Specialty insurer and reinsurer Brit has reported an improved underwriting result for the full year 2019 while its return on invested assets also spiked, contributing to pre-tax profit of $186.3 million, compared with a loss of $190.3 million for 2018.
Brit’s underwriting result totalled $68.4 million for 2019, which represents a significant improvement on the $56.9 million underwriting loss reported in the prior year.
The combined ratio strengthened from 103.3% in 2018 to 95.8% in 2019, which the firm says reflects an attritional loss ratio of 55% (57.2% in 2018) and a major loss ratio of 3.6% (12% in 2018). Brit recorded catastrophe losses, before reinstatements, of $58.4 million in 2019, which is a meaningful reduction on the $196.8 million recorded a year earlier.
Discussing its underwriting experience in the year, and Brit states that the market continued to benefit from the strengthening of premiums rates throughout the year. Overall, Brit achieved risk adjusted rate increases of 5.9% in the year versus 3.7% in 2018.
Overall, Brit’s premiums grew by 2.4% to $2.3 billion in the year, with a slight decline in Global Specialty Direct to $1.7 billion, more than offset by 19% premium growth in Global Specialty Reinsurance and 44% growth in Other underwriting.
Brit also experienced some favourable prior year reserve development, although at a lower rate than what it witnessed in 2018. Brit says that this resulted in a year-end of reduction of $30 million.
Net earned premiums increased by almost 12% across the Group to $1.64 billion, with direct business increasing by 6.4%, reinsurance business by almost 16%, and other underwriting by almost 115%.
Matthew Wilson, Group Chief Executive Officer (CEO) of Brit, commented: “I am pleased to report a return to profit for Brit, with our underwriting performance and investment return delivering a strong 2019 result, with a profit before tax of US$186.3m and a combined ratio of 95.8%. Given the ongoing market environment, I believe this is an encouraging set of results reflecting our clear strategy, which is focused on leadership, innovation and distribution, and the talent and commitment of our people.
“2019 has undoubtedly had its challenges for the industry, on the back of the difficult prior two years. Claims experience has again been impacted by significant major loss activity, an increasing impact from small and medium loss events, and continued pressures on attritional loss ratios.
“The industry has also witnessed the increasing effects of social inflation, climate change and other socio-economic factors. Despite this, we reported an improved underwriting result which reflected the combination of rate increases, a healthy attritional ratio, a reduced level of major losses and an unbroken record of reserve releases since we started disclosing them 16 years ago.”
At $186.3 million, Brit’s pre-tax profit is the highest the firm has recorded over the last five years, and was helped in 2019 by a return on invested assets, net of fees, of $148.1 million. In contrast, Brit saw its invested assets produce a negative return in 2018 of $82.1 million, a year when the underwriting performance also suffered and turned negative for the specialty re/insurer.
“We have seen positive insurance market developments in the year, such as rate increases and capacity withdrawals, which will provide us with further opportunities in 2020. However, the market continues to face significant challenges such as the frequency and magnitude of major and medium loss events, attritional ratio pressures, expense levels and political and economic uncertainty. Our strategy and discipline position us well in this environment.
“I believe our plans for 2020, underpinned by our wider strategy and discipline, position us well to maximise opportunities as they arise and allow us face the future with optimism,” said Mark Allan, Group Chief Financial Officer (CFO) of Brit.