Brit returns to profit in 2021 as combined ratio falls to 95.7%
Specialist insurer Brit announced a return to underwriting profitability for 2021 and produced its best result in five years, with a gain of $90.6 million against a loss of more than $217 million in 2020, while the combined ratio strengthened to 95.7%.
In addition to better underwriting performance, Brit reported growth in gross premiums written to $3.2 billion, growth in net premiums written to $2 billion and growth in net premiums earned to $1.8 billion.
Premium growth was evident in London Market Direct, London Market Reinsurance, Overseas Distribution and other underwritings, while the volume of underwriting dropped significantly.
Given its exposures, Brit also buys reinsurance and in 2021 its reinsurance expense increased to 38.3% of GWP at $1.24 billion, a year-over-year increase of over of $591 million.
Brit attributes the higher cost primarily to a loss portfolio reinsurance contract with RiverStone Managing Agency Limited. Excluding this agreement, and the company’s reinsurance expense would have increased by $247.1 million, due to the impact on higher premium levels from adjustable excess of loss contracts and reinsurance treaties. proportion, a new UK-sponsored Cat Bond-backed XL contract issued in late 2020 by a segregated cell in Sussex UK, additional cyber protections and the reinsurance program for Ki.
In 2021, Brit’s operating income was impacted by a number of catastrophic events as well as the COVID-19 pandemic. Overall, major losses amounted to $324.4 million in 2021, or 15.5% of the combined ratio, compared to $404.8 million, or 23.7% in 2020.
Of the total major losses, some $200.5 million are from Hurricane Ida, $77.7 million from Texas winter storms and $18 million from July’s European floods. Additionally, the company recorded COVID-19 losses of $28.2 million in 2021, although this is well below the $271.4 million in pandemic losses recorded in 2020.
Brit reports that despite the losses, underwriting contributed $90.6 million to its 2021 result, as the company produced a combined ratio of 95.7%, compared to 112.7% in 2020.
In total, the specialty insurer recorded a profit of $236.9 million for 2021, compared to a loss of $232 million the previous year.
The company’s Group Acting CEO, Martin Thompson, said: “In early October I was asked to join Brit as Acting CEO, following the announcement that Matthew Wilson was to take leave to health reasons. We at Brit and Fairfax wish Matthew well and look forward to his return.
“I am pleased to report a positive 2021 for Brit, with our underwriting performance and return on investment delivering a strong overall result. This performance builds on the continued success of our strategy of leadership, innovation and Distribution, with the growth of our business reflecting the dedication of our employees and the unique culture that Matthew and his team have created at Brit.
“Our clear strategy enabled us to achieve a combined ratio for the year of 95.7%. This reflects the combination of an excellent attrition ratio, prior year reserve releases and increased revenues from our third-party capital management businesses and AGG. The fact that we achieved this performance despite exposure to a number of major claims and the continued impact of COVID-19 was particularly encouraging, demonstrating the increased resilience of our business and our strong focus on disciplined underwriting.
“In addition to having obtained a good underwriting result, we increased our written premium by 31.8% to $3,238.3 million. This reflects strong and focused growth in our core direct and reinsurance portfolios, as well as a very successful first year of trading for Ki.
“Defending the potential of data and technology is critical to Brit’s future success. Ki is the embodiment of this, but we have also made great strides across the UK in delivering on our innovation agenda. This includes milestones in how we use technology in claims, investments in how we use data to empower our primary underwriters and, in January 2022, the appointments of a chief technology officer and of a data manager.
“Looking to 2022, as uncertainty remains around COVID-19, rising inflation and the potential for increased frequency and severity of major claims, we remain optimistic. Ongoing rate increases, continued improvement in our attritional loss ratio and our clear strategy give us confidence that Brit is well positioned to meet the opportunities and challenges ahead.