Profits and premiums plummet at Blue Capital despite rate hikes

Business written by Blue Capital Reinsurance Holdings decreased by almost a third in the first quarter of 2018 compared with the same period a year before, despite positive rate increases.

Reinsurance premiums at the Bermuda holding company, which offers collateralized reinsurance in the property-catastrophe market and invests in insurance-linked securities (ILS), fell to $12.5 million in the quarter, decreasing by $4.5 million over the same period a year ago when it wrote $17 million of business.

The company said the decrease was a result of reduced writings driven by a smaller capital base and greater cessions to third party reinsurers, partially offset by an average risk adjusted price increase of 12 percent during the January renewals. Blue Capital Reinsurance Holdings offers collateralized reinsurance in the property catastrophe market through its operating subsidiaries.

The company’s profits also plummeted as a result of catastrophe losses related to Hurricane Irma because claim settlements and related loss adjustment expenses were greater than originally expected.

Michael McGuire, chairman and CEO, said: "The first quarter results were adversely impacted by an increase in reported losses related to Hurricane Irma as claim settlements and related loss adjustment expenses were greater than originally expected."

It posted a net profit of $0.5 million for the three months ended March 31, 2018, compared with $4.1 million a year earlier. Its combined ratio for the quarter was 98 percent compared with 56.5 percent in the same period a year ago. It said the deterioration in the current periods' combined ratio was driven by significantly higher loss and loss adjustment expense ratios.

The current quarter's loss and loss adjustment expenses of $4.5 million compared unfavorably to the $1.8 million reported a year ago, stemming from an increase in estimated losses related to Hurricane Irma which made landfall in Florida in September 2017.

Reinsurance acquisition costs for the current quarter were $1.9 million compared to $2.7 million a year ago, reflecting lower premium earnings and profit commissions. General and administrative expenses for the current quarter were $1.1 million compared to $1.3 million a year ago due to lower performance fees in the current quarter.

“Pricing continues to show positive momentum, and as we previously reported, we achieved improved pricing during January renewals," McGuire said. "The market improvements coupled with our strategic alignment with Sompo International Holdings has enabled us to construct an improved portfolio year over year with higher return expectations and a lower risk profile."

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