The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Bahamas First has warned “it will take some time” to correct problems with its Cayman subsidiary’s life and health portfolio that have been blamed for a $6m-plus jump in claims payouts.

Patrick Ward, the underwriter’s president and chief executive, said the issues at Cayman First had pushed the group into a near-$1m loss for the nine months to end-September 2021 - a near $8m negative turnaround from the $6.842m comprehensive income generated in the same period last year.

The Bahamas First chief could not be reached for comment, despite Tribune Business leaving several messages for him, so the precise nature of the difficulties with the Cayman subsidiary’s life and health portfolio - and how long it will take to redress them - could not be ascertained.

Still, Mr Ward told shareholders via the third quarter and nine-month report: “The escalation in health claims costs highlighted in earlier reports continued on an accelerated track in the 2021 third quarter, resulting in an increase of about $6m in claims costs over the same period in 2020.

“This adverse claim development accounts almost entirely for the reduction in net underwriting income to $20.5m compared to the $27.6m achieved in the prior year. While we are reasonably confident that we have identified the underlying causes, it will take some time to correct the situation fully and restore the health account to acceptable profitability targets......

“The Group’s comprehensive [loss] is now $1m, compared to $6.8m [in profits] in 2020. It is clear that the difference in outcomes is chiefly related to the performance of the health account in Cayman and we will bolster our mitigation strategies to bring this performance back in line.”

Net claims incurred for the three months to end-September more than doubled, rising by 126.8 percent to $11.366m compared to $5.01m in the year before period. For the first nine months of 2021, they have increased by 42.3 percent to $26.903m compared to $18.908m in 2020.

“Unfortunately, net incurred claims for the current quarter exceeded prior year results. For the cumulative nine-month period, claims grew by $8m or 42 percent over the same period in 2020,” Mr Ward confirmed.

“During August 2021, Cayman experienced a brush with Tropical Storm Grace, which had sustained winds of 60 miles per hour (mph) and gusts of 100mph. Gross claims expected from this loss event are currently estimated at $2.3m and should not impose a material net impact on the group.”

As a result of the increased claims payouts, Bahamas First’s Cayman subsidiary fell to a $2.41m loss for the nine months to end-September 2021 as opposed to a $1.644m profit in the 2020 comparable period. This wiped out the $1.365m profit produced by the Bahamian operation, although this was itself more than 70 percent down on the $4.674m generated in 2020.

Seeking to point out the positives, Mr Ward said: “During the third quarter 2021, we saw a continuation of the growth in premiums for both the property and casualty and health segments of our business. Taken in isolation, gross premiums written for the third quarter amounted to $45.5m compared to $42m for the same period in 2020.

“For the nine months ended September 30, 2021, gross premiums grew by 7.8 percent to $135m compared to $125m in the prior year...... Investment income remains flat for the year, due to the Group’s largely unchanged legacy investment in Commonwealth Bank’s equity. We continue to monitor and control administrative expenses across the group, which are well within budget at this stage of the year.”

Bahamas First is not the only BISX-listed insurance stock with challenges. Alister McKellar, J S Johnson’s managing director, told investors in unveiling its 2021 third quarter and nine-month results that the combination of COVID-19 and increased reinsurance rates have “taken their toll” on its property and casualty underwriter, Insurance Company of The Bahamas (ICB).

“COVID and reinsurance rate increases took their toll on our underwriting segment for the quarter. The business posted a modest result of $514,267 in net income, which is a substantial decline from the $1.3m it registered in the third quarter 2020,” he explained.

“While we continually look for ways to mitigate rate adjustments for our customers, it proves extremely challenging in such a tight market.” The figures unveiled by J S Johnson show ICB’s net income for the first nine months of 2021 declined by 60.5 percent year-over-year.

However, net income from the agency and brokerage business helped to more than compensate, as this rose 41.6 percent year-over-year to hit $5.54m compared to $3.913m for the same period to end-September 2020. As a result, J S Johnson’s total nine-month profits jumped by just over 16 percent to hit $6.054m compared to $5.214m the year before.

“Despite the negative impact of COVID-related disruption that we continue to face in the country, our overall financial results for the third quarter of 2021 were relatively solid and steady,” Mr McKellar said.

“Understandably we’ve seen an increase in customer requests for premium installment payments, and some fall-off in policy renewals, but we continue to monitor and manage the situation effectively. The result of these efforts has been an increase in net income to $6.05m.

“Total income for the quarter rose 7 percent, driven largely by strong performance from our agency business. Net revenue from contracts with customers in this segment rose to $16.8m, a 17.5 percent increase over 2020. A sharp focus on expenses company-wide also helped with profitability in the third quarter by limiting the increase in total expenses to just 3 percent over last year.”