Brit H1 profit drops 90% as cat losses bite

Lloyd’s insurer Brit made a profit after tax of £6.4m in the first half of 2011, down 90.5% on the £67.4m it made in H1 2010.

The reduction in profit was driven by lower premium income, higher claims and an absence of a £33.4m foreign exchange gain that boosted revenues in the first half of 2010.

Brit’s combined ratio for H1 2011 increased to 104.8% from 96.5% in the same period last year. The company suffered a net impact from natural catastrophes of £95.4m (H1 2010: £44m) which added 15.5 percentage points to the combined ratio.

Slightly offsetting this was £43.1m of reserve releases from prior years (Q1 2010: £41.9m).

Gross written premium fell 0.7% to £845.3m from £851.5m, which Brit attributed to active management of the underwriting portfolio and a disciplined approach to new and renewal business.

Despite the profit slump, chief executive Dane Douetil praised his company for turning a profit despite the high level of natural catastrophes in the first half of 2011.

Fellow Lloyd’s insurer Beazley, which reported its results last Friday, made an after-tax loss of $14.1m (£8.6m) in the first half of 2011 as a result of the catastrophes.

“The underlying performance of Brit Insurance continues to strengthen,” Douetil said in a statement. “The continued improvement in the underlying claims ratio has been particularly encouraging at a time of difficult pricing conditions and is the result of our total focus on underwriting performance across the business. This is reflected in the company producing a profitable result despite the unprecedented number of catastrophe events in the first six months.”

The company’s underlying attritional claims ratio – i.e. for non-catastrophic events – was 3.5 points lower than the full-year 2010 number.

Brit H1 2011 results in £m (compared with H1 2010)

• Gross written premium: 845.3 (851.5)
• Investment return: 54.6 (57.5)
• Profit after tax: 6.4 (67.4)
• Reserve releases: 43.1 (41.9)
• Catastrophe losses: 95.4 (44)
• Combined ratio: 104.8% (96.5%)