Brit Group GWP small rise - free to view

Brit Group GWP small rise - free to view

Netherlands-domiciled Brit Insurance has reported gross written premiums of £336.5m, up 1.2% from the £332.6m recorded in the first three months of last year. At constant exchange rates the increase would have been 6.5%, Brit said.

Brit has also announced a renewal rights deal with QBE that will see "a market leading Aviation team" move across to Brit and to begin writing from June 1.

The insurer, which floated on the London stock exchange at the end of March with a market capitalisation just shy of £1bn, said that there had been no major loss events in the first quarter and that claims experience had been in line with expectations. The group said that it had "immaterial exposure" to the Malaysian Airlines MH 370 disappearance and the Sewol Korean ferry disaster.

Premiums for Q1 2014 split £215.7m to Brit Global Specialty Direct and £120.8m to Brit Global Specialty Reinsurance. That represented 8.2% year on year growth for the primary arm and a 9.3% year on year fall for the reinsurance arm.

Overall, rates were down by about 3%, with most of the pressure in reinsurance.

Brit said that the 13.6% year on year increase (at constant FX rates) in the primary market reflected the continued expansion of Chicago-based Brit Global Specialty USA (BGSU), where premiums were up 69% year on year to $35m. BGSU writes business on behalf of Brit Syndicate 2987. Another factor in the increase on the primary side was new hires by Brit Global Specialty London. These included High Value Property, Political Risks, UK Property and Fine Art & Specie).

The decline in premium at the reinsurance arm – down 9.3% in reporting terms and by 4.1% at constant exchange rates – was said to be "in line with expectations", reflecting "challenging market conditions experienced primarily by the Property Treaty book". Brit said that it had "maintained underwriting discipline in this environment.

The investment return of £28.6m net represented a non-annualised 1.1%, up from 0.9% in Q1 2013.

Brit PLC group chief executive Mark Cloutier said that the group had made a good start to the year, with the new Bermuda office writing more than $16m in premiums in the quarter, mainly in casualty treaty. That partially offset the decline elsewhere in the reinsurance book. A new UK property platform began writing in Q2, along with the opening of a Latin American office based in Miami, led by Juan Calvache, who had previously been at Partner Re. The Latin American office will focus on expanding BGSU's US Facultative Property platform into the Latin American and Caribbean markets.

The Analyst's view: Eamonn Flanagan; Shore Capital

Eamonn Flanagan saw the 1.1% investment return as "a good outcome". However, he said that Brit Group was trading at a roughly 40% premium to NTAV at the end of 2013, 2hich was not viewed as particularly cheap on a price/NTAV basis, "especially in comparison to its quoted peers".

However, he noted that "with the likelihood of a £75m dividend for 2014, equivalent to 18.75p a share, the shares have undoubted income attractions with a potential c8.3% forward yield".


The benchmark of £75m a year, with the potential for special dividends, looks generous to dividend seekers, and is somewhat redolent of the high dividend strategy at Admiral mixed with the love of special dividends at Lancashire. But the downside, as Flanagan notes, is that it leaves Brit Group open to having to cut the dividend should there be a major loss. That need not be a major loss that impacts Brit. It could be a loss that hits the market and pushes up rates. That would make it in Brit's interests to retain capital to take advantage of the higher pricing, but with an aggressive dividend policy in place, that would require some nimble PR work with investors.

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