The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

J S Johnson shrugged off ongoing reinsurance capacity concerns to yesterday unveil a 15.1 percent profit increase for the 2022 that was aided by placing COVID-related restrictions “in the dust”.

Alister McKellar, the BISX-listed insurance agent and broker’s managing director, told shareholders the $10.408m net income performance for the 12 months to end-December 2022 also benefited from The Bahamas enjoying a third consecutive year that was almost hurricane-free (Tropical Storm Nicole excepted”.

He added that the agency and brokerage business received a further boost from a “one-time non-recurring windfall”, which he did not identify, while its Insurance Company of The Bahamas (ICB) underwriter saw gains in the value of its investment portfolio more than triple compared to 2021.

“Watching the Bahamian sun melt into the horizon on the last day of the last month of the calendar year always gives me pause,” Mr McKellar wrote. “So much happens in 12 months that it’s sometimes difficult to put everything into perspective. This year, however, one thing is perfectly clear: The country has finally left COVID, lockdowns, mask mandates and tests, and general paranoia, in the dust. Life goes on and Bahamians couldn’t be happier.”

He added that J S Johnson had also benefited from the wider Bahamian economy’s post-COVID revival, which has largely been driven by the tourism rebound as well as real estate and other foreign direct investment (FDI) projects and related construction activity.

“Our results for the period reflect this trend, with a more than 15 percent increase in net income - from $9.03m to $10.4m - compared to the same period last year. A combination of another low claims experience and a general return to ‘business-as-usual’ in the country certainly played a role in the positive results,” Mr McKellar said.

“Under our agency arm, the increase in net revenue from contracts with customers was aided by a one-time, non-recurring windfall. This was a material factor spurring the increase in net income from $5.494m to $6.56m. Under our underwriting segment, the strong results were a direct result of our investment portfolio as Bahamian equities rebounded after the effects of the pandemic. The result being an unrealised gain of $813,832 as compared to $223,254 last year.”

ICB, the insurance underwriter through which J S Johnson places much of its property and casualty business, in common with its competitors is grappling with increased reinsurance costs and reduced capacity in a “hardening” market as global players pull back from covering assets located in hurricane prone areas.

“As I’ve mentioned in previous reports, we continue to struggle to find reinsurance capacity for our property division,” Mr McKellar said. “While we’ve largely maintained our book of existing business in this segment, I don’t expect the problem to ease any time soon. Our motor segment, on the other hand, enjoyed a nearly 5 percent increase in premium volume for the year, which is encouraging.”

Bahamian households and businesses were warned earlier this year that insurance premiums could increase “across the board” by 15-20 percent as underwriters pull back from covering waterfront and Family Island risks due to the reduced availability of reinsurance.

The Bahamas Insurance Association (BIA), in a statement, added that local underwriters such as Bahamas First, RoyalStar Assurance and Security & General have “seen a dramatic increase in their reinsurance costs of 20 percent to 30 percent for 2023” as reinsurers adjust to the multi-billion dollar losses inflicted by Hurricane Dorian and similar storms throughout Florida and the Caribbean in recent years.

Reinsurance price hikes have been driven by the greater risk associated with insuring Caribbean assets, and the desire of global reinsurers to recover multi-billion dollar losses, sustained from recent hurricanes that have struck The Bahamas, Florida and the wider Caribbean in recent years.

Some reinsurers have also decided to exit this region as a result, cutting the supply of reinsurance and further driving up prices. 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, thus making the local industry a price taker.

Breaking down its performance by segment, J S Johnson revealed that its agency and brokerage business drove the majority of he net income increase with a 19.4 percent, or more than $1.6m, increase in that line. ICB’s profits were relatively flat, growing by just over $300,000 year-over-year.