The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

RoyalStar Assurance yesterday said its $4.401 million net income for the 2012 full-year exceeded post-Sandy expectations by 10 per cent, as it vowed to “protect our turf” against increased competitive threats this year.

Recalling that the Bahamian general insurer had projected $4 million in net income at the 2012 third quarter-end, Anton Saunders, its general manager, told Tribune Business: “We came in at $4.4 million, so we were 10 per cent above where we thought we’d be at year-end.

“The Sandy losses were not as great as we thought, so the impact to our commissions [from reinsurers] was not as great as we thought it would be either.”

The property and casualty underwriter’s net income performance represented a 26.5 per cent improvement on prior year levels, as it shrugged off the impact made by Hurricane Sandy.

“The gross claims finished at about $5 million, and the net impact was $1.2 million,” Mr Saunders told this newspaper.

He added that RoyalStar was still negotiating the Sandy-related insurance claim from Grand Bahama International Airport, but added: “That’s not going to impact the bottom line for us, as we did not retain a significant portion of the risk,”

Looking ahead to 2013, Mr Saunders said that apart from potential hurricanes, RoyalStar’s financial performance would heavily “depend on the competitive environment we live in” - a reference to the market entrance of Netherlands Antilles General Insurance Company (NAGICO).

NAGICO has made an aggressive entrance, undercutting established Bahamian insurers on premium prices by up to 20 per cent, but Mr Saunders said RoyalStar would remain true to its conservative philosophy of only underwriting businesses where the premium matched underlying risk.

“We’re a strong Bahamian company,” he said. “We don’t panic, and we’ll protect our turf if we have to. We price our product based on the risk we see out there, and the margins have to make sense.

“We’ve not been blocked by competition in the past. We’ll protect our turf, protect our portfolio. “

Emphasising that RoyalStar’s goal was not to have the greatest share of the Bahamian property and casualty market by gross written premium, or necessarily post the highest profits, Mr Saunders told Tribune Business: “Whatever profits we make, 50 per cent is ploughed back into our business, so the Bahamian people understand that when a catastrophic event occurs, we’ll be there for them.”

While RoyalStar had seen a “bit of a pick up” in new car owners seeking comprehensive insurance policies, Mr Saunders told Tribune Business that the “general shift” towards second-hand vehicles continued in the recession’s aftermath.

RoyalStar’s auto insurance book now featured a 50:50 equal split between new and used vehicles, he added, whereas pre-recession it had been at least 60:40 in favour of new cars.

As for marine/boat business, Mr Saunders told Tribune Business: “We don’t have a big marine book.

“We’re probably the smallest marine book in the market. We’ve basically priced ourselves out of the marine market because of the losses we’ve suffered in the past, and are only accommodating marine business for our property and liability clients.”

Describing auto and property insurance as “our bread and butter”, the RoyalStar managing director added: “We made profits on all lines of business last year despite the hurricane.

“The unfortunate thing is that the market is tied to the economy, and there’s no big spurt of construction going on now. The Baha Mar project has not spilled over to us; most of that is offshore.

“What we might see this year is that a lot of people who have completed their mortgages with the banks may see an opportunity to switch to non-catastrophe coverage, instead of catastrophe, or increase their deductibles. I think we’ll see more of that in the future.”

Writing in RoyalStar’s annual report, Mr Saunders said the insurer’s 2012 comprehensive income consisted of $3.767 million in underwriting profits, and $633,900 in net investment income.

“The 2012 results are also a significant achievement because they include the financial losses from Hurricane Sandy and the decrease in investment income due to the reduction in interest rates and an impairment of investments in securities of $304,750,” Mr Saunders said.

“During the year, we were able to grow our shareholder equity reserves to $42.47 million despite the purchase of treasury shares in the amount of $1.375 million.”

That purchase involved the acquisition of shares held by former RoyalStar managing director Steve Watson, who left the company last year.

Meanwhile, Mr Saunders added: “The Return on Equity (ROE) applicable to ordinary shareholders for 2012 was a respectable 11.63 per cent compared to a ROE of 9.19 per cent for 2011.

“The balance sheet at December 31, 2012, included a total of $48.784 million in cash and investment-related assets.”

Elsewhere, Mr Saunders said RoyalStar’s gross written premium top-line rose by $732,100 year-over-year to $64.867 million.

“Our net written premiums (NWP) for 2012 were $20.144 million, which was an increase of 1 per cent over 2011 and the first increase in NWP for over 10 years,” Mr Saunders said.

“We will continue to monitor our property exposures to ensure that we obtain adequate property rates for the islands in which we do business. Our strategy of growing our exposures when premium levels rise and reducing them when premium levels fall continues.

“:Expenses for 2012 totalled $5.265 million, which was a decrease of 2.4 per cent over the prior year. The expenses for 2012 included an increase of $168,000 in depreciation expense.”