By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

RoyalStar Assurance saw its 2016 profits decline by 72.8 per cent year-over-year due to Hurricane Matthew, with drove a more than-$4 million increase in net claims after reinsurance payouts.

The property and casualty insurance underwriter saw net income drop from $3.712 million to $1.009 million, as net claims jumped 80.8 per cent to $9.71 million.

This was the main factor that drove a 63 per cent increase in RoyalStar’s direct expenses, which increased year-over-year from $9.959 million to $16.237 million.

Its 2016 results, released late yesterday afternoon, showed that RoyalStar’s underwriting gain fell by 35 per cent, declining from $7.987 million to $5.187 million, due to Matthew-related claims and the subsequent increase in claims.

While operating expenses were flat compared to 2015, standing at $5.278 million, RoyalStar also saw other income decline by around 50 per cent due to a negative valuation adjustment associated with its income properties.

The insurer, though, did record a $470,607 boost after its 19 per cent equity interest in Luxury Homes (Bahamas), the real estate holding company that owns a 100-acre plus tract opposite St Andrew’s School at Yamacraw, was converted into an ‘investment in associate’.

The conversion, according to RoyalStar’s financial statements, occurred after one of its directors was appointed to Luxury Homes (Bahamas) Board in 2016, thus giving it “significant influence over this entity”.

Luxury Homes (Bahamas) other shareholder is Arawak Homes, an affiliate of Sunshine Holdings, which holds most of the equity in RoyalStar’s 53.05 per cent majority shareholder, RoyalStar Holdings.

The financials also reveal that RoyalStar and the other shareholders have agreed “to contribute towards the repayment” of a $7 million CIBC FirstCaribbean loan taken out by Luxury Homes (Bahamas) in 2005, spending $82,322 on this last year.

RoyalStar also contributed $5.25 million towards the capitalisation of Gateway Financial, the mortgage restructuring business set up by Sunshine Holdings last year, and which purchased a portfolio of delinquent loans from Scotiabank (Bahamas).

The insurance underwriter invested $2.75 million into a Gateway Financial bond issue paying 6.75 per cent interest, and maturing in 2019. A further $2.5 million was injected into another bond tranche, this one paying 6.5 per cent and maturing in 2020.

The financial statements also disclose that $1 million was invested in a Sunshine Holdings bond issue held last year.

RoyalStar’s bottom line performance almost exactly matches that of its Bahamas First rival, which saw total comprehensive income for 2016 decline by 72 per cent due to the net claims increase stemming from Hurricane Matthew.

Like its competitor, RoyalStar is likely content to have ‘weathered the storm’ by remaining profitable, meeting all claims demands and staying solvent, with net equity closing 2016 just above $43 million.