BF&M posts $7.1m first-quarter profit
BF&M Ltd made a profit of $7.1 million in the first quarter of this year, as the insurer saw income from premiums and investments rise.
However, the profit was $1.1 million less than in the first quarter of 2015, as the effects of the company's asset-liability matching policy — to limit the swings in net income resulting from interest-rate fluctuations — kicked in, coupled with an increase in health insurance claims.
The first-quarter profit generated annualised return on shareholders' equity of 10.7 per cent.
John Wight, BF&M's chief executive officer said the year had started with strong results.
“The core operating earnings in the first three months of 2016 were ahead of the corresponding period in 2015,” Mr Wight said. “The results for the first quarter of 2015 had certain one-time gains which did not reoccur throughout the remainder of the year.”
Earnings volatility has escalated for insurers like BF&M in recent years, because of accounting rules, under International Financial Reporting Standards, that require changes in the market value of investments to be recorded in the net income calculation.
In the first quarter, US interest rates fell, meaning that the fair value of the fixed-income investments that dominate BF&M's investment portfolio rose by $10.3 million.
Under its asset-liability matching policy, the company increases or decreases insurance reserves to offset the investment value