Brit reports improved combined ratio of 76.2% for 2023

Brit Ltd., a global speciality re/insurer and subsidiary of Fairfax Financial Holdings Limited, has reported a combined ratio for the full year 2023 for continuing business after discounting of 76.2%, a solid improvement on 2022’s 88.5%, as the insurance operating result strengthened year-on-year.

For 2023, group profit after tax (including discontinued operations) was $895.4 million compared to $308.9 million in 2022. Profit on ordinary activities before tax, FX and discontinued operations hit $720.3 million, a steep increase from $281.3 million for 2022, as Brit reports an improved return on net tangible assets on all operations of 51.9%, compared to 12.6% in 2022.

The insurance operating result, excluding the impact of discounting, was a profit of $405.7 million, an increase from 2022’s $93.9 million.

Insurance premiums written for the year fell 5.5% year-on-year to $3.8 billion, reflecting market conditions in certain classes, the implementation of the firm’s catastrophe strategy, and continued focus on improving the performance of the book by exiting underperforming businesses.

By portfolio, Brit reports that reinsurance premiums written in 2023 shrank slightly from $997.9 million to $882.4 million, with small reductions in casualty, property, and at Ambridge Re.

For the direct portfolios, total written premiums increased from $2.86 billion in 2022 to $2.87 billion in 2023, while underrating classes in run-off decreased from $88.8 million to $27.4 million.

In terms of loss activity, Brit reports that its undiscounted best estimate reserves established for major natural catastrophe losses in 2023, net of amounts recoverable from reinsurers, is $69.6 million, which is a considerable decline from the $306.6 million seen in 2022. For 2023, losses were driven by the Hawaiian wildfires at a cost of $51.7 million and Hurricane Idalia at a cost of $17.9 million.

The investment return was strong at $394.4 million or 6.2%, compared to a loss of $132.1 million or -2.3% in 2022.

The company has also reported a highly successful third year of trading for Ki, which recorded insurance premiums written of $877 million, and a combined ratio after discounting of 83.2% for 2023.

More broadly, the re/insurer notes that the overall market conditions have continued to harden, enabling Brit to achieve risk-adjusted rate increases of 7.1%, bringing the compound increase since January 1st, 2018 to 65.1%.

Martin Thompson, Group Chief Executive Officer, commented: “Brit has delivered an excellent result for 2023, with a strong underwriting and investment performance. Our undiscounted combined ratio of 85.3%, a 10.9 percentage point improvement from 2022, reflects the strength of Brit’s underwriting teams and the successful execution of our catastrophe strategy, as well as a year of more benign major loss activity. Our discounted combined ratio reduced to 76.2% (2022: 88.5%).

“Overall, market conditions have remained broadly positive, and we achieved risk-adjusted rate increases of 7.1%. In total, we have seen compound increases since 1 January 2018 of 65.1%. While we have continued to achieve rate increases in most of our underwriting portfolios, in some lines we are seeing increased competition and rate reductions, putting pressure on premium income. We remain vigilant to this and continue to closely monitor our underwriting approach as we maintain our focus on cycle management.

“Against this backdrop we have remained highly disciplined and focused on underwriting profitability. This is reflected in a slight reduction in the Group’s overall insurance premium written to $3,753.5m (2022: $3,970.0m), mainly driven by market conditions in certain classes, the implementation of our catastrophe strategy, and our continued focus on improving our performance by exiting underperforming business.

“In its third year of trading, Ki’s insurance premium written increased by $42.9m to $877.0m and continued to make a positive contribution to the Group. Ki has further driven change in the Lloyd’s market including the evolution of Ki’s business model, allowing brokers to access digital capacity from multiple Lloyd’s syndicates directly through the Ki platform, made possible through multi-year partnerships with capacity partners.”

“Our ability to deliver a best-in-class claims service is an important differentiator for Brit. We continued to support our clients when they need it most, with innovation at the heart of our claims approach, as demonstrated with our response to the 2023 Hawaiian wildfires and other major loss events. We were delighted that this resulted in our claims team being recognised in winning a number of prestigious industry awards.

“Looking ahead, our aspiration for the Group is to be a long-term winner in the Lloyd’s market, supported by our clear strategic focus on driving performance and profitability. Our 2023 results show we have the foundations from which to achieve this: through Syndicate 2987 we are a highly relevant lead market, while Ki is demonstrating the future of follow. In 2024 we will continue to invest in our technology strategy, broker relationships and underwriting capabilities to build on the established leadership positions of these respective parts of the Group, while retaining our long-term focus on careful management of the insurance cycle.

“While we remain mindful of shifting market dynamics, this positioning gives me great confidence in the outlook for Brit. Underpinning this confidence is our special and unique culture and I am proud of Brit’s reputation for fostering diverse talent. I would like to thank all my colleagues at Brit for their contributions over the last year, as well as our brokers and partners in the market for their ongoing support,” he added.

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