2012 Half Year Report

27-07-2012

The Brit Group - strong operating performance while substantially completing major restructuring into focused global specialty underwriter


Financial highlights
  • Annualised return on net tangible assets1 of 15.1% (30 June 2011: 2.0%).
  • Combined ratio2 improved to 93.3% (30 June 2011: 104.8%), including 1.7% for prior period reserve strengthening.
  • Underlying attritional claims ratio improved to 55.9% (30 June 2011: 58.6%), with improvement since 2009 of 11.0%.
  • Underlying management expenses reduced by 9.6% to £69.0m (30 June 2011: £76.3m).
  • Investment return (non-annualised) of 1.6% (30 June 2011: 1.5%).
  • Gross written premiums of £794.9m (30 June 2011: £845.3m) reflecting further underwriting discipline and disposals. Direct business totalled £579.5m (30 June 2011: £596.1m) and reinsurance £215.4m (30 June 2011: £249.2m).
  • Operating profit of £79.6m (30 June 2011: £15.0m).
  • Profit before tax3 of £45.0m (30 June 2011: £6.8m), after two divestiture-related one-off charges totalling £60.5m (£38.4m intangible asset impairment following the sale of the non-core regional UK business and a £22.1m impairment following the announcement of the sale of the Group's historic UK liabilities).
  • Total value created4 of £74.0m or 8.2% (30 June 2011: £11.8m) with closing net tangible assets (NTA) of £896.2m (31 December 2011: £897.2m).

Strategic highlights

  • Completed transformation to global speciality (re)insurer underwriting on the Group's Lloyd's platform (Brit Syndicate 2987), as Brit Global Specialty (BGS).
    - Sale of non-core regional UK business to QBE Insurance (Europe) Limited.
    - Agreed the sale of Brit Insurance Limited (BIL), the Group's historic UK liabilities, to RiverStone Group.
  • Completed integration of insurance and reinsurance within BGS, enabling faster decision-making and risk analysis, and reinforcing the new strategic vision for the Group as a global specialty player focused on underwriting excellence.
  • Further strengthening of the senior management team with the appointment of Chief Investment Officer John Stratton and Head of Claims Steven Robson, both of whom report to Mark Cloutier.

Mark Cloutier, Group CEO of The Brit Group said:

'It has been a good first half for The Brit Group with strong operating and investment results driving a 15.1% annualised return on net tangible assets and total value creation for the six month period of £74.0m. This was achieved during a period of significant restructuring within the Group as we sharpened our focus on our core business.

'In recent months we have set out to create a more efficient and clearly defined Lloyd's specialty underwriter which is now the heart of our business. We formed Brit Global Specialty through the merger of our reinsurance and global markets strategic business units and commenced underwriting in our new Richmond Virginia specialty insurance operation, while at the same time we negotiated and signed two strategic transactions disposing of our non-core UK regional business which, combined, will achieve a premium to NTA and provides the Group with substantial capital flexibility.

'To have delivered the results we have while undertaking such significant change in the Group speaks volumes about the commitment and dedication of the entire Brit team and I am grateful to all our employees for their hard work and dedication. We plan to continue strengthening our team with the addition of a number of new underwriters and teams in addition to the recent senior management appointments we have made.

'With the bulk of the restructuring behind us we can now concentrate on continuing and accelerating the profitable growth of our core specialty business, which will be founded on the principles of disciplined underwriting, excellent claims practices and active capital management with a view to creating a premium Lloyd's franchise.'

Read the full announcement

For further information, please contact

Mark Cloutier, Group CEO, The Brit Group +44 (0) 20 7984 8500
Tom Burns / James Olley, Brunswick +44 (0) 20 7404 5959

Notes

  1. Return on net tangible assets (RoNTA) is calculated as: Profit after tax before the effects of FX on non-monetary items and before any charges in respect of intangible assets, divided by the weighted average NTA during period. In arriving at this adjusted profit after tax figure for the period ended 30 June 2012, a £38.4m intangible asset impairment charge made on the sale of the non-core regional UK business has been written back. This is consistent with the Group's RoE calculations as presented in previous reporting periods. To derive an annualised figure, an annualisation factor has been applied to all the components of the H1 RoNTA with the exception of the £38.4m write back.
  2. Excluding the effect of foreign exchange on non-monetary items.
  3. Including the effects of FX on non-monetary items and after accounting for the sale of the non-core regional UK business and the forthcoming sale of BIL. These accounting adjustments include a £38.4m impairment of goodwill and other intangible assets.
  4. Total value created represents the increase in net tangible assets during the year, before capital distributions and dividends.

About The Brit Group

The Brit Group is a global speciality (re)insurer underwriting on its Lloyd's platform, as Brit Global Specialty. The scope is wide-ranging: from small and medium sized traders to the largest multinational corporations. Our distribution model is centred on brokers and intermediaries. Brit Global Specialty accesses our market leading Lloyd's of London Syndicate, Brit 2987.