Insurer reveals extent of reserves as it announces £191m profit
Brit moved to allay market fears over its sub-prime exposure as it announced its healthy 2007 results this week.
The insurer confirmed it had received 25 notifications of claims, and had reserved £62.5m to deal with sub-prime claims on top of the £163m in premiums received for professional liability policies in 2007.
Brit has received nine notifications of sub-prime claims to the end of February totalling £12.7m and a further 16 notifications that did not specify a sum.
It laid out the entire contents of its investment portfolio, and the amount invested in each class of security, in a bid to show it had no sub-prime exposure within its assets.
The company reported a pre-tax profit of £191m, up from £186m in 2006. Gross written premiums increased by £28.6m to £1.26bn, but the combined ratio rose six points to 92.7%.
Citibank analyst Trevor May said: “The company has given a detailed assessment of its exposures and, it appears to us, prudently reserved within the 2007 results for likely claims. While there could be more to come, the company does appear to be proactively managing the situation. Some might be surprised by the candour with regard to the sub-prime claims exposure, but the fact that the company has been able to make provision and still beat expectations shows the robust financial position.”
However, Brit shares closed down 2.5% on the day.
Commenting on its sub-prime exposure, Brit said: “Our underwriting guidelines in these areas are strict and our line sizes closely monitored. As a number of the classes potentially affected, such as casualty, are written on a ‘claims made’ basis, our exposure in these areas will fall away over the short term.”
Heavy flood claims led its UK division to report a combined ratio of 109.3%, up from 96.9% in 2006.
The company also announced it was abandoning its goal of writing £2bn in premiums by 2010, instead opting for a target of 5% premium income growth per year.
Brit chief executive Dane Douetil said: “I am extremely pleased with the record performance of the group in 2007, particularly in view of a more normal claims environment. Improvements to market conditions in the UK should come over the course of 2008.”
