By NEIL HARTNELL
Tribune Business Editor
nhartnell@tribunemedia.net
Bahamas First yesterday said it was “fully expecting this year will be better” than 2013, when total comprehensive income rose 13.2 per cent despite an almost-$2 million hit from May’s floods.
Patrick Ward, the property and casualty insurer’s president, told Tribune Business its bottom line performance could have exceeded $9 million last year had it not been for the combined $2.74 million impact generated by the floods and legacy litigation it had inherited with the Cayman First purchase.
Emphasising that his 2014 forecast was based on the absence of a major claims event, such as a hurricane, Mr Ward also indicated that the insurer was strong enough to withstand the “big what if” that is the Government’s fiscal reform plans.
“We were obviously impacted by the floods in May, which on a net basis cost us $2 million,” Mr Ward told Tribune Business. “If not for that, we would have been $2 million better off.
“Apart from the one-time impact of the floods, the core results are in line with what we expected. It actually was very close.”
Writing in Bahamas First Holdings’s 2013 annual report, released yesterday, Mr Ward said the carrier incurred 330 claims from the May floods, generating a net payout (after reinsurance monies) of $1.94 million.
Gross losses, the bulk of which were borne by Bahamas First’s reinsurers, totalled $4.7 million, with property-related claims accounting for $4.2 million or 90 per cent of the total. Bahamas First’s share of the payout was 40 per cent of the gross.
But this failed to stop its total comprehensive income increased from $5.689 million in 2012 to $6.442 million last year, as the general insurance underwriter shrugged off a 7 per cent rise in net claims incurred - up from $25.818 million to $27.608 million.
Profits were up from $5.1 million to $5.8 million.
“If you look at the core performance, the underwriting results, we had underwriting profits of $24.5 million, which is ahead of where we were in 2012 at $23.8 million,” Mr Ward told this newspaper.
“If you look at the 2011 position, we were only at $18.8 million, so it was an even more significant improvement over two years ago.” The 4 per cent year-over-year increase took Bahamas First’s net underwriting income to historical highs.
Bahamas First’s 2013 performance was also boosted by its 83.52 per cent share of the $1.5 million in total dividends paid out by its Cayman First subsidiary.
With its affiliate having taken a final $0.8 million hit on litigation related to a Hurricane Ivan claim in 2013, Mr Ward agreed that the underwriter’s decision to expand into other English-speaking Caribbean markets was starting to pay-off.
“It’s actually paying a significant result, and our expectations are being realised,” Mr Ward said of Cayman First.
“What we have now is diversification, not just in terms of lines of business, but we have significant geographical diversification, which helps us enormously.
“It helps take the pressure off having to grow in any one market, which is very difficult to do with the economy the way it is.”
While there were “some early signs” that Bahamian economic recovery was “bottoming out”, Mr Ward said Bahamas First continued to feel the impact in its top-line premium income.
While gross premiums were up 2 per cent year-over-year, at $161.139 million compared to $157.796 million in 2012, Mr Ward said there was “very little growth available”.
He attributed this to property owners who, without a mortgage hanging over them, were electing to take the risk of switching to cheaper non-catastrophe (hurricane) coverage, and motorists increasingly buying used vehicles that could only attract ‘third party’ as opposed to comprehensive coverage.
“We haven’t seen any reduction in the number of clients we have, and that’s very important, but we have seen a reduction in average premium spend per client,” Mr Ward told Tribune Business.
He added that the performance of NUA Insurance Brokers & Agents, Bahamas First’s wholly-owned brokerage business, was reflective of the overall market.
Mr Ward said its almost-$50 million portfolio had shown some growth on the motor vehicle side, but remained flat on the property category.
Writing in the company’s annual report, he added: “The overall claims ratio in 2013 was 45 per cent, which is slightly elevated from the result of 43 per cent in the prior year.
“The same is true for the expense ratio, which was 33 per cent in 2012, but finished the current year at 34 per cent, primarily due to the impact of an increased bad debt provision in 2013.
“The group’s combined ratio of 94 per cent is slightly above the prior year result of 93 per cent, primarily due to the increase in net claims incurred.”
Mr Ward said shareholder equity had increased from $47.2 million at year-end 2012 to $50.2 million at December 31, 2013, and a further dividend payment would be discussed at the 2014 annual general meeting (AGM).
Analysing its results more closely, Bahamas First said its net property and casualty claims for 2013 were 15 per cent higher than in 2012, finishing at $11.8 million compared to $10.2 million.
The claims related to its Cayman-based health business were only 1.4 per cent higher in 2013 at $15.8 million, compared to $15.6 million in 2012.
For the Bahamas, gross premiums in the property insurance segment fell by 4 per cent year-over-year.
“The corresponding decline in both catastrophe and non-catastrophe aggregates was just over 3 per cent, which is evidence of the continuation of the trend that we have observed in the last few years, involving a shift by consumers towards non-catastrophe property covers,” the underwriter added.
Motor insurance premiums in the Bahamas rose 4 per cent year-over-year in 2013, countering a 5 per cent drop in the Cayman Islands. However, gross premiums generated by engineering and contractor performance bonds fell by 8 per cent due to a tepid construction environment.
“The group’s investment return in 2013 was 11.6 per cent higher than the prior year result,” Bahamas First said.
“The total investment assets increased by 7.2 per cent to $62 million, from the $58 million total recorded in 2012, primarily driven by increases in our fixed income securities.
“Total investment income, including unrealised gains and (losses) on available for sale investments, was $2.8 million in 2013, compared to $1.3 million in 2012.”
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