The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Bahamas First is “not desperate” to make further acquisitions, even though its top executive concedes this is the only viable route to growth.

Patrick Ward, the insurer’s president and chief executive, told Tribune Business that there would be “very little” opportunity for underwriters to expand their existing books of business in 2016.

Bahamas First’s 2015 annual results show how intense competition, and a saturated market, continue to drive down property and casualty premiums, with the carrier’s ‘top line’ off 6 per cent last year.

Mr Ward predicted that such a trend would continue through 2016, although there were some early signs that the pressure on premium rates might be starting to ease.

“There’s very little growth opportunity in terms of organic growth,” he told Tribune Business. “We saw a pretty flat scenario for growth by policy count - top-line growth - for most of the lines.”

Mr Ward blamed this on “significant competition” for property and casualty market share in the Bahamas, which was “driving rates down”.

“Motor policies are pretty much flat and declining to some extent,” he added. “One has to question how sustainable this scenario is, because as rates decline, one has to question whether the amount of premium collected is sufficient to cover the technical risk.

“It’s more a question of sustainability. I certainly expect to see this trend maintain during 2016. There are some early signs of a let-up in rate pressures, but I’m not personally convinced of that yet.

“We need to assess developments more before we make a judgment on that. This year is going to be very similar to 2015 in many respects.”

The Bahamian property and casualty market has become increasingly crowded in recent years, via the entrance of new players such as Netherlands Antilles General Insurance Company (NAGICO) to compete with more established underwriters.

And amid the intensifying battle for market share, insurers have had to contend with the implementation of Value-Added Tax (VAT) on insurance premiums.

This has further impacted the affordability of insurance for many Bahamians, reducing the consumer pool for underwriters to draw from.

Acknowledging that Bahamas First and the wider markets were facing “a lot of headwinds”, Mr Ward added: “But, on the other side of the coin, we think there may be some opportunities for us to pursue in the future.”

Declining to provide details, he continued: “We’re still developing some of those, but as the market goes through this period of declining premiums, there are opportunities for Bahamas First to provide insurance solutions to entities in the insurance space that might need them.”

Apart from its Cayman foray, Bahamas First has traditionally grown via the acquisition of local brokers and agents. Besides increasing its sales and distribution channels, such a strategy has enabled it to increase market share and premium income.

It continues to execute on this plan, acquiring the Marsh Harbour-based Van Stratton Agency earlier this year and absorbing the business into its wholly-owned Nassau Underwriters (NUA) subsidiary.

“That’s the only viable option for growth,” Mr Ward told Tribune Business of mergers and acquisitions. “Organic growth is going to be anemic.

“We’re always looking, but it’s a question of finding the right opportunity that fits with our desired profile.

“We’re not in a hurry, and will make sure that whatever opportunities emerge for us are the right ones. We’re not desperate to do anything, but we’re obviously going to look very closely at any opportunity.”

Bahamas First’s total gross written premiums, or top-line income, fell by 6 per cent to $143.361 million in 2015. That represented an almost $9 million decline on the prior year, and was a further fall from the $161.319 million gained in 2013.

“The prevailing market conditions at both the reinsurance and primary company levels are such that we fully expect a continuation of declining prices and, therefore, top-line pressures, which was certainly the case in 2015,” Bahamas First told shareholders in its annual report.

“Intense competition throughout the Caribbean region continues to increase both in scope and scale, with price reductions reaching levels that, no so long ago, were inconceivable.”

Bahamas First said the pressure was felt most in its core property insurance business, where premium prices fell by “double digits” in both this nation and the Cayman Islands.

Still, with a property portfolio worth $71 million, Bahamas First was able to generate an underwriting profit in both countries despite Hurricane Joaquin.

“In the Bahamas, we have roughly the same amount of exposures on the books, as was the case in 2014, and in the case of Cayman we have managed to grow the portfolio by a small margin which, in the current climate, is a significant achievement,” the annual report said.

As for its motor insurance book, Bahamas First said total gross premiums collected remained relatively flat year-over-year at $35 million. While total policies written in the Bahamas did not increase, they rose in the Cayman Islands by 10 per cent.

Bahamas First fared better when it came to net written premiums, which in 2015 fell by just 2 per cent - from $60.545 million to $59.158 million. Net premiums earned declined by 1 per cent, from $60.375 million to $59.872 million.

Bahamas First’s total group equity jumped by 8 per cent to $60.6 million by year-end 2015, even though cash flows from operating activities fell by $4.3 million due to Hurricane Joaquin. Investment income was $2.3 million.