Specialty insurer Brit has reported a return to underwriting profitability for 2021 and produced its strongest result for five years, with a gain of $90.6 million compared with a loss of over $217 million in 2020, as the combined ratio strengthened to 95.7%.
As well as a stronger underwriting performance, Brit has reported gross written premium growth to $3.2 billion, net written premium growth to $2 billion, and growth in net earned premium to $1.8 billion.
Premium growth was evident across London Market Direct, London Market Reinsurance, Overseas Distribution and other underwriting, while the volume of discontinued underwriting declined significantly.
Given its exposures, Brit also purchases reinsurance and during 2021, its reinsurance expense increased to 38.3% of GWP to $1.24 billion, which is a year-on-year increase of more than $591 million.
Brit attributes the higher cost mainly to a loss portfolio reinsurance contract with RiverStone Managing Agency Limited. Excluding this arrangement, and the firm’s reinsurance spend would have increased by $247.1 million, driven by the impact on higher premium levels on adjustable excess of loss contracts and proportional reinsurance treaties, a new XL contract supported by the Brit-sponsored Cat Bond issued in late 2020 by a segregated cell of Sussex UK, additional Cyber protections and the reinsurance programme for Ki.
During 2021, Brit’s operating result was hit by a number of catastrophe events and also the COVID-19 pandemic. Overall, major losses amounted to $324.4 million in 2021, or 15.5% of the combined ratio, compared with $404.8 million, or 23.7% in 2020.
Of the major loss total, some $200.5 million is attributable to Hurricane Ida, $77.7 million to Texas winter storms, and $18 million to the European floods in July. Additionally, the firm booked COVID-19 losses of $28.2 million in 2021, although this is far lower than the $271.4 million of pandemic losses recorded in 2020.
Brit reports that despite the losses, underwriting contributed $90.6 million to its 2021 result, as the firm produced a combined ratio of 95.7%, compared with 112.7% in 2020.
All in all, the specialty insurer has recorded a profit of $236.9 million for 2021, against a loss of $232 million in the prior year.
The company’s interim Group Chief Executive Officer (CEO), Martin Thompson, commented: “In early October I was asked to step into Brit as Interim CEO, following the announcement that Matthew Wilson was to take a leave of absence due to health reasons. All of us at Brit and Fairfax wish Matthew well and look forward to his return.
“I am pleased to report a positive 2021 for Brit, with our underwriting performance and investment return delivering a strong overall result. Underpinning this performance was continued successful execution against our strategy of Leadership, Innovation and Distribution, with the progression of our business testament to the dedication of our people and the unique culture Matthew and his team have created at Brit.
“Our clear strategy saw us deliver a combined ratio for the year of 95.7%. This reflected the combination of an excellent attritional ratio, prior year reserve releases and increased income from our third party capital management and MGA businesses. That we delivered this performance despite exposure to a number of major loss events and the continued impact of COVID-19 was particularly encouraging, demonstrating the increased resilience of our business and our firm focus on disciplined underwriting.
“As well as delivering a good underwriting result, we grew our written premium by 31.8% to $3,238.3m. This reflects strong, targeted growth in our core direct and reinsurance books, and a very successful first year of trading for Ki.
“Championing the potential of data and technology is central to Brit’s future success. Ki is an embodiment of this, but we also made strong progress across the whole of Brit in delivering on our innovation agenda. This includes significant milestones in how we use technology in Claims, investment in how we use data to empower our lead underwriters and, in January 2022, the appointments of a Chief Technology Officer and a Chief Data Officer.
“Looking ahead to 2022, while uncertainty remains around COVID-19, rising inflation and the potential of increased frequency and severity of major loss events, we remain optimistic. Ongoing rate rises, continued improvement in our attritional claims ratio and our clear strategy give us confidence that Brit is well placed to respond to the opportunities and challenges ahead.”
