that I suspect is because they almost never turn down a request.
In surety, you can't afford to make many misktakes, because each of them is costly... I will try to get a hand on the top surety companies in Canada in terms of gross written premiums and post relevant info as it comes along. If I'm not mistaking Jevco does not present its surety operations as a seperate segment.