2013 Full Year Report

17-02-2014

Strong underwriting performance combined with successful growth initiatives

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Financial highlights

  • Return on net tangible assets before FX movements1 of 24.5% (2012: 18.5%).
  • Operating profit before FX movements2 of £184.6m (2012: £141.0m)
  • Profit after tax increased by 20.1% to £101.7m (2012: £84.7m), reflecting strong underwriting performance.
  • Combined ratio3 significantly improved to a record 85.2% (2012: 93.2%).
  • Attritional claims ratio improved to 51.3% (2012: 51.9%), a 12.9 percentage point improvement since 2009.
  • Return on investments and investment related derivatives4 of £54.7m or 2.1% (2012: £87.9m/2.9%).
  • Gross written premiums of £1,185.7m (2012: £1,147.9m).
  • Closing net tangible assets (NTA) of £649.6m (2012: £649.1m), after distributions of £100.0m.
  • Total value created5 during period of £100.5m, equivalent to 15.4% of closing NTA (2012: £121.9m/18.8%). Total value created since 1 January 2010 of £419.3m.

Strategic highlights

  • Focus on global specialty underwriting as one of the largest syndicates at Lloyd’s.
  • Continued improvement in quality of underwriting coupled with premium growth in targeted segments.
  • Further recruitment of top underwriting talent, both in the UK and internationally.
  • New UK teams hired in the UK Property, Political and Credit Risk, High Value Homeowners, Fine Art and Specie and Cargo sectors.
  • Expansion of US specialty operations, with over 50 employees across nine cities now writing US$155m of run-rate premium within the parameters of the Group’s underwriting guidelines and risk management framework.
    • Excess and Surplus (E&S) property business expanded with the acquisition of the renewal rights and the underwriting platform of Maiden Specialty.
    • Team hired to lead new Criminal Justice Services Operations (CJSO) programme.
  • Distribution capability further enhanced by opening of a Bermuda branch office.
  • Senior management team has been further strengthened and is now complete.
    • Dr Richard Ward, former Chief Executive of Lloyd’s, appointed Group Chairman.
    • Appointment of Chief Financial Officer Andrew Baddeley, from Atrium Underwriting.
    • Appointment of Chief Operating Officer Nigel Meyer, formerly Interim Chief Financial Officer at Brit.
    • Appointment of Director of Strategy and Corporate Development Joy Ferneyhough, from Espirito Santo Investment Bank.

Mark Cloutier, Group CEO of Brit Insurance, said:

“2013 was another excellent year for Brit, our second full year operating as ‘new Brit’, a highly focused specialty insurance and reinsurance business underwriting solely through Lloyd’s. Excluding the impact of foreign exchange, we achieved a 24.5% return on net tangible assets, a significant improvement over the 2012 figure of 18.5%, and an operating profit of £185m. Total value creation was £100.5m, equivalent to 15.4% of closing NTA.

Our continued focus on improving the quality of earnings, driven by underwriting performance and expense discipline has delivered handsomely with the Group achieving an 85.2% combined ratio. I am particularly pleased our attritional loss ratio continues to improve and is now down 12.9 percentage points since 2009. We have also invested significantly in our investment infrastructure in recent years and I am pleased that our focus in this area has delivered an attractive return, after fees, of 2.1% under very difficult market conditions.

Our strategy is even more valid today than it was when we initially developed it three years ago. Given the challenges facing the market today, our focus on underwriting specialty products and leveraging off the Lloyd’s business model globally via our local distribution network gives us a highly efficient platform on which to develop our business and drive future profitable growth.

We have made excellent progress on our growth plans in 2013, including adding new specialty teams and underwriting talent in London, the United States, Bermuda and China which we believe have added well in excess of £100m of new business on an annual run rate basis. We will continue to grow our business wherever we see suitable profitable opportunities that fit our specialty strategy.

Brit is a success story today because of one key ingredient, its people. We are proud of the successes the entire Brit team has achieved in 2013 and we look forward with confidence to building on this strong platform in 2014.”

Matthew Wilson, CEO of Brit Global Specialty commented:

“Our continued disciplined underwriting and the relatively benign catastrophe backdrop, have resulted in our lowest ever combined ratio of 85.2%. Particularly pleasing is that every area of Brit Global Specialty contributed to a strong underwriting result. Premium revenues grew by 3% and underwriting profit by 150%.

In 2013 we hired new London based underwriting teams in Marine Cargo, Fine Art and Specie, High Value Homeowners and Political Risks and Trade Credit. Our US service company operation, Brit Global Specialty USA, grew by 64% to US$120m gross written premium, through selective complementary team hires and by acquiring the renewal rights of Maiden Specialty's E&S property business. In China we began writing property and construction business in the Asian region through the Lloyd's China platform.

We believe we have laid solid foundations for continued underwriting out-performance.”

For further information, please contact

Tom Burns / Edward Moore, Brunswick +44 (0) 20 7404 5959

Notes

  1. Return on net tangible assets (RoNTA) is calculated as: Profit after tax before FX gains/losses and return on FX related derivatives and before any charges in respect of intangible assets, divided by net tangible assets at the beginning of the period (adjusted on a weighted average basis for share buybacks or share issues during the period). In arriving at this adjusted profit after tax figure for the year ended 31 December 2012, a £38.4m intangible asset impairment charge made on the sale of the non-core regional UK business has been written back.
  2. Excluding the effect of foreign exchange on monetary and non-monetary items and return on FX related derivatives.
  3. Excluding the effect of foreign exchange on non-monetary items.
  4. Calculated after investments management expenses. The 2012 figure has been represented on this basis.
  5. Total value created represents the increase in net tangible assets during the period, before distributions.

Disclaimer

This document does not constitute or form part of, and should not be construed as, an offer for sale or subscription of, or solicitation of any offer or invitation or advice or recommendation to subscribe for, underwrite or otherwise acquire or dispose of any securities (including share options and debt instruments) of the Company nor any other body corporate nor should it or any part of it form the basis of, or be relied on in connection with, any contract or commitment whatsoever which may at any time be entered into by the recipient or any other person, nor does it constitute an invitation or inducement to engage in investment activity under Section 21 of the Financial Services and Markets Act 2000 (FSMA). This document does not constitute an invitation to effect any transaction with the Company or to make use of any services provided by the Company. Past performance cannot be relied on as a guide to future performance.