TIDM32OW
RNS Number : 6695W
Brit Limited
03 August 2018
Brit Limited
PRESS RELEASE
3 August 2018
interim results for the six months ended 30 june 2018
A STRONG underwriting result in a challenging environment
Key points
-- Gross written premiums of US$1,150.8m (2017: US$1,092.5m), a
5.3% increase (3.3% at constant FX rates).
-- Premium rate increases of 3.5% (2017: decreases of 2.2%).
-- Net earned premium(1) of US$783.5m (2017: US$740.7m), an
increase of 3.4% at constant FX rates.
-- Strong underwriting result with a combined ratio(1,2) of 95.9% (2017: 94.0%).
-- Profit on ordinary activities before the impact of FX and tax
of US$17.9m (2017: US$143.8m).
-- Profit after tax of US$12.9m (2017: US$139.7m).
-- Investment return(3) after fees of US$5.1m, representing a
non-annualised return of 0.1% (2017: US$126.3m/3.2%).
-- RoNTA(4) (non-annualised) of 2.3% (2017: 12.6%) and total
value created of US$2.0m (2017: US$142.2m).
-- Adjusted net tangible assets(5) of US$1,045.7m (31 December 2017: US$1,043.7m).
-- Brit managed capacity on new initiatives expanded to over
US$400m for 2018, generating US$5.8m of fee income in the period,
including:
o Successful 1 January 2018 launch of Sussex Capital, the
open-ended fund which writes through Sussex Re, providing direct
collateralised reinsurance and collateralised reinsurance to Brit's
reinsurance portfolio.
o Successful completion and expansion of the fourth annual
Versutus Ltd Series Notes, offering continued access to Brit's
strong underwriting franchise.
o Syndicate 2988 stamp capacity expanded to GBP98.5m (c.US$130m)
for 2018, now offering broader access to Brit's extensive
underwriting capabilities with over 20 lines of business.
-- Fairfax ownership of Brit increased from 72.51% to 88.04%.
Matthew Wilson, Group Chief Executive Officer of Brit Limited,
commented:
'Following the major losses of 2017, we have achieved overall
risk adjusted premium rate increases of 3.5% in the period,
primarily driven by the loss affected Property, Treaty and Marine
classes, in both our London and US portfolios. While these rate
increases are welcomed, they are lower than initially anticipated
as capacity continues to exceed demand and brokers move business to
new carriers at current or reduced rates. In this challenging
environment, we have continued to take action to protect our
balance sheet, with the application of rigorous risk selection
criteria in marginal classes and the decision to withdraw from
certain classes such as International Professional Indemnity and
General Aviation.
Against this backdrop, it was encouraging that our strategy
delivered a combined ratio for the period of 95.9%. This reflected
the combination of a healthy attritional ratio, continued back year
reserve releases and an absence of major losses. The net impact of
the 2017 major losses has remained unchanged in the period.
Our premium written grew by 3.3% at constant exchange rates over
the same period in 2017, to US$1,150.8m. A number of factors
contributed to this growth including the favourable development of
prior year premiums and the impact of rate increases, partly offset
by reductions in certain classes following the actions outlined
above. It was again pleasing to see an increased contribution from
our initiatives of recent years, including our US and Singapore
platforms, as we continue to expand our international distribution
capability.
For 2018, Brit's total managed capacity across Versutus, Sussex
Capital and Syndicate 2988 has exceeded US$400m. We successfully
launched Sussex Capital in January 2018, the open-ended fund which
writes through Sussex Re, providing direct collateralised
reinsurance and collateralised reinsurance to Brit's reinsurance
portfolio. In February, we announced the fourth annual expansion of
Versutus, which now has invested capital of US$187m, offering
access to Brit's strong underwriting franchise. In addition,
Syndicate 2988, which was launched in 2017, has been expanded to a
stamp capacity of GBP98.5m (c.US$130m) for 2018 and now offers
broader access to Brit's extensive underwriting capabilities with
over 20 lines of business for 2018. These initiatives represent
excellent progress as we continue to develop and enhance our
capital markets participation.
We have continued to focus on advancing and resolving the open
claims reported as a result of the 2017 catastrophes. In certain
circumstances, resources have been recently redeployed to impacted
areas to support our coverholders and fast-track claims resolution.
Our brokers have commended us for our service excellence, including
the expediting of claims payments wherever appropriate.
During the period we have also continued to selectively expand
our underwriting and claims capabilities, predominantly in the US.
This ongoing success in attracting high-quality talent is helping
us expand our client offering while delivering sustainable,
profitable growth and a best-in-class claims service.
While the rating environment in 2018 has been more positive, the
outlook for the remainder of 2018 remains challenging. However, we
continue to focus on our core fundamentals of underwriting
discipline, risk selection and capital management. We have a clear
strategy and have established a strong platform with a
well-balanced business mix. This, supported by Fairfax as our
parent, continues to position us well in the current rating and low
yield environment.'
