Global specialty re/insurer Brit Limited has posted a loss after tax of $166.5 million for full-year 2018, driven primarily by $196.8 million of natural catastrophe losses.
These included $98.6 million of losses from the California wildfires, $56.3 million from Hurricane Michael, $27.1 million from Hurricane Florence, $26.0 million from Typhoon Jebi, and $7.0 million from Typhoon Mangkhut.
Brit said that it benefited from the protection of its reinsurance program, which it spent an additional $230.5 million on in 2018, although the higher level protections that were triggered in 2017 were not utilised in 2018 due to the comparatively smaller scale of the catastrophe events.
In total, major losses contributed 12.0 percentage points to Brit’s 2018 combined ratio of 103.3% (compared with 112.4% in 2017), against a long-term expected average of 3.9%.
Brit increased its gross written premium by 8.9% to $2.24 billion in 2018, with direct business increasing by 5.0% to $1.76 billion and reinsurance increasing by 17.8% to $451.7 million.
In contrast, the company’s overall net earned premium (NEP) decreased by 4.8% to $1.47 billion in 2018 ($1.54 billion in 2017), although the reinsurance segment grew its NEP by 11.9% to $333.2 million ($297.8 million in 2017).
The company’s reinsurance expenditure in 2018 was $756.7 million (or 33.8% of gross written premiums), compared with $526.2 million in 2017 (or 25.6% of GWP).
This increase primarily reflected a loss portfolio reinsurance contract with Fairfax’s RiverStone Managing Agency, under which Brit ceded its Non-US PI, 2014 and prior EL UK/PL UK and legacy books of business for a premium of $186.3 million.
2018 also marked the first time in five years that Brit experienced overall rate increases, but with increases of 3.7% on average, rates remained lower than anticipated following the 2017 major loss events.
Rates for direct business increased by an average of 3.8% and by 3.0% for reinsurance, with the main drivers being property, political risks and violence, marine, energy, aviation, specialty liability, BGSB, specialty lines, and BGSU casualty.
“Brit generated strong premium growth in 2018, against a backdrop of improving rates, whilst taking decisive action in underperforming areas,” said Matthew Wilson, Group Chief Executive Officer (CEO) at Brit. “Premiums written increased by 8.0% through the expansion of our US operations and growth in classes where we have a strong track record.
“During 2018 both insurance and investment market conditions remained challenging, with catastrophe events and unrealised losses on equities and funds heavily impacting our results,” he continued.
“Despite this, our results reflect our ability to maintain strong underwriting discipline while continuing to deliver selective growth, particularly through our BGSU and third-party capital platforms. We therefore enter 2019 with premium rates trending upwards and believe we are well positioned to benefit from this improving environment.”
Brit also suffered from volatility in the investment markets, seeing a negative return of $82.1 million on its invested assets in 2018, compared with a positive return of $204.2 million in 2017.
“2018 was another difficult year for the market, with investment conditions compounding losses from major catastrophe activity,” added Mark Allan, Group Chief Financial Officer at Brit.
“Brit’s result for the year ended 31 December 2018 reflects significant claims from major loss activity and volatile investment markets resulting in significant unrealised losses on equity holdings, offset by a solid attritional loss ratio performance and strong prior year reserve releases,” he explained.
“Despite these pressures, our business model has proved resilient and we enter 2019 with a very strong capital position, having again demonstrated our ability to meet our commitments to clients in their time of need.”
