TIDM32OW
RNS Number : 6177H
Brit Limited
02 August 2019
Brit Limited
PRESS RELEASE
2 August 2019
interim results for the six months ended 30 june 2019
A STRONG result in aN IMPROVING environment
Key points
-- Gross written premiums of US$1,210.5m (H1 2018: US$1,150.8m),
a 5.2% increase (6.5% at constant FX rates).
-- Premium rate increases of 4.3% (H1 2018: increases of 3.5%).
-- Net earned premium(1) of US$804.9m (H1 2018: US$783.5m), an
increase of 4.2% at constant FX rates.
-- Positive underwriting result with a combined ratio(1,2) of 94.4% (H1 2018: 95.9%).
-- No material change in overall net major loss estimates for 2017 and 2018 events.
-- Profit on ordinary activities before the impact of FX and tax
of US$127.1m (H1 2018: US$17.9m).
-- Profit after tax of US$120.3m (H1 2018: US$12.9m).
-- Solid investment return(3) after fees of US$94.7m,
representing a non-annualised return of 2.4% (H1 2018:
US$5.1m/0.1%).
-- RoNTA(4) (non-annualised) of 12.6% (H1 2018: 2.3%) and total
value created of US$122.2m (H1 2018: US$2.0m).
-- Adjusted net tangible assets(5) of US$1,083.4m (31 December 2018: US$992.9m).
-- Continued implementation of our strategy, including:
o Brit managed third party capacity on Sussex, Versutus II and
Syndicate 2988, expanded to over US$440m for 2019 (2018:
US$400m);
o Completed the acquisition of Ambridge Partners LLP, one of the
world's leading MGUs of complex risks, based in New York; and
o Significant strategic investment in Sutton Special Risk Inc.,
a leading Toronto based MGU specialising in Accident & Health
business.
Matthew Wilson, Group Chief Executive Officer of Brit Limited,
commented:
'I am pleased to report a positive first half of 2019 for Brit,
with underwriting performance and investment return delivering a
strong result. We also continued to successfully execute against
our clear, progressive, strategy further building on our
underwriting discipline, leadership positions and international
distribution footprint.
2019 has continued to deliver positive risk adjusted premium
rate increases, with the period achieving 4.3%, building on the
2018 positive movement of 3.5%. However, these increases, whilst
welcome, are primarily focused on areas impacted by the major
losses experienced in 2017 and 2018, and the market in other areas
remains challenging. We have continued to take action to protect
our balance sheet and maintained our rigorous risk selection
criteria in marginal classes.
Against this backdrop, our strategy delivered a respectable
combined ratio for the period of 94.4%. This reflected the
combination of a healthy attritional ratio, an absence of major
losses and increased income from our third party capital management
and MGA businesses. It was particularly pleasing that against the
backdrop of major catastrophe loss creep for the market, there was
no material change to our overall net 2017 and 2018 major loss
position.
Our premium written grew by 6.5% at constant exchange rates, to
US$1,210.5m. We have continued to see an increased contribution
from our strategic initiatives of recent years, especially from our
US platform, as we continue to expand our international
distribution capability. We have also expanded our core book,
reflecting improved market conditions and targeted growth across
our treaty portfolio and selected direct classes, partly offset by
planned contractions across a number of challenged classes. The
growth in our reinsurance book was particularly pleasing, where our
highly respected teams have a strong track record.
In the period, we continued to invest in businesses with a
strong track record in both distribution and underwriting. We
completed our acquisition of Ambridge Partners LLC, one of the
world's leading managing general underwriters of complex risks and
a key trading partner of Brit for the past thirteen years.
Ambridge, which is based in New York, London and Frankfurt, will
retain its independence and will continue to underwrite on behalf
of its existing broad Brit-led consortium of Lloyd's syndicates and
international insurers. We also made a significant strategic
investment in Sutton Special Risk Inc (Sutton), a leading Toronto
based MGU, which specialises in Accident & Health business and
underwrites on behalf of a broad panel of Lloyd's syndicates and
international carriers. Our investment offers attractive exposure
to a fast-growing and profitable MGU with a strong presence in
Canada and the United States.
For 2019, Brit's total managed capacity across Versutus, Sussex
Capital and Syndicate 2988 has increased to US$440m. The renewal
and expansion of our ILS capacity, alongside the growth in planned
gross written premium for Syndicate 2988, continues our successful
strategy of managing capital for third parties by offering access
to Brit's leading underwriting capabilities, deep client
relationships and extensive distribution network.
We continue to expand our underwriting capabilities selectively
to position the business for the future. Following significant
research and development, we successfully launched our e-trading
portal, initially focussing on US Cyber business. This initiative
presents Brit with the opportunity to access business previously
not available to the London Market, the ability to reduce expenses
significantly and the potential to grow our most profitable
segments, working with our distribution partners.
