The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Bahamas First has unveiled a 94 per cent year-over-year increase in first half profits, although this was driven largely by a $4 million gain in the value of its investment holdings.

The property and casualty insurer saw the unrealised gain in the value of its investment holdings, in both equity and debt securities, jump by 1,648 per cent to $4.264 million at end-June 2016 compared to just $243,946 the year before.

The investments that drove the increase were not disclosed in Bahamas First’s report to shareholders, and this also masked a 10 per cent year-over-year fall in its net underwriting income.

This figure, which measures the performance of Bahamas First’s core insurance operations, fell to $11.446 million as at end-June 2016, compared to $12.658 million the year before - a more than $1.2 million decline.

The fall resulted from a combination of lower gross written premiums, which represents Bahamas First’s top-line revenues, and a 6 per cent increase in net claims incurred.

Ian Fair, Bahamas First Holdings’ chairman, told shareholders: “Investment income during 2016 has exceeded both budget and prior year by significant amounts as a result of the sharp uplift in the value of our equity and international bond holdings, resulting in an unrealised gain of $4.3 million.”

Besides the increase in the unrealised value of its investments, Bahamas First also experienced an 8 per cent increase in actual investment income, which jumped from $1.086 million to $1.178 million.

Detailing the forces impacting Bahamas First’s core general insurance business, Mr Fair said increased competition was continuing to pressure premium rates being levied on consumers.

“The present insurance market conditions for property and casualty insurers and intermediaries in both Bahamas and Cayman are best characterised by intense competition, leading to price reductions,” he confirmed.

“Rates in our property class of business continue to decline relative to the prior year, resulting in a 5 per cent reduction in gross premiums written.

“Fortunately, the benefit of a higher level of incoming base commissions (5 per cent increase), coupled with a decline in our own cost of reinsurance protection (14 per cent decrease), has resulted in additional income to help mitigate the effect of rate reductions.

“Net premiums written and earned declined by 6 per cent due to our intentional reduction in the retention of the motor/liability account.”

Mr Fair said all Bahamas First’s business lines had produced improved claims ratios compared to 2015, apart from its Bahamian auto portfolio.

“The motor line experienced an elevated loss ratio owing to adverse developments on a few prior year claims, primarily contributing to a 6 per cent increase in net claims incurred,” the Bahamas First chairman wrote.

“As a result of the aforementioned, the group’s net underwriting income decreased by 10 per cent to $11.4 million.”

As a result of all this, Bahamas First’s total comprehensive income increased from $3.033 million to $5.878 million year-over-year.

Mr Fair said Bahamas First had contained operating expenses, which grew by just 1 per cent during the 2016 first half, hitting $11.011 million compared to $10.955 million the year before.

He added that Bahamas First’s expense ratio was set to improve during the 2016 second half, due to the company redeeming 50 per cent of its Series 1 Corporate Bonds - some $3.75 million - in July.

“In April of this year, our Cayman subsidiary paid dividends totalling $1.4 million of which 87.65 per cent inured to our benefit,” Mr Fair added.

“Cayman First continues to perform well contributing $1.25 million towards the group’s comprehensive income, a 37 per cent improvement over the prior year.

“The group’s equity attributable to owners of the parent increased to $61.2 million, compared to $54.6 million at June 2015, primarily as a result of the operational earnings generated during the period,” he continued.

“The group’s return on equity for the 12 months ended June 30, 2016 stands at 17.4 per cent, on track to exceed our 2016 budget.”

Breaking down Bahamas First’s results by geographical location, its Bahamas business suffered a 3.7 per cent drop in gross written premiums during the 2016 first half, falling from $46.794 million to $45.065 million.

As a result, net underwriting income for the Bahamas operation fell by almost $1 million or 12.3 per cent to $7.095 million, compared to $8.09 million in 2015.

However, with the investments boost, the Bahamas’ bottom line contribution more than doubled year-over-year, leaping from $1.969 million to $4.437 million.