The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A TOP Bahamian insurance executive says the official end to the 2022 hurricane season “can’t come soon enough” given that Hurricane Ian will further “tie our hands” on premium prices for local consumers.

Alister McKellar, J. S. Johnson’s managing director, told shareholders in a 2022 third quarter report that was written just prior to Tropical Storm Nicole’s arrival: “I pointed out early-season tropical storm activity and the possibility that more disturbances could be heading our way into the third quarter.

“I’m happy to say, however, that I have been spectacularly wrong. Until now. After two consecutive years without an Atlantic hurricane making landfall in The Bahamas, Mother Nature may yet have the last word on the matter as sub-tropical storm Nicole gains steam on her way to the east coast of Florida. The official end of the season on November 30 cannot come soon enough.”

While Nicole was ultimately a relative non-event for Bahamian property and casualty insurers, certainly when compared to Hurricane Dorian and previous weather-related catastrophes, Mr McKellar warned that the multi-billion dollar reinsurance industry losses suffered from Hurricane Ian’s devastation of Florida’s west coast threatens to further undermine the will of such companies to continue underwriting business in the Caribbean.

“We all understand that sinking feeling after witnessing the horrible devastation Hurricane Ian wrought upon Fort Myers and south-west Florida in September,” he wrote. “Unfortunately, that event will likely further solidify the reluctance of international reinsurers to assume additional hurricane risks in our wider region. We continue to search for new avenues of additional coverage capacity, but our hands remain largely tied for the foreseeable future.”

This means that, with reinsurance capacity restricted and that sector demanding higher prices to continue covering property and other risks in The Bahamas, premium costs paid by Bahamian businesses and households will likely both further increase and remain high.

Bahamian property and casualty underwriters must acquire huge amounts of reinsurance annually because their relatively thin capital bases mean they cannot cover the multi-billion dollar assets at risk in this nation. This means premium pricing in The Bahamas is largely dictated by reinsurers, and the cut-back in supply with the global reinsurance market pulling back from the Caribbean due to hurricane-related losses, means these cost pressures will only further rise.

Mr McKellar, meanwhile, said the absence of storm-related activity through the first three quarters ensured that J. S. Johnson’s profits for the nine months to end-September 2022 were 14.54 percent ahead of last year’s comparatives, standing at $6.935m compared to $6.054m.

“Other important financial indicators such as outstanding claims (declined more than 30 percent) and earnings per share (increased by 11 percent, $0.72 to $0.80) indicate solid, steady business activity,” he added.

Elsewhere, FamGuard Corporation saw its net income for the nine months to end-September 2022 fall by 15.5 percent or just over $1m year-over-year, dropping from $8.1m to $7.009m. While total income was relatively flat at $98.491m, total benefits and expenses increased by almost $1m to $91.482m.

Dodridge Miller, chairman for Family Guardian’s BISX-listed parent, told shareholders: “The financial results continue to reflect the stability and resilience of the company despite the rising inflation, global interest rates and other external factors which impact our business. The group reported total revenue of $98.5m for the nine months ended September 30, 2022, compared to the $98.8m reported for the comparative prior period.

“Gross premiums exceed the prior year by 1.1 percent, and totalled $85.2m. Net investment income totalled $11.7m, and was impacted by the net fair value losses arising from the decline in equity and bond market prices. The unfavourable fair value movements were partially offset by an increase in investment income arising from the group’s increased investment in local debt securities.”

As for benefits, Mr Miller added: “Benefits across all lines of business totalled $61.1m and continue to reflect the net results of a decrease in death benefits over the prior year, which trended higher than normal due to COVID-related deaths. These positive impacts were partially offset by an increase in group and individual health benefits during the period.

“Total expenses, including commissions paid to agents and brokers, reported a negative variance of 3.3 percent over the prior year. Consistent with the increase in premium income reported for the period, commission expenses increased by 4.6 percent year-over-year and total $10.2m. Expenses, excluding commissions, increased mainly due to costs associated with preparations for the implementation of the new accounting standard International Financial Reporting Standard (IFRS) 17.

“The group’s statement of financial position remains strong with total assets of $388.8m, of which investment assets comprised $318.5m, representing 82 percent of our total assets. Liabilities amounted to $286.2m, an increase of 2.8 percent over the December 31, 2021, balance mainly due to increases in reserves for future policyholder liabilities which comprise obligations to holders of long-term and short-term insurance policies,” Mr Miller added.

“Shareholder’s equity stood at $102.6m compared to $97.4m as of December 31, 2021. The Group’s capital remains strong and continues to measure well in excess of the local minimum requirements established by the Insurance Commission of the Bahamas.”