Key points

  • Gross written premiums of US$1,150.8m (2017: US$1,092.5m), a 5.3% increase (3.3% at constant FX rates).
  • Premium rate increases of 3.5% (2017: decreases of 2.2%).
  • Net earned premium1 of US$783.5m (2017: US$740.7m), an increase of 3.4% at constant FX rates.
  • Strong underwriting result with a combined ratio1,2 of 95.9% (2017: 94.0%).
  • Profit on ordinary activities before the impact of FX and tax of US$17.9m (2017: US$143.8m).
  • Profit after tax of US$12.9m (2017: US$139.7m).
  • Investment return3 after fees of US$5.1m, representing a non-annualised return of 0.1% (2017: US$126.3m/3.2%).
  • RoNTA4 (non-annualised) of 2.3% (2017: 12.6%) and total value created of US$2.0m (2017: US$142.2m).
  • Adjusted net tangible assets5 of US$1,045.7m (31 December 2017: US$1,043.7m).
  • Brit managed capacity on new initiatives expanded to over US$400m for 2018, generating US$5.8m of fee income in the period, including:
    • Successful 1 January 2018 launch of Sussex Capital, the open-ended fund which writes through Sussex Re, providing direct collateralised reinsurance and collateralised reinsurance to Brit’s reinsurance portfolio.
    • Successful completion and expansion of the fourth annual Versutus Ltd Series Notes, offering continued access to Brit’s strong underwriting franchise. 
    • Syndicate 2988 stamp capacity expanded to £98.5m (c.US$130m) for 2018, now offering broader access to Brit’s extensive underwriting capabilities with over 20 lines of business.
  • Fairfax ownership of Brit increased from 72.51% to 88.04%

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

‘Following the major losses of 2017, we have achieved overall risk adjusted premium rate increases of 3.5% in the period, primarily driven by the loss affected Property, Treaty and Marine classes, in both our London and US portfolios. While these rate increases are welcomed, they are lower than initially anticipated as capacity continues to exceed demand and brokers move business to new carriers at current or reduced rates. In this challenging environment, we have continued to take action to protect our balance sheet, with the application of rigorous risk selection criteria in marginal classes and the decision to withdraw from certain classes such as International Professional Indemnity and General Aviation.

Against this backdrop, it was encouraging that our strategy delivered a combined ratio for the period of 95.9%. This reflected the combination of a healthy attritional ratio, continued back year reserve releases and an absence of major losses. The net impact of the 2017 major losses has remained unchanged in the period.

Our premium written grew by 3.3% at constant exchange rates over the same period in 2017, to US$1,150.8m. A number of factors contributed to this growth including the favourable development of prior year premiums and the impact of rate increases, partly offset by reductions in certain classes following the actions outlined above. It was again pleasing to see an increased contribution from our initiatives of recent years, including our US and Singapore platforms, as we continue to expand our international distribution capability.

For 2018, Brit’s total managed capacity across Versutus, Sussex Capital and Syndicate 2988 has exceeded US$400m. We successfully launched Sussex Capital in January 2018, the open-ended fund which writes through Sussex Re, providing direct collateralised reinsurance and collateralised reinsurance to Brit’s reinsurance portfolio. In February, we announced the fourth annual expansion of Versutus, which now has invested capital of US$187m, offering access to Brit’s strong underwriting franchise. In addition, Syndicate 2988, which was launched in 2017, has been expanded to a stamp capacity of £98.5m (c.US$130m) for 2018 and now offers broader access to Brit’s extensive underwriting capabilities with over 20 lines of business for 2018. These initiatives represent excellent progress as we continue to develop and enhance our capital markets participation.

We have continued to focus on advancing and resolving the open claims reported as a result of the 2017 catastrophes. In certain circumstances, resources have been recently redeployed to impacted areas to support our coverholders and fast-track claims resolution. Our brokers have commended us for our service excellence, including the expediting of claims payments wherever appropriate.

During the period we have also continued to selectively expand our underwriting and claims capabilities, predominantly in the US. This ongoing success in attracting high-quality talent is helping us expand our client offering while delivering sustainable, profitable growth and a best-in-class claims service.

While the rating environment in 2018 has been more positive, the outlook for the remainder of 2018 remains challenging. However, we continue to focus on our core fundamentals of underwriting discipline, risk selection and capital management. We have a clear strategy and have established a strong platform with a well-balanced business mix. This, supported by Fairfax as our parent, continues to position us well in the current rating and low yield environment.’

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

‘During the first half of 2018, Brit delivered a profit on ordinary activities before FX and tax of US$17.9m and a profit after tax of US$12.9m, against a backdrop of intense competition and volatile equity markets.

Underwriting contributed US$32.0m to the result, with a combined ratio of 95.9%. This reflected an attritional ratio of 56.5%, reserve releases of US$8.9m and an absence of major loss activity.

Our net investment return was US$5.1m. Fixed income provided a positive overall return with increased income on cash and bonds, offset by a limited amount of mark to market losses on the bonds due to our short duration positioning. This positive performance was partly offset by unrealised losses on some of our equity portfolio, reflecting volatile market conditions in the period.

In the period, we have benefited from the growth of our third party capital vehicles, generating US$5.8m of fee income. The generation of such underwriting-related income is an important part of Brit’s strategy and has the benefit of assisting Brit in managing its expense base and enhancing shareholder return.

We manage our currency exposures to mitigate their impact on solvency rather than to achieve a short-term impact on earnings. While we experienced a total foreign exchange loss of US$11.0m in the period, foreign exchange movements reduced our management capital requirements by US$27.4m, favourably impacting our solvency position.

Our balance sheet remains strong, with adjusted net tangible assets largely unchanged at US$1,045.7m (after capital contributions, dividends paid and share buybacks). As a result, we hold a surplus of US$446.5m or 43.7% above the Group’s management capital requirement. During the period, our capital requirements reduced from US$1,073.4m to US$1,021.0m, reflecting movements in interest rates (US$25.0m favourable impact) and foreign exchange rates (US$27.4m favourable impact).

Our investment portfolio remains defensively positioned with a large allocation to cash and cash equivalents (US$842.2m or 20.3%) and fixed income securities (US$2,544.7m or 61.3%). Brit’s equity allocation has decreased during the period and now stands at US$733.9m or 17.7%, partly reflecting the market movements in the period. At 30 June 2018, 78.4% of our invested assets were investment grade and the duration of the portfolio was 0.6 years. As economic growth continues, inflation and interest rates are likely to increase further. We remain short duration relative to our liabilities and defensive in our approach to credit risk.’


1 Excludes the effect of foreign exchange on non-monetary items.
2 Excludes amount attributable to third party underwriting capital providers. The 2017 figures have been re-presented on this basis.
3 Inclusive of return on investment related derivatives, return on associates and after deducting investment management expenses.
4 RoNTA calculation excludes all FX movements. 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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