We have also made a number of important senior appointments,
including a Head of Innovation who will manage the innovation
process and position Brit as one of the most forward thinking,
progressive and innovative businesses, 'writing the future' of the
London Market.
In May, Lloyd's launched a vision for its future. Brit is fully
supportive of these initiatives and has seconded subject matter
experts to the various workstreams and is engaged at an executive
level. We have also appointed a Head of Strategy to help develop,
manage and implement our engagement with, and response to, the
initiatives.
We have continued to focus on our client service capabilities
and development of a best-in-class claims service. We have entered
into a new partnership with the Geospatial Intelligence Center, to
provide us with industry-leading aerial images of event-affected
areas which will allow us to make rapid and accurate property
catastrophe assessments, allowing us to expedite claim settlements
for our clients when they need it most.
Looking ahead, a number of indicators give us cause for
optimism, including rate increases, the withdrawal of some capacity
and the measures taken by Lloyd's to improve market performance.
However, conditions remain challenging in a number of areas, with
lower than anticipated rate increases in some sectors and some
heightened claims activity on more recent years. In this
environment, our clear strategy of embracing data driven
underwriting discipline, and rigorous risk selection; coupled with
innovative capital management solutions and continued investment in
distribution, uniquely positions us to respond to the opportunities
and challenges of today's market.'
Mark Allan, Group Chief Financial Officer of Brit Limited,
said:
'During the first half of 2019, Brit delivered a profit on
ordinary activities before FX and tax of US$127.1m and a profit
after tax of US$120.3m. After a challenging period, it is pleasing
to report a strong first half result, reflecting the continued
commitment of all our staff.
Underwriting contributed US$43.5m to the result, with a combined
ratio of 94.4%. This reflected an attritional ratio of 56.0% and an
absence of major loss activity. 2017 and 2018 have proved to be
challenging years, with a number of early large and attritional
losses occurring in addition to the catastrophes in those years.
However, we have seen more benign claims activity on older years
continue with 2016 and prior showing releases, to result in an
overall US$1.9m reserve release. We have again purchased additional
catastrophe protections, positioning us well for the remainder of
2019.
Our investment return was US$94.7m (net of fees), a
non-annualised return of 2.4%. This was driven by the strong
performance of our equity portfolio, which recovered the losses
experienced in late 2018, as markets rebounded. Our cash and fixed
income portfolio also generated positive income and capital
returns, as yields fell substantially.
In the period, we have continued to benefit from the growth of
our third party capital vehicles and from our investment in MGAs.
Working with our capital and distribution partners is an important
part of Brit's strategy, that will enhance our leadership position
and assist Brit in managing its expense base and strengthen our
client proposition.
The ILS market is going through a transitional period on the
back of 2017 and 2018, with market loss activity highlighting
different strategies, risk profiles and performance. We believe
that alignment is critical, and Brit is well positioned to provide
attractive access to our partners with clear alignment in all of
our third party capital vehicles.
Our balance sheet remains strong, with adjusted net tangible
assets increasing to US$1,083.4m (31 December 2018: US$992.9m),
after capital contributions, dividends paid and the impact of the
Ambridge acquisition. As a result, we hold a surplus of US$338.2m
or 29.1% over the Group's management capital requirement. During
the period, our capital requirements increased from US$1,081.1m to
US$1,163.2m, primarily reflecting movements in interest rates.
Our investment portfolio remains consistent with our position
throughout 2018, with a large allocation to cash and cash
equivalents (US$572.7m or 14.4%) and fixed income securities
(US$2,750.8m or 69.3%). Brit's equity allocation stands at
US$616.2m or 15.5%. At 30 June 2018, 81.0% of our invested assets
were investment grade and the duration of the portfolio was 0.8
years. There is much uncertainty in the current market outlook,
with strong fundamentals contrasting with many macroeconomic and
political risks. We are well positioned to continue to benefit from
the positive economic environment in the US.
While we have seen some positive market developments in the
period, conditions remain challenging in a number of areas. We also
continue to face political and economic uncertainty and challenges.
The second half of 2019 is likely to experience weakening GDP
growth, with heightened tension around international trade
supported by loose monetary policy. However, our strategy and
discipline position us well in this environment.'
Notes
1 Excludes the effect of foreign exchange on non-monetary items.
2 Excludes amount attributable to third party underwriting capital providers.
3 Inclusive of return on investment related derivatives, return on associates
and after deducting investment management expenses and third party share
of investment return.
4 RoNTA calculation excludes all FX movements. Based on adjusted net
tangible assets (footnote 5).
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 2019 Interim Report
Brit Limited's 2019 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 2019, published on 1 August 2019, 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
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
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