The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Bahamas First Holdings yesterday said it shrugged off a collective $2.5 million ‘hit’ from Hurricane Sandy and various investment/commission decreases to hit “90 per cent” of its 2012 comprehensive income target.

Patrick Ward, the general insurance holding group’s president and chief executive, told Tribune Business that Bahamas First was in “the very early stages” of assessing other Caribbean acquisition targets following the success of its Cayman First purchase.

Mr Ward revealed that the group’s Cayman business, even though it only holds a majority 84 per cent stake, accounted for 55-60 per cent - the lion’s share - of Bahamas First’s bottom line for the 12 months to end-December 2012.

Pointing out that the Bahamian property and casualty industry was effectively a battle for market share, with new entrants making organic growth extremely difficult, Mr Ward said the Cayman First acquisition was set to serve as a model for Bahamas First’s ongoing expansion strategy.

The group, whose subsidiaries include the underwriter Bahamas First General Insurance Company and the agency Nassau Underwriters (NUA), generated $5.689 million in total comprehensive income for its 2012 financial year - a major improvement on the previous year’s $807,944.

It came in just below its $5.9 million comprehensive income target for the year, and Mr Ward told Tribune Business: “As a percentage of budget, we were probably in excess of 90 per cent of where we thought we would be.

“We were on target despite a couple of events that impacted last year - Hurricane Sandy, and a reduction in our Commonwealth Bank holdings.

“If you combine that with a loss of incremental insurance commissions, you are looking at a combined impact of about $2.5 million.”

The effect of Mr Ward’s statement is to suggest that Bahamas First Holdings could have generated $8.2 million in total comprehensive income for 2012, had it not been for those adverse impacts.

The group’s annual report revealed that Hurricane Sandy generated 358 claims and collective gross losses of $8.6 million, accounting for 18.7 per cent of Bahamas First’s $46 million in gross claims.

In addition, Bahamas First took a $770,000 hit on the unrealised value of its Commonwealth Bank shareholding, due to the latter’s share price at year-end 2012 being lower than at the same point in 2011.

And back-to-back hurricane years (Sandy and Irene) meant that Bahamas First’s “loss ratio will not be at the level for us to earn the maximum level of commissions” from reinsurers.

Mr Ward said the latter issue would be “less of a factor in 2013” barring another hurricane-related event.

Meanwhile, outlining Bahamas First’s growth strategy going forward, its chairman, Ian Fair, told shareholders in the group’s annual report: “We shall continue to seek, in a careful and measured manner, further opportunities in the region, which is the best way to generate positive growth for Bahamas First Holdings in the future.

“We have a strong reputation in the market, especially with our reinsurers, and need to take advantage of this position.”

Expanding on this under questioning from Tribune Business, Mr Ward said: “Our primary targets are going to be jurisdictions very similar to the Bahamas and Cayman in terms of being English-speaking, common law jurisdictions, stable currencies, good governance from a currency perspective, and very little risk from an exchange perspective.

“We are at the very early stages of looking at some options. I couldn’t say more at this stage.”

Apart from the crowded Bahamian market, Bahamas First’s strategy is also being influenced by the current production from Cayman First.

While accounting for just $52 million, or almost one-third (33 per cent) of Bahamas First’s group-wide $157.8 million gross written premium, Mr Ward revealed that Cayman First generated “pretty close” to $4 million in standalone comprehensive income.

Even accounting for the fact Bahamas First enjoyed just 84 per cent of these profits, Mr Ward revealed to Tribune Business that Cayman First now accounted for “between 55-60 per cent” of the group’s bottom line.

“The success of our Cayman investment has given us a very good indication of the things that can be done to diversify risk while adding value to the brand proposition Bahamas First represents,” Mr Ward said.

“It proves the point that in a very diversified portfolio, it is possible to have a natural catastrophe event and the company can absorb these losses and still retain a good bottom line.”

It could be argued, though, that Cayman First’s performance effectively served to mask the relatively modest showing by Bahamas First General Insurance Company, which generated just $739,518 in total comprehensive income on more than $106 million in gross written premium. The former figure, though, represented a more than $1.1 million turnaround on the previous year’s $414,104 net loss.

Meanwhile, at home, Mr Ward said Bahamas First would continue to “take a look” at agent and broker acquisition opportunities when they presented themselves.

This has been the group’s primary organic growth route in recent years, and in 2012 it acquired the insurance portfolios belonging to the Bethel-Thompson Insurance Agency and the Eleuthera-based Joshua Culmer Insurance Agency.

Together, the two agencies generated combined premiums of $2.5 million in 2012, and are expected to “generate positive earnings for NUA” in their first full year.

Bahamas First paid $475,000 for Bethel-Thompson and $250,000 for Joshua Culmer, according to its annual report.

Mr Ward, meanwhile, told Tribune Business that while Bahamas First Holdings expected little to no growth in gross written premium in 2013, “we do expect some bottom line growth”. He declined to go into details.