Mark Allan, Chief Financial Officer of Brit Limited, said:
'During the first half of 2018, Brit delivered a profit on
ordinary activities before FX and tax of US$17.9m and a profit
after tax of US$12.9m, against a backdrop of intense competition
and volatile equity markets.
Underwriting contributed US$32.0m to the result, with a combined
ratio of 95.9%. This reflected an attritional ratio of 56.5%,
reserve releases of US$8.9m and an absence of major loss
activity.
Our net investment return was US$5.1m. Fixed income provided a
positive overall return with increased income on cash and bonds,
offset by a limited amount of mark to market losses on the bonds
due to our short duration positioning. This positive performance
was partly offset by unrealised losses on some of our equity
portfolio, reflecting volatile market conditions in the period.
In the period, we have benefited from the growth of our third
party capital vehicles, generating US$5.8m of fee income. The
generation of such underwriting-related income is an important part
of Brit's strategy and has the benefit of assisting Brit in
managing its expense base and enhancing shareholder return.
We manage our currency exposures to mitigate their impact on
solvency rather than to achieve a short-term impact on earnings.
While we experienced a total foreign exchange loss of US$11.0m in
the period, foreign exchange movements reduced our management
capital requirements by US$27.4m, favourably impacting our solvency
position.
Our balance sheet remains strong, with adjusted net tangible
assets largely unchanged at US$1,045.7m (after capital
contributions, dividends paid and share buybacks). As a result, we
hold a surplus of US$446.5m or 43.7% above the Group's management
capital requirement. During the period, our capital requirements
reduced from US$1,073.4m to US$1,021.0m, reflecting movements in
interest rates (US$25.0m favourable impact) and foreign exchange
rates (US$27.4m favourable impact).
Our investment portfolio remains defensively positioned with a
large allocation to cash and cash equivalents (US$842.2m or 20.3%)
and fixed income securities (US$2,544.7m or 61.3%). Brit's equity
allocation has decreased during the period and now stands at
US$733.9m or 17.7%, partly reflecting the market movements in the
period. At 30 June 2018, 78.4% of our invested assets were
investment grade and the duration of the portfolio was 0.6 years.
As economic growth continues, inflation and interest rates are
likely to increase further. We remain short duration relative to
our liabilities and defensive in our approach to credit risk.'
Notes
1 Excludes the effect of foreign exchange on non-monetary items.
2 Excludes amount attributable to third party underwriting capital providers.
The 2017 figures have been re-presented on this basis.
3 Inclusive of return on investment related derivatives, return on associates
and after deducting investment management expenses.
4 RoNTA calculation excludes all FX movements. Based on adjusted net
tangible assets.
5 Adjusted net tangible assets are defined as total equity, less intangible
assets net of the deferred tax liability on those intangible assets.
Brit Limited 2018 Interim Report
Brit Limited's 2018 Interim Report is available at
www.britinsurance.com.
For further information, please contact:
+44 (0) 20 3857
Antony E Usher, Group Financial Controller, Brit Limited 0000
+44 (0) 20 3727
Edward Berry, FTI Consulting 1046
+44 (0) 20 3727
Tom Blackwell, FTI Consulting 1051
About Brit Limited
Brit is a market leader in global specialty insurance and
reinsurance. We underwrite across a broad class of commercial
insurance with a strong focus on property, casualty and energy
business. Brit is a reputable and influential name in the Lloyd's
market and we pride ourselves on our specialist underwriting and
claims expertise.
We operate globally via a combination of our own international
distribution network that benefits from Lloyd's global licences and
our broker partners and underwrite a broad class of commercial
specialty insurance. Our underwriting capabilities are underpinned
by a strong financial position, our underwriting expertise and
discipline and customer service.
We have a strong track record and are passionate about our
business, our people and our clients and we have focused on
cultivating a franchise that is built on delivering exceptional
service. Our culture is centred on achievement and we have
established a framework that identifies and rewards strong
performance.
Brit is a member of the Fairfax Financial Holdings Limited group
of companies (Fairfax). The Fairfax financial result for the six
months ended 30 June 2018, published on 2 August 2018, includes the
Brit financial result.
www.britinsurance.com
Disclaimer
This press release does not constitute or form part of, and
should not be construed as, an offer for sale or subscription of,
or solicitation of any offer or invitation or advice or
recommendation to subscribe for, underwrite or otherwise acquire or
dispose of any securities (including share options and debt
instruments) of the Company nor any other body corporate nor should
it or any part of it form the basis of, or be relied on in
connection with, any contract or commitment whatsoever which may at
any time be entered into by the recipient or any other person, nor
does it constitute an invitation or inducement to engage in
investment activity under Section 21 of the Financial Services and
Markets Act 2000 (FSMA). This document does not constitute an
invitation to effect any transaction with the Company or to make
use of any services provided by the Company. Past performance
cannot be relied on as a guide to future performance.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
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of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR UGUQURUPRGWP
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