Rates up 3.5% for Brit but H1 earnings tumble

Specialty re/insurer Brit has benefitted from higher prices in the first half of 2018 but net profit dived nevertheless due to a sharp drop in investment return.

Premium rate increases in the first six months of 2018 of 3.5 percent compared to decreases of 2.2 percent in 2017. The combined ratio deteriorated slightly to 95.9 percent in the first half compared to 94.0 percent in the same period of 2017. Underwriting profit was $32.0 million after $44.1 million a year ago.

“Following the major losses of 2017, we have achieved overall risk adjusted premium rate increases of 3.5 percent in the period, primarily driven by the loss affected property, treaty and marine classes, in both our London and US portfolios,” said Brit CEO Matthew Wilson.

“While these rate increases are welcomed, they are lower than initially anticipated as capacity continues to exceed demand and brokers move business to new carriers at current or reduced rates. In this challenging environment, we have continued to take action to protect our balance sheet, with the application of rigorous risk selection criteria in marginal classes and the decision to withdraw from certain classes such as international professional indemnity and general aviation.

“Against this backdrop, it was encouraging that our strategy delivered a combined ratio for the period of 95.9 percent. This reflected the combination of a healthy attritional ratio, continued back year reserve releases and an absence of major losses. The net impact of the 2017 major losses has remained unchanged in the period,” Wilson noted.

Gross premium written increased to $1.15 billion in the first six months of 2018 after $1.09 billion in the same period a year ago, helped by a favourable development of prior year premiums and the impact of rate increases.

“For 2018, Brit’s total managed capacity across Versutus, Sussex Capital and Syndicate 2988 has exceeded $400 million,” Wilson said. “We successfully launched Sussex Capital in January 2018, the open-ended fund which writes through Sussex Re, providing direct collateralised reinsurance and collateralised reinsurance to Brit’s reinsurance portfolio. In February, we announced the fourth annual expansion of Versutus, which now has invested capital of $187 million, offering access to Brit’s strong underwriting franchise. In addition, Syndicate 2988, which was launched in 2017, has been expanded to a stamp capacity of £98.5 million for 2018 and now offers broader access to Brit’s extensive underwriting capabilities with over 20 lines of business for 2018,” Wilson noted.

Nevertheless, the group’s net profit declined to $12.9 million in the first half of 2018 from $139.7 million in the same period a year ago as investment returns fell to $5.1 million in the first half of 2018 from $126.3 million a year ago. Investment returns were impacted by unrealised losses on some of Brit’s equity portfolio, reflecting volatile market conditions in the period, chief financial officer Mark Allan explained.

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