The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A 56 per cent drop in underwriting income from its Insurance Company of the Bahamas (ICB) affiliate slashed J. S. Johnson’s 2012 half-year profits by 14 per cent, with Hurricane Sandy possibly having put paid to hopes of an improved second half.

The BISX-listed agent/broker, revealing a first half bottom line drop from $4.982 million to $3.163 million, said its 2012 second quarter net income fell by an even greater 37 per cent.

Alister McKellar, J. S. Johnson’s newly-appointed managing director, who has taken over from the long-serving Marvin Bethell, said in his report to shareholders that ICB’s performance had been impacted by a more than $1.9 million reversal on commissions and fees.

These had fallen from $1.518 million in 2011 to a negative $391,000 for the 2012 first half.

Mr McKellar, who has failed to return repeated Tribune Business phone calls seeking comment, wrote to investors: “Following on from the first quarter results, both segments experienced declines in net income during the first half of 2012.

“Underwriting results showed the more significant decline, with net income dropping 56 per cent from the previous period, which is a direct result of the decline in net commission and fees.”

J. S. Johnson’s business consists of two segments - its agency/brokerage business, and its ICB property and casualty underwriting affiliate. It places much of its agency/brokerage business through the latter.

Sounding an optimistic note, Mr McKellar added: “Although net income is down for the second quarter of the year by 37 per cent, and concurrently total income by 14 per cent, the modest decline in total expenses shows promise for the company in its effort to reduce costs.

“As mentioned in the chairman’s report at the end of 2011, with the pace of the recovery of the Bahamian economy, the true turnaround will probably not be seen until late 2012. This, along with the company’s ability to maintain lower expense levels, should yield a better performing result for the last half of the year.”

It is unclear whether Hurricane Sandy will force a reappraisal of the improved 2012 second half prediction.

Tom Duff, ICB’s general manager, told Tribune Business on Monday that based on the first week post-storm, he was looking at a claims/insured losses experience that was “50 per cent” less than that of Hurricane Irene in 2011.

ICB sustained more than $6 million in gross claims from Irene, and Mr Duff is currently putting Sandy’s exposure at $3 million ‘at the top end’.

In fact, J. S. Johnson’s 2012 first half results may have looked worse were it not for the year-over-year 43 per cent reduction in net claims incurred for the six months to end-June 2012.

These dropped from $1.365 million to $784,193, as ICB last year incurred claims from the fire that devastated the Betty K dock in downtown Nassau.

Acknowledging this, Mr McKellar said in his first-half message to shareholders: “Total expenses are down by 2 per cent on last year.

“The major contributor being net claims incurred, which are down 43 per cent on 2011, and 20 per cent on 2010 levels. This decrease has been partially offset by minor increases in the remaining expense categories.”