2017 Half Year Report




Key points 

  • Gross written premiums of US$1,092.5m (2016: US$1,030.6m), an increase of 6.0% (7.9% at constant exchange rates).
  • Net earned premium1 of US$740.7m (2016: US$751.8m), an increase of 0.6% at constant exchange rates.
  • Combined ratio1 of 95.1% (2016: 96.5%), with no major loss activity (2016: 4.0 percentage points of major losses) but with further rate decreases. Combined ratio1, excluding the impact of Ogden2, of 93.3%.
  • Profit on ordinary activities before the impact of FX and tax of US$143.8m (2016: US$189.6m), or US$156.9m excluding the impact of Ogden2.
  • Profit after tax of US$139.7m (2016: US$197.6m).
  • Investment return3 after fees of US$126.3m, representing a non-annualised return of 3.2% (2016: US$182.0m/4.6%).
  • RoNTA4 (non-annualised) of 12.6% (2016: 16.1%) and total value created of US$142.2m (2016: US$192.8m).
  • Adjusted net tangible assets5 increased to US$1,161.2m (31 December 2016: US$1,064.8m), after a dividend payment of US$45.8m in March 2017.
  • Continued execution of strategy to deliver opportunity-driven profitable growth, with considered expansion in a number of areas of our book including cyber, US program business and yachts and the launch of a number of initiatives across both underwriting and claims.
  • Successful launch of Syndicate 2988, supported by third party capital. 

Mark Cloutier, Group Executive Chairman of Brit Limited, said:

‘Brit has delivered a strong performance in the first half of 2017. Our non-annualised return on adjusted net tangible assets before FX, which we see as a key indicator of our performance, was 12.6%. This was driven by the combination of a healthy contribution from underwriting results, notwithstanding very challenging market conditions, and an excellent performance from our investment portfolio. It is very pleasing to see the continued profitable growth of the new underwriting initiatives launched in recent years.

Producing strong results in the current environment demands a great deal of concentration and discipline and, in that regard, we have continued to focus on our core fundamentals of leadership, innovation and distribution and have maintained our strategy of remaining well diversified while adopting a defensive stance to protect our business and preserve capital.

We believe that our performance shows that we have the right operating model, underwriting approach and corporate culture, to not only operate successfully through the current difficult market conditions but to also be ready to take full advantage of emerging opportunities when trading conditions begin to improve, as the results of the current lack of market discipline starts to bite hard on sector results.’

Matthew Wilson, Group Chief Executive Officer of Brit Limited, commented:

‘Market conditions have, as expected, remained difficult during the first half of 2017, with Brit experiencing an overall rate reduction of 2.2%, albeit lower than the 3.7% reduction experienced in H1 2016. Against this backdrop, we have maintained our rigorous risk selection in the classes experiencing pressure and continue to focus growth efforts in classes experiencing more favourable rating conditions. This strategy, coupled with a relatively benign period in terms of major losses, resulted in a highly respectable combined ratio of 95.1%, after incorporating the effect of Ogden rate changes. Our underlying CoR, excluding the impact of Ogden, was 93.3%.

Our premium written grew by 7.9% at constant exchange rates over the same period in 2016, to US$1,092.5m. This was driven by positive back year premium development and our initiatives to broaden our distribution base. We continue to add specialty underwriting talent in targeted areas and in 2017 have strengthened our US program capability and launched a new US cyber and technology team.

In the period, it was particularly pleasing to see our US operation, BGSU, reach the milestone of writing over US$1bn of premium since its formation in 2009. BGSU has reached this milestone by delivering strong, profitable organic growth with a focus on niche areas where it has significant expertise and experience. Its average combined ratio since 2014 has been a highly credible 93%.

The successful launch of Brit Syndicate 2988 reinforces our long-term commitment to the Lloyd’s market and ambition to use its infrastructure to expand our current position as the largest Lloyd’s only insurer. It will also help us further position Brit as the specialist underwriter of choice, building on our existing strength across underwriting, claims and capital management and track record of delivering attractive returns for capital providers.

In the current environment, we believe our proactive approach and our emphasis on leadership, innovation and distribution is an important complement to our highly disciplined underwriting. We will continue to look at new opportunities as they arise and we believe our strategy will hold us in good stead during these challenging conditions and beyond.’

Mark Allan, Chief Financial Officer of Brit Limited, said: 

 ‘During the first half of 2017, Brit delivered a strong profit on ordinary activities before FX and tax of US$143.8m and a profit after tax of US$139.7m, against a backdrop of increasing competition and continued pricing pressures. Total value created during the period was US$142.2m. Both our underwriting and investing activities contributed to this strong performance.

Underwriting contributed US$42.4m to the result, with a combined ratio of 95.1%. This reflected a stable attritional ratio of 55.4%, reserve releases after incorporating the effects of the Ogden rate change of US$7.9m and an absence of major loss activity. Our net investment return was an excellent US$126.3m, representing a non-annualised return of 3.2%, driven by gains on our equity and fund investments. Foreign exchange gains, net of returns on FX related derivatives, totalled US$9.6m.

We have taken advantage of the competitive market conditions and have increased our level of reinsurance protections, with spend increasing from 26.5% to 29.6% of premiums written. We have continued to partner with the Bermuda domiciled special purpose reinsurer, Versutus Limited, which has increased the amount of capital deployed to support Brit to US$150.0m. We have also increased the use of quota shares to manage our net exposure and have purchased a two year catastrophe protection, which largely explains the increase in ceded premium in the period.

Our balance sheet remains strong, with adjusted net tangible assets of US$1,161.2m, an increase of 9.1% in the six months to 30 June 2017, after a dividend payment of US$45.8m in the period. This means that we hold a surplus of US$477.2m or 44.0% above the Group’s management capital requirement.

We continue to see positive development of our reserves, with releases of US$7.9m in the period, after the impact of Ogden.

Our investment portfolio remains defensively positioned, with a large allocation to cash and cash equivalents (30.6%) and fixed income securities (49.4%). The portfolio’s duration has fallen in the period, from 1.1 years to 0.6 years.

While the outlook for the remainder of 2017 remains challenging, we believe we are well positioned to navigate the current climate and take advantage of opportunities as they arise.’


1 Net earned premium and the combined ratio exclude the effect of foreign exchange on non-monetary items.
2 With effect from 20 March 2017, the Ogden discount rate was reduced from 2.5% to minus 0.75%. The Ogden discount rate is used in the calculation insurance compensation awards in the UK.
3 Investment return includes return on investment related derivatives, associated undertakings and is after deducting investment management fees.
4 RoNTA excludes foreign exchange movements and is based on adjusted net tangible assets.
5 Adjusted net tangible assets are defined as total equity, less intangible assets net of the deferred tax liability on those intangible assets.

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