Brit posts strong underwriting performance but investments dent H1 result

Specialty insurer Brit has reported a loss of $186.9 million for the first half of 2022, compared with income of $204.3 million a year earlier, as a negative return on assets more than offset an improved underwriting result in the period.

Across the group, Brit has reported H1 2022 gross written premium (GWP) growth to almost $2 billion, as net written premium (NWP) increased to $1.4 billion, and net earned premium increased to $1.25 billion.

At the same time, underwriting profit increased from $39.6 million in H1 2021 to $104.9 million in H1 2022, with Brit reporting a combined ratio of 91.6% for the period, compared with 95.5% a year earlier.

For H1 2022, the attritional ratio totalled 51.7%, which Brit says is a reflection of good underwriting discipline, rigorous risk selection, and healthy compound rate increases.

Major losses reached $39.6 million in the period, contributing 3.2 percentage points to the combined ratio, and relates to provisions booked for the ongoing war in Ukraine following an assessment of direct exposures within the terrorism, casualty treaty, marine war, contingency and political and credit risk classes, along with potential secondary impacts.

In its results announcement, Brit highlights that 2022 continues to deliver strong rate increases as a result of the catastrophe loss experience, the rising cost of reinsurance, and market pressure on liability lines primarily reflecting social inflation. For H1 2022, Brit achieved a risk-adjusted rate change of 12.1%, as the company continued to grow its business in “this increasingly favourable rating environment.”

In terms of its outwards reinsurance, Brit has explained that expenditure in H1 2022 was $573.9 million, compared with $600 million a year earlier. The insurer attributes this decline to the impact of a four year excess of loss contact with a premium of $93 million entered into in 2021.

“In 2022, there has been increased reinsurance expenditure where adjustable excess of loss contracts and proportional reinsurance treaties have been impacted by premium growth,” says Brit. “We have also increased our expenditure on Terror XL protections reflecting the challenging reinsurance marketplace following the invasion of Ukraine, and Ki has purchased additional quota share contracts and catastrophe covers.”

Turning to investments, and Brit has reported that the aggregated return on invested assets, net of expenses, in H1 2022 was -$233.4 million, compared with a gain of $168.9 million a year earlier. Brit attributes this performance to the “turbulent market condition” which hit most asset classes, including equities, funds, and fixed income.

“Going into the second half of 2022, the industry faces a number of challenges and uncertainties, driven by the volatile geopolitical and economic landscapes, including inflationary pressures and ongoing supply chain issues. Wider challenges also continue to exist such as the potential for increased frequency and magnitude of major loss events, excess capacity, the cost of doing business in the London Market, and increased competition from local carriers in some markets. However, against this backdrop we believe we are well positioned to respond to the opportunities and challenges ahead,” said Martin Thompson, Interim Group Chief Executive Officer (CEO).

Gavin Wilkinson, Group Chief Financial Officer (CFO), added: “We have continued to experience strong underwriting conditions and favourable market developments in the first half of 2022. However, the world faces ongoing volatility, challenges arising from inflation, and uncertainty surrounding events in Ukraine. The insurance market also continues to evolve. However, we believe that our strategy, discipline and financial strength position us well to take advantage of opportunities as they arise.”

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