The Tribune

• RoyalStar: ‘Don’t want our eggs in one basket’

• Aiming to reduce Bahamas to 55-60% of total

• No longer home growth ‘by leaps and bounds’

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A Bahamian insurer says “there is something on our radar” for further Caribbean expansion as it bids to cut its reliance on this nation to just 55-60 percent of its annual business activity.

Anton Saunders, RoyalStar Assurance’s managing director, told Tribune Business that “we don’t want all our eggs in one basket” given the frequency and severity of hurricanes that property and casualty underwriters must now prepare to deal with on an annual basis.

Declining to provide details on possible further growth beyond The Bahamas, given that RoyalStar is already present and writing business in territories such as the Cayman Islands, Turks & Caicos, US Virgin Islands, British Virgin Islands and Anguilla, he explained that the diversification drive means the company is not looking for expansion in its home territory “by leaps and bounds”.

Disclosing that RoyalStar plans to undertake an analysis of its US Virgin Islands business to determine whether further expansion next year is warranted, Mr Saunders said all markets outside The Bahamas were performing well and meeting expectations bar Anguilla where it has yet to reach “critical mass”.

“Our strategy is to diversify the business, so that only 55-60 percent of the business is in The Bahamas and the rest is throughout the Caribbean,” he told this newspaper. “We don’t want all our eggs in that basket.”

Some observers will likely argue that The Bahamas’ growing economic and fiscal woes following Hurricane Dorian and COVID-19 may force, or encourage, local companies to seek growth and expansion opportunities outside this nation as a hedge against future problems at home.

Mr Saunders, though, made no mention of this as a motivating factor for RoyalStar. Noting that The Bahamas still accounts for 65 percent of the property and casualty underwriter’s business, and the remainder of the Caribbean 35 percent, he said: “We have a little ways to go.”

Asked about further expansion possibilities in the Caribbean, he added: “Let’s put it this way. If the opportunity is there, and our resources can handle it, we will look at it. There is something on our radar but we cannot speak definitively to it right now. We always keep things on our radar and if the opportunity is good we will look at it.”

Tribune Business previously revealed that RoyalStar is poised to acquire a majority 80 percent ownership interest in Star General Insurance Agents & Brokers by year-end, in a move that secures a key distribution channel presently owned by one of its major shareholders.

While this gives the insurer an opportunity to increase group-wide efficiencies, Mr Saunders said The Bahamas is no longer a significant focus for growth via mergers and acquisitions. “The Bahamas is a mature market,” he explained, “so what we are going to do with the Star acquisition is that we’ll control part of our distribution channel and try and make things more efficient and profitable from there.

“We are not going to expand in The Bahamas significantly because we want to diversify the business. There will be some organic growth had, but we’re not looking to grow by leaps and bounds in The Bahamas any more.

“We understand there is a risk that the more you go and expand, the more you expose your balance sheet. We’ve seen a lot of hurricanes and we just like the diversification. Even if The Bahamas gets hit we will have profits from the other territories and vice versa.”

Asked how well RoyalStar’s most recent expansion into the US Virgin Islands has been performing, Mr Saunders said: “All expectations are being met. We are going to look at it again and see if we expand more or hold the line.

“We’ll look at our portfolio, which is doing well and all expectations and growth targets are being met, and do an analysis this quarter to see whether we will increase business next year.”

As for the property and casualty underwriter’s other Caribbean territories, the RoyalStar chief added: “We have our ups and downs in certain territories such as Anguilla. We have not reached critical mass yet there, so it is an ongoing drag for now, but all other territories have met their targets. 

“In Anguilla we need to have more focus there to write more business. Because of COVID-19 we don’t travel, and we like to see and touch the islands before we make a move. That’s been delayed because we have not travelled to the islands.”

RoyalStar recently had its highest-level “financial strength” and credit ratings reaffirmed by the industry’s top assessor, as AM Best confirmed its “A (Excellent)” financial strength and “a” (Excellent) long-term credit rating, together with a ‘stable’ outlook.

A. M. Best, in its assessment of RoyalStar, said: “The ratings reflect RoyalStar Assurance’s balance sheet strength, which A. M. Best assesses as strongest, as well as its strong operating performance, limited business profile and appropriate enterprise risk management.

“The balance sheet strength is derived from the group’s strongest risk-adjusted capitalisation, as measured by Best’s Capital Adequacy Ratio (BCAR), conservative investment portfolio and comprehensive reinsurance programme.

“These strengths are partially offset by RoyalStar’s exposure to weather-related catastrophe events given its geographic concentration of business in the Caribbean, and its dependence on reinsurance to mitigate losses and protect its surplus. Nevertheless, strong earnings over the past five years, despite major catastrophe events in 2016 and 2019, have enabled the company to maintain risk-adjusted capitalisation at the strongest level.”