By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Bahamas First's executive chairman has pledged to make "strategic changes" after the insurer's 2023 full-year profit slumped by 63.1 percent due primarily to "ongoing issues" with its Cayman health business.

Alison Treco, who has taken charge of the property and casualty underwriter's daily operations following the retirement of group chief executive, Patrick Ward, signalled that there are several issues she is seeking to put right in her shareholder report on the unaudited results for the 12 months to end-December 2023.

"As executive chair, I am currently overseeing the group’s operations as we look to make some strategic changes aimed at improving operational efficiency and, ultimately, the overall performance of the group," Ms Treco wrote.

"The overall performance for the group for 2023 was a comprehensive income of $6m, which was 14.9 percent ($1m) below the prior year. The group’s profit for the year was $1.6m, down 63.1 percent from the prior year’s result of $4.4m.

"The profit for the property and casualty segments for the year ended December 31, 2023, was $6.5m, a 4.5 percent increase from the prior year. Unfortunately, the group’s result was impacted by the ongoing issues with the health segment, which incurred a loss in 2023 of $4.9m compared to a loss in 2022 of $1.8m."

Bahamas First's Cayman subsidiary has been plagued with problems stemming from delays in processing claims as a result of introducing a new information technology (IT) system. Ms Treco conceded this had resulted in "a loss of business", with the improvements and corrections made unlikely to be fully felt until Bahamas First's 2025 financial year.

"For the year ended December 31, 2023, Cayman First Insurance Company’s health unit saw a 12.9 percent decline in gross written premium compared to 2022. The loss of business resulted from the issues with claims payments in 2023 arising from the implementation of the new IT system," Ms Treco affirmed.

"In 2023, the health operation also experienced an increase in costs as Cayman First sought to remediate the issues and this, combined with the lower premium level, resulted in a higher loss on the segment than prior year.

"The loss ratio did not deteriorate when compared to the prior year but is still unacceptably high. Cayman First is implementing the necessary adjustments to pricing to improve the loss ratio but this will not impact financial results until late 2024 and into 2025," the Bahamas First executive chair added.

"In the last quarter of 2023, Cayman First engaged a new chief executive and vice-president of health with the immediate goal of stabilising operations. This has resulted in a significant improvement in the claims turnaround time to within regulatory guidelines.

"There are some claims legacy issues that are still being worked through. As we continue to remediate the issues in 2024, the health unit is expected to incur costs over and above the expected operational norms."

Meanwhile, Ms Treco warned that the 'hard' reinsurance market means Bahamas First's local business and homeowner clients will not see any relief from high property and casualty insurance premiums in the near future.

"The reinsurance capacity for property and catastrophe insurance remains limited entering 2024, and the restricted capacity also comes with a cost as reinsurers are requiring premium increases," she explained.

"As a result, the increase in reinsurance costs has had a significant impact on our customers’ rates and is unlikely to reduce in the near future. The lack of catastrophe claim events and resulting increase in profit commission from reinsurance contracts contributed to the improved profit over prior year."

Focusing solely on Bahamas First's fourth quarter results for the three months ended December 31, 2023, Ms Treco added: "For the three months ended December 31, 2023, the group reported a total comprehensive income of $6.8m which was 11.4 percent ($0.9m) below the 2022 fourth quarter.

"The group’s profit for the fourth quarter was $3.3m, which was 34.1 percent lower than the prior year despite higher insurance revenue, which was offset by higher operating expenses. Prior year profit was also aided by revaluation gains on building revaluation of $0.8m within investment and other income.

"As in the previous year, the seasonal nature of earning premium and commission is significantly weighted to the fourth quarter, resulting in a higher profit in the fourth quarter than the total profit for the year."