Property value boost drives insurer’s 39% profit increase


Tribune Business Editor

A $3.2m gain from revaluing its property assets enabled Bahamas First to shrug off a decline in its core insurance underwriting business and post a 39 percent total comprehensive income increase for the 2022 full-year.

The property and casualty insurer, unveiling its unaudited financials for the 12 months to end-December 2022, revealed that underwriting income fell by more than $3.5m or 11 percent year-over-year to $29.404m compared to $33.031m the prior year.

Patrick Ward, the BISX-listed carrier’s president and chief executive, said the “material dip” was caused in part by an increase in Bahamian motor vehicle accident claims as more motorists returned to the roads post-COVID. He also cited continuing issues with the company’s Cayman Islands health insurance portfolio that it is now moving to address.

And, while Bahamas First’s top-line gross written premiums rose by 7.3 percent in 2022 to $191.2m, Mr Ward bemoaned the fact this growth could have been higher but for reduced reinsurance capacity which prevented the underwriter from taking on more new business.

“The economic landscapes in both the Cayman Islands and The Bahamas were very much supportive of business development endeavours but constrained somewhat by a lack of reinsurance capacity for catastrophe property damage covers, in particular,” Mr Ward told Bahamas First shareholders. “During the fourth quarter of 2022, we booked gross income of $42.7m, which is 0.9 percent above the premium levels achieved during the same period in 2021.

“Based on the level of GDP improvement in our operating jurisdictions, we believe that the top-line performance for the current quarter and, indeed, the full year, would have been better if we were able to access additional capacity from the international reinsurance markets during the year. For reasons previously identified, this was not possible. However, because it was a market-wide problem, we did not find ourselves at a competitive disadvantage.

“As foreshadowed in the preceding quarter, the negotiations for our reinsurance contracts for 2023 proved to be especially challenging. The combination of regional and global factors that led to this scenario will likely persist for the next 12 months and possibly longer. We were able, nevertheless, to successfully place all of our reinsurance contracts for 2023 at the best terms available in what has been described as a once-in-a-generation renewal cycle.”

Analysing Bahamas First’s performance, Mr Ward added: “The full-year top line grew to $191.2m, which exceeds the prior year total of $178.2m by 7.3 percent. The property and casualty and health business segments registered growth in both jurisdictions, with the health segment leading the way with a robust year-over-year increase in premium.

“Overall net underwriting income, however, saw a material dip, compared to the prior year, finishing at $29.4m compared to $33m in 2021. The motor portfolio in The Bahamas experienced a reduction in underwriting profitability due mainly to a return to more normal frequency and severity of damage claims, and prior year adverse loss development. Additionally, the Cayman health business continued to perform below our expectations.”

Focusing on the issues in the Cayman Islands, the Bahamas First chief said: “The roll-out of new technology and connected systems, together with a change in key personnel within the health segment, has caused a number of operational challenges for our Cayman subsidiary, leading to negative market perceptions about the company’s ability to fulfill its obligations to policyholders.

“The Board and management are focused on the remedial actions that are required to resolve these issues, and to ensure that the benefits of the new systems are experienced by our clients in that market in the shortest possible timeframe.”

Breaking its business down into segments, Bahamas First’s Bahamian property and casualty business saw profits fall by $770,000 year-over-year, declining by 16 percent from $4.796m to $4.025m. However, this was largely compensated for by its Cayman equivalent, which increased to $3.163m from $1.975m in 2021 - a rise that offset losses on the health side, which rose to $1.546m from $1.149m.

Turning to a mixed investments outcome, Mr Ward added: “The investment returns for the year represent a mixed bag of results, with our equity holding in Commonwealth Bank showing improvement, while our fixed income investments posted an unrealised loss.

“The Commonwealth Bank share price increased by 18 percent during 2022, which resulted in increases in the unrealised gain. However, these were offset by the decrease in unrealised gain when we sold a portion of our holdings. Consequently, we experienced a net increase in unrealised loss of $0.3m while posting a realised gain included in other income of $2m during the year.

“Our global bond portfolio has reported an unrealised loss of $1.5m due to market factors. This was offset by an unrealised gain of $3.2m on revaluation of our land and buildings.” It is unclear where this property revaluation gain was booked, but Bahamas First’s “other net income” more than doubled, growing by 155.6 percent from $1.6m to $4.091m.

And the carrier also enjoyed a positive $1.838m reversal on its other comprehensive income, which stood at $982,357 for the 2022 full-year compared to an $855,618 loss the year before. “We saw a sharp rise in comprehensive income in the current quarter, amounting to $7.1m compared to $5.8m in the fourth quarter of 2021,” Mr Ward wrote. The revaluation of our land and buildings in the fourth quarter was the largest contributor to this result.

The Group’s comprehensive income for 2022 is $6.6m, compared to $4.8m in 2021..... Despite the difficult reinsurance market conditions and our continued dependence on this vital component of our business, we are encouraged by the bright economic outlook in both The Bahamas and The Cayman Islands, which should provide an impetus for improved results in 2023.”

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