2015 Half year Report

31-07-2015

INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2015

A STRONG UNDERWRITING PERFORMANCE IN A CHALLENGING ENVIRONMENT

Key points

  • Gross written premiums of US$1,096.9m (30 June 2014: US$1,171.0m), a decrease of 6.3%. At constant exchange rates the decrease was 3.2%.
  • Net earned premium1 increased by 1.4% to US$816.5m (30 June 2014: US$805.2m). At constant exchange rates the increase was 5.3%.
  • Resilient combined ratio1 of 90.6% despite the challenging rating environment (30 June 2014: 88.3%).
  • Operating profit before FX and transaction related expenses of US$70.9m (30 June 2014: US$172.3m).
  • Profit after tax of US$6.4m (30 June 2014: US$94.5m).
  • Investment return2 after fees for the period of US$7.6m, representing a non-annualised return of 0.2% (30 June 2014: US$94.0m/2.1%).
  • Annualised RoNTA3 of 11.4% (30 June 2014: 25.0%).
  • Adjusted net tangible assets4 decreased to US$1,074.3m (31 December 2014: US$1,209.6m), driven by dividend payment of US$154.1m in April 2015.
  • Rebalancing of the investment portfolio, reducing credit exposures and extending duration in risk-free assets.
  • Continued commitment to deliver opportunity-driven profitable growth, with the recruitment of a new US General Liability team, the strengthening of our Latin American team and the expansion of our London Market Healthcare team.
  • Successful acquisition of the Company by Fairfax Financial Holdings Limited completed.

Mark Cloutier, Group CEO of Brit Limited, said:

‘The first half of 2015 has been a challenging but exciting time for our Group. While both underwriting and investing conditions have been ‘complex’ our first half highlight is the successful completion of the transaction with Fairfax. The partnership with Fairfax provides Brit with a supportive and stable long-term platform from which to continue to deliver on our strategy to become a leading global speciality (re)insurer.

First half trading conditions have been challenging as we faced continued pressure on pricing and an increasingly complex marketplace in terms of capacity, distribution and regulation. Against this backdrop we believe our strategy to focus on underwriting discipline has again proven its value as we delivered a 90.6% combined ratio for the period. While gross written premium was slightly lower (3.2% on a constant currency basis), we continue to build out our platform with the addition of new specialty underwriting talent and have seen the benefit in terms of profitable premium flow arising from growth initiatives implemented over the past few years.

During the period we started to rebalance our investment portfolio to reduce credit exposures and extend duration. This revised strategy takes a long-term view of markets which may lead to increased short-term volatility in our investment performance. Investment return after fees for the period was a non-annualised 0.2%, reflecting the impact of anticipated US interest rate rises on the longer-dated government bonds now held in the portfolio.

Looking forward, notwithstanding our expectations that trading conditions for our sector will continue to be challenging, we are pleased with the core operating performance of our model and are very excited about our future as a member of the Fairfax family.’

Matthew Wilson, Chief Underwriting Officer and Group Deputy CEO of Brit Limited, commented:

‘Our disciplined underwriting approach continues to deliver robust results, and I am particularly pleased with our combined ratio of 90.6% for the first half of this year against a very difficult market environment and a higher than average incidence of smaller weather and risk losses. Risk adjusted premium rates decreased in-line with our expectations, strongly influenced by reductions seen across our reinsurance business and direct energy and property portfolios. In these lines in particular we have been rigorous with our risk selection and as a result total gross premiums fell by 3.2% on a constant currency basis year on year. Net earned premium increased by 5.3% on a constant currency basis, primarily reflecting the growth in written premium during 2014 driven by our 2013 and 2014 underwriting initiatives and organic growth in classes experiencing more favourable rating conditions.

We continue however to look at new opportunities as they arise and I am also pleased to see a number of the underwriting initiatives launched in the last year deliver profitable premium growth for the Group. Although we expect the second half of 2015 to remain challenging, we believe our underwriting approach and selective attitude to growth should afford Brit greater resilience to the market pressures and I look forward to exploring the opportunities to leverage the broader global Fairfax network for the Brit Group and our clients.’

Notes

1 Net earned premium and the combined ratio exclude the effect of foreign exchange on non-monetary items.

2 Investment return includes return on investment related derivatives and is after deducting investment management fees.

3 RoNTA excludes all foreign exchange movements and transaction related expenses and is based on adjusted net tangible assets.

4 Adjusted net tangible assets are defined as total equity, less intangible assets net of the deferred tax liability on those intangible assets.

Read the full report

For further information, please contact:

Sam Dobbyn, Head of Investor Relations, Brit Limited +44 (0) 20 7984 8500
Paul Marriott, FTI Consulting +44 (0) 20 3727 1341
Edward Berry, FTI Consulting +44 (0) 20 3727 1046

About Brit Limited

Brit Limited is a market-leading global specialty insurer and reinsurer, focused on underwriting complex risks. It has a major presence in Lloyd’s of London, the world’s specialist insurance market provider, with significant US and international reach. We underwrite a broad class of commercial specialty insurance with a strong focus on property, casualty and energy business. Our capabilities are underpinned by strong financials.

On 5 June 2015, Brit became a member of the Fairfax Financial Holdings Limited group of companies (Fairfax). The Fairfax result for the period ended 30 June 2015, which included the Brit result from the acquisition date, was published on 30 July 2015.