The Tribune

Summit Insurance blamed reduced real estate valuations for a 38.2 per cent year-over-year profits slump, as it focuses on “defending our book” in a year that will have “negative growth”.

Timothy Ingraham, the property and casualty underwriter’s president, told Tribune Business that its $1.585 million total comprehensive income in 2014 was “a little below our expectations”.

He blamed this largely on a collective $437,000 hit from “property valuation adjustments”, which Summit did not incur in 2013.

However, Mr Ingraham said the carrier’s underwriting profits, which were essentially flat year-over-year at $3.324 million, did come in “on target” despite suffering a major year-end claim as a result of the Soldier Road Industrial Park blaze that destroyed the Bapak property.

But he conceded that Summit would be hard-pressed to match last year’s underwriting profits in 2015, due to the numerous pressures affecting both the general insurance market and wider economy.

Apart from Value-Added Tax’s (VAT) impact on consumer spending, the Bahamian economy is also having to cope with Baha Mar’s delayed opening and the new tax’s inflationary effects.

Mr Ingraham suggested that with VAT-induced inflation set to outpace economic expansion, the net effect would be “negative growth” for the Bahamas in 2015.

Looking back at 2014, the Summit chief said the underwriter had “held our own” despite being impacted by impairment and revaluation charges relating to its Sears Hill headquarters and other properties.

“They were a little below our expectations,” Mr Ingraham conceded of Summit’s results, as total comprehensive income slipped from $2.563 million to $1.585 million. Net income dropped 32.3 per cent, from $2.149 million to $1.456 million.

“It primarily has to do with the adjustment in property values,” he added. “Take them out, and I think we were pretty much on target with where we thought we’d be.

“We moved into some new premises almost two years ago, and so the value of that was settling as a result of the rentals. Last year we were still finishing up everything, and had to revise the value a bit because of everything else going on in the market.”

Summit suffered an almost-$217,000 negative reverse on the value of its investment property, and incurred a $258,245 impairment hit also. Neither of these charges were incurred in 2013.

As a result, the underwriter’s other income dropped by 44.8 per cent, from $1.038 million the year before to $573,206 in 2014.

“The real estate valuation reduction did create a bit of a drag on the results, due to the net effect, but the technical results were the same as the year before,” Mr Ingraham told Tribune Business.

“From a technical point of view, we held our own, and did a reasonable job in getting a good bottom line from the results we got.”

Mr Ingraham described the performance of Summit’s different business lines as “a mixed bag”, with its property portfolio performing well until Bapak’s business burnt to the ground just before Christmas.

He added that Summit’s motor portfolio, and public and employer liability segments, also produced “slightly higher than normal losses”. As a result, Summit’s net claims incurred jumped from $4.711 million to $5.228 million, an 11 per cent increase.

Mr Ingraham suggested that reduced discretionary income as result of VAT and a slow economy would encourage persons to reduce their level of insurance coverage in 2015.

Summit’s top-line gross premiums fell by 4.5 per cent in 2014, from $35.876 million to $34.26 million, and the pressure is likely to persist through 2015.

Net premiums written dropped by 9 per cent, from $14.874 million to $13.532 million, while net premiums earned were off by 5.1 per cent year-over-year at $14.407 million.

Mr Ingraham said the underwriter’s strategy was “to try and hold the fort, so to speak, and to try and defend our book of business against our competition”.

He added that the reputation possessed by its agent, Insurance Management, for fairness and customer service would stand Summit in good stead to deal with a market in which persons were increasingly seeking “value for money”.

“I think it will be a challenge in 2015 to match last year, certainly the technical results,” Mr Ingraham told Tribune Business.

“If we come out with stable technical results, we’ll be happy with that. The delay with Baha Mar will probably cause a slower economic recovery than people expected, and the implementation of VAT and one or two other things will not help a whole lot.

“Given VAT, inflation will outpace any growth in the economy, which effectively means negative growth.”