Insurer hit by reduced investment returns in volatile markets
Brit Insurance has reported that its pre tax profits have fallen by more than half for the six months to June 30th blaming investment losses in volatile markets.
The general insurer and reinsurer said its pre-tax profits for the six months totalled £49.9m compared with £106.8 million a year ago. The figure is however above its forecast of £47.3m.
Brit's investment return tumbled to £2.1m in the first six months of 2008, from £55.9 million a year ago.
The insurer said it expected a "much better performance" in the second half if the interest rate environment performs in line with expectations, after a "good" July and August.
Dane Douetil, Group CEO of Brit Insurance said in a statement: “I am delighted with the continued strong performance in our core business of underwriting, with all three businesses growing during the period whilst again delivering a combined ratio below 90%, despite challenging market conditions. Volatile investment markets caused a drag on our short term performance with income and realised gains of £65.8m being largely offset by unrealised losses of £63.7m. We believe our investment portfolio remains well positioned for the medium term.
He added: “With net unearned premium of £588.3m and invested assets of £2,784.3m both standing at an all time high and our three underwriting businesses in good health, I believe Brit Insurance is in fine shape to face what will inevitably be tougher macro economic and market conditions in the months ahead.”
The group has left its provision for possible subprime related losses -- mostly from cover for executives unchanged.
Brit said gross written premiums grew 3.8 percent to £754.8m in the first half, and said it expected 3 to 5 percent growth in 2008, broadly in line with its target.
Its underwriting performance was ahead of expectations, though competitive conditions meant its combined ratio -- costs and claims as a percentage of premiums -- worsened to 89.4 percent from 87.7 percent.
The figures at a glance:
• Gross written premium up 3.8% to £754.8m for the 6 months to 30 June 2008 (2007: £727.4m);
• Combined ratio of 89.4% (30 June 2007: 87.7%);
• Profit before tax of £49.9m (30 June 2007: £106.8m), reflecting lower investment returns;
• Interim dividend maintained at 7.5p per share;
• Acquisition of 38.2% share in Xbridge Limited, an online insurance and finance technology platform;
• Consistent record of back year reserve releases continues;
• No change to technical provisions held in respect of sub-prime related exposures;
• Unearned premium reserve (net) up 6.0% to £588.3m (31 December 2007: £555.1m);
• Invested assets up 2.0% to £2,784.3m (31 December 2007: £2,728.6m).