Brit makes strong comeback after challenging years

Brit Limited has bounced back delivering a profit before tax of US$186.3m (approximately £127.6m) in its financial results for the year ended 31 December, 2019.

The (re)insurance group said this was due to improving market conditions.

It follows two difficult previous years and a substantial loss in 2018.

Matthew Wilson, group chief executive officer at Brit Limited said that the results reflects its “clear strategy, which is focussed on leadership, innovation and distribution and the talent and commitment of our people”.

It reported a strong underwriting performance of US$68.4m (£52.48m) which Wilson said reflected its combination of rate increases, a healthy attritional ratio, a reduced level of major losses and unbroken record of reserve releases since it started disclosing them 16 years ago.

Meanwhile profit after tax was US$179.9m (£137.8m); and its gross written premium climbed 2.4% to US$2.3bn (£1.8bn) compared to 2018 which was US$2,239.1m.

Combined ratio was 95.8% compared to 2018 which was 103.3% including 3.6

Wilson added: “2019 has undoubtedly had its challenges for the industry, on the back of the difficult prior two years. Claims experience has again been impacted by significant major loss activity, an increasing impact from small and medium loss events, and continued pressures on attritional loss ratios.”

Brit has continued the implementation of its strategy with its managed third-party capacity on Sussex, Versutus II and Syndicate 2988 growing to US$440m (£337.60m). As well as completing the acquisition of Ambridge Partners LLP – a New York based managing general underwriter of complex risks. It has also made significant strategic investments in Sutton Special Risk Inc – a Toronto based MGU.

Challenging classes

But he added: “Where classes remained challenging, we continued to take decisive action to protect our balance sheet by discontinuing those business lines.”

In 2019 Brit withdrew from certain classes written in the US and Latin America and took the decision to withdraw from the Lloyd’s Singapore Platform as well as the Lloyd’s China Platform.

“This streamlining provides added focus to our core markets and products, where we see the most potential to further develop our leadership positions. We strive to provide direction and leadership within our business and to our industry. We are supportive of the Future at Lloyd’s Blueprint and are proud to have worked with Lloyd’s to be the first Lloyd’s Syndicate to use ILS capacity to back our capital at Lloyd’s, a landmark achievement,” Wilson said.

Risk adjusted premium rate increases in 2019 were 5.9%, building on 2018’s positive movement of 3.7%.

Its premium written grew by 3.4% at constant exchange rates, to US$2,293.5m.

Brit has expanded its core book, reflecting improved market conditions and targeted growth across its treaty portfolio and selected direct classes.

Wilson said that this was “partly offset by planned contractions across a number of challenged classes”.

Losses contained

Mark Allan, group chief financial officer at Brit Limited said: “2019 saw another year of windstorm event causing damage in the US and Japan. Our balanced underwriting approach meant our losses were contained within expectations for the year.”

The wider market and Brit had challenging years in 2017 and 2018 with a number of early large losses and attritional pressure occurring in addition to significant to catastrophes in those years.

“However, we have seen more benign claims activity on older years, with 2016 and prior showing releases, resulting in an overall US$47.9m reserve release, equivalent to a 2.9pps reduction in the combined ratio. It was particularly pleasing that despite major catastrophe loss creep for the market, there was no material change to our overall net 2017 and 2018 major loss position,” Allan added.

However, it has also seen a healthy contribution from its third-party capital vehicles and from its investment in MGAs.

Allan said that this was an important part of Brit’s strategy.

Meanwhile its invested assets were 81.1% of its investment grade and the duration of the portfolio was 1.1 years.

“The low yield environment remains challenging and there continues to be 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,” Allan said.

Future

Wilson, said: “Looking ahead, a number of indicators give us increased cause for optimism, including continuing rate increases, the withdrawal of market capacity from certain business lines and the measures taken by Lloyd’s to improve market competitiveness as highlighted in their ‘Blueprint One’.

“Whilst the market is not without its challenges, our clear strategy of embracing data driven underwriting discipline and applying rigorous risk selection, coupled with innovative capital management solutions and continued investment in distribution, uniquely positions us to respond to today’s opportunities and challenges.”

He said that Brit continues to face political and economic uncertainty as well as challenges.

“2019 saw continued volatility in financial markets and experienced weakening growth, recession fears, falling yields, heightened tension around international trade and loose monetary policy. These trends show no signs of abating as we go into 2020 and the resulting outlook for the investment market continues to be challenging,” Wilson added.

Allan said he believes its plans for 2020, underpinned by its wider strategy and discipline, position Brit well to maximise opportunities as they arise and allow it to face the future with optimism.