The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A Bahamian insurer yesterday unveiled a 145.4 per cent net income increase for 2012, shrugging off a 50 per cent decline in construction industry premiums.

Timothy Ingraham, Summit Insurance Company’s president, told Tribune Business the underwriter’s bottom line could have quadrupled to between $2.5-$3 million for last year, had it not been for claims associated with Hurricane Sandy.

But, with Summit’s share of storm-related property/auto claims coming in at between $1-$2 million, the general insurance carrier had to be content with net income of $1.681 million for the year to end-December.

That still represented a more than doubling of the previous year’s $684,865 bottom line, when Summit and its competitors had to deal with an even higher level of claims courtesy of Hurricane Irene.

Mr Ingraham, meanwhile, revealed that Summit was set to move into its new headquarters building - the old CLICO (Bahamas) branch office on Sears Hill - as early as next week.

The move from rented accommodation at East Bay Street’s Island Traders Building is seen as a better use of money, and opportunity to generate better returns than bank deposits via appreciating property values.

Mr Ingraham, though, said 2013 to-date had been “a challenge”. With a “shrinking insurance pie”, resulting from new market entrants and lower homeowners/auto premiums, the Summit chief said the company’s year-end net income and gross premiums were likely to be “flat” compared to 2012.

Reflecting on the past year, Mr Ingraham told Tribune Business: “I think we had a pretty good year all things considered, given that Hurricane Sandy passed us by during the year and affected the bottom line. The underwriting gain was almost double the year before, and we are very pleased with that.

“We think we finished with a reasonable result. For us, Sandy was just below the $5 million mark for all claims. We [Summit] had a percentage of that, between $1-$2 million would have been our share of that.”

Had it not been for Summit’s share of Hurricane Sandy payouts, Mr Ingraham said that when it came to 2012’s net income, “ the $2.5-$3 million mark is probably where we would have ended up. We’d like to think close to $3 million”.

Summit’s improved 2012 profits were driven by an 88.7 per cent increase in underwriting income, which rose to $2.309 million from $1.08 million the year before.

That, in turn, was largely sparked by an 8.5 per cent rise in net premiums earned, which rose from $15.265 million to $16.565 million, largely on the back of a positive $2.5 million swing related to the unearned premium reserve.

Summit was able to reduce this reserve by $1.051 million in 2012, as opposed to a $1.492 million increase the previous year, due to a corresponding decline in top-line gross written premiums.

These fell by 13.4 per cent, from $42.385 million in 2011 to $36.694 million, with Mr Ingraham attributing this to the general weakness in the Bahamian economy and construction industry.

“A slowdown in the construction industry was one of the main factors,” he told Tribune Business.

“We insure quite a few contractors for risk and liabilities associated with that, and provide bonds for contractors. All of that was very significantly affected last year.

“If you compare it, year-over-year, to the year before, there’s been at least a 50 per cent drop-off in premium income related to the construction industry.”

Summit, for whom 97 per cent of business comes from Insurance Management, held total operating expenses flat year-over-year, coming in at $1.799 million compared to $1.777 million the year before.

“It’s very critical that you control your expenses as much as possible, especially in tough economic times,” Mr Ingraham said. “That’s one of the things you can control, more so than premium income and, to a certain extent, reinsurance costs.”

As for Summit’s new head office, Mr Ingraham said the opening would coincide with the underwriter’s 20th anniversary.

“We are very close to moving into that,” he told Tribune Business. “The final touches are being put on the building now, and we expect to move in in a matter of days, probably a week or so.

“We have two buildings on site. We will occupy one and rent the other.”

Explaining the rationale for Summit becoming a property owner, Mr Ingraham said the insurer felt this was a better use of its funds when compared to renting. It also believes it can generate better returns than bank deposits if the property appreciates in value.

“We felt that what we spend on rent and fees could be invested in a property that sat on the balance sheet,” he added.

“A smart investment in property could give you a better return than money you have sitting in the bank. The money paid for rent is invested in the building.

“You have to pay for the upkeep and maintain the building, but in the long run it is better to hold space than continue to rent. If you look on the balance sheet, the building does not account for a huge chunk of our assets.”

Mr Ingraham acknowledged that 2013 had been challenging due to the entrance of new players, such as Netherlands Antilles General Insurance Company (NAGICO), which meant “the pie is cut a little smaller”.

“It’s a matter of holding on to your book of business, and making sure it’s a profitable book of business,” he told Tribune Business.

“We tend not to focus too much on the top line; growing the bottom line and net assets is more critical to us.

“We feel that if we are able to hang on to our book of business, better days are ahead, and we can look to more aggressive targets for growth once the economy is better.”

But, back to the present, Mr Ingraham added: “I expect 2013 to be flat at best, with the bottom line roughly the same as 2012.

“As far as the top line is concerned, I expect it to be flat because we have a shrinking insurance pie.”

Apart from the increased competition, Mr Ingraham said homeowners were either reducing sums insured, or failing to insure and leaving the mortgage holders to pay for cover. And, on the auto front, car owners were holding on to vehicles for longer and dropping from comprehensive coverage to third party.

With nothing set to make “a big dent” in unemployment and the economy in the foreseeable future, other than Baha Mar, Mr Ingraham said: “These are the kinds of times when you basically put your head down and figure out what you’ve got, keeping it on the positive and not the negative side.”