By NEIL HARTNELL
Tribune Business Editor
J S Johnson yesterday said it had managed to maintain 2011 dividend levels in line with the previous year, despite suffering a 25.1 per cent net income drop as a result of net claims incurred by its Insurance Company of the Bahamas (ICB) underwriting affiliate more than doubling.
Marvin Bethell, the BISX-listed broker and agent's managing director, told Tribune Business that 2011 was "a tough year for the insurers", as borne out by the 111 per cent increase in net claims incurred to $3.524 million, compared to $1.669 million in 2010.
In common with other Bahamas-based general insurance underwriters, ICB had to deal with catastrophe losses in the shape of Hurricane Irene, together with claims sparked by the two downtown Bay Street fires that destroyed the Betty K dock and Pompey Museum.
"What made it worse was that ICB had a very good year the year before, when it had about $4 million in profit," Mr Bethell told Tribune Business, noting the impact on J S Johnson's year-over-year comparatives.
The almost $1.7 million increase in net claims accounted for much of J S Johnson's $2.439 million net income drop, with profits for the 12 months to end-December 2011 falling 25.1 per cent to $7.233 million compared to $9.662 million in 2010.
ICB's underwriting claims effectively cancelled out a stellar year by J S Johnson's agency and brokerage arm, which grew its net income from $3.717 million in 2010 to $6.271 million last year - a 68.7 per cent increase.
The hurricane and fire-related losses experienced by ICB, though, an underwriting carrier in which J S Johnson holds a 40 per cent stake, slashed its net income contribution from $5.945 million in 2010 to just $962,073 last year.
Still, extolling the positive, Mr Bethell said: "There are normal losses throughout the Bahamas, and when you put it all together it had an impact, but nevertheless ICB still made money. They still made a profit despite those three items impacting the results.
"The company [J S Johnson] posted fairly good results, and kept dividend levels at the same level as the year before. We even paid an extraordinary dividend of $0.02 per share."
Meanwhile, Mr Bethell told Tribune Business that the insurance industry in general was grappling with the fact that premium income has dropped, but claims have not - and have even increased.
"In the type of economy we're in now, premium income is under a lot of pressure," he confirmed, explaining that Bahamians whose car loans and mortgages had expired were now electing to cut costs, in some cases, by switching from comprehensive to third party motor coverage or dropping hurricane insurance for their homes.
Still, Mr Bethell told Tribune Business that J S Johnson was forecasting a better financial performance for 2012. "We're predicting that things will start to improve," he added, noting that the US economy seemed to be improving and the Bahamas' tourism numbers were picking up.
"We're expecting this year to be no worse than last year - in fact, it will be a little bit better, if we don't have a major fire or hurricane," Mr Bethell said. "We're certainly budgeting for it to be better than last year."
Asked by this newspaper how J S Johnson's performance year-to-date had been, he replied: "It's looking pretty good so far. The numbers are in line with expectations."
Looking at the 2011 performance, Mr Bethell added: "On the brokerage side it was in line with expectations, but on the underwriting side we did not see it coming. But that's what we're in business for. We're able to deal with large claims and still make a profit, and that says a lot."
Mr Bethell is set to step down and retire as J S Johnson's managing director on June 30, 2012. He will be replaced by fellow executive, and executive director, Alister McKeller.