The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Bahamas First says “more improvements” are required before the woes impacting its Cayman health portfolio are fully behind it as it unveiled profits of $2.2m for the quarter to end-September 2023.

Patrick Ward, the BISX-listed property and casualty insurer’s group president and chief executive, told shareholders in his update for the 2023 third quarter that the majority of the $300,000 increase in expenses for the year-to-date was associated with efforts to sort out the health claims processing backlog in its other Caribbean territory.

“Year-to-date 2023 third quarter, other expenses were $10.3m or $0.3m higher than the prior period. The increased expenses were driven by increased salaries, professional fees and travel, the majority of which related to the remediation efforts that are underway within the health segment of our business in Cayman,” Mr Ward wrote.

“We have seen a reduction in the backlog of health claims processing. However, we still require more process improvements and automation to sustain consistency in timely processing.” Tribune Business reported earlier this year that Bahamas First had assigned its non-executive directors to probe woes that resulted in regulators threatening to bar its Cayman affiliate from writing new life and health business.

It disclosed that its Board had appointed a committee of its non-executive directors to investigate the matter “and the governance related thereto”, having confirmed that its Cayman First subsidiary was non-compliant with that territory’s health insurance regulations due to a claims processing “backlog” that had resulted from the implementation of a new system in the 2022 third quarter.

“As a result of problems with the implementation of the new processing system, Cayman First failed to comply with regulatory reporting deadlines with respect to claims processing, payment and client invoicing,” Bahamas First told shareholders earlier this year. “These problems, which have proved both difficult and, as a result, slow to resolve, are ongoing.

“They have led to the Cayman Health Insurance Commission (CHIC) indicating to Cayman First on March 30, 2023, that what occurred breached the conditions of its Approved Insurer Certificate for health insurance business issued by the CHIC, that it was considering enforcement action and may be minded to make regulatory orders which would prevent new health insurance for Cayman residents being underwritten by [Cayman First].”

Bahamas First and its affiliate responded by providing the Cayman regulator with a plan to resolve the issues, and hired an international consultant and added extra staff to address it with hopes of “achieving substantial resolution of the problems within the course of the next 90 days”.

“It is to be stressed that Cayman First has no problem in meeting claims in full, but the problem encountered has been in processing claims,” Bahamas First told investors. “The Boards of Bahamas First and Cayman First are concerned as to the time taken and the difficulties encountered by management to resolve the situation with life and health.”

Meanwhile, in his update to shareholders, Mr Ward said: “For the three months ended September 30, 2023, we are reporting a total comprehensive income of $2.2m in comparison to a $0.6m loss during the same period in 2022.

“The drivers for the improved result are an improved insurance service result of $1m and investment result of $1.6m. For the nine months ended September 30, 2023, we are reporting a total comprehensive loss of $0.8m in the consolidated statement of comprehensive income, in comparison to a $0.6m loss in the prior year.”

He added: “For the year-to-date, gross written premium increased by 4.4 percent compared to the same period in the prior year, as we experienced growth in premiums across the property and casualty major lines of business. This growth was generated primarily from rate increases. However, insurance revenue only increased by 0.4 percent from the prior year due to the timing of business written.

“For the fiscal year-to-date, under the new standard we are reporting insurance service expenses of $68.3m, a 3.7 percent decrease from the prior year’s total of $70.9m. While the expenses are down during this period, this is largely attributed to lower health claims (2023: $25.4m; 2022: $29.7m).

“The loss ratio for this line of business remains elevated as the remediation and restructuring efforts are ongoing. However lower premiums from the health unit directly impact the lower claims reported.”

As for Bahamas First’s investments, Mr Ward said: “During the first three quarters of 2023, we reported combined investment and other income and other comprehensive income of $2m compared to $1.1m for the same period of 2022.

“The driver of the higher investment income are improved unrealised gains on the bond portfolio of $1.7m offset by lower net realised and unrealised gains on the Commonwealth Bank equities of $0.8m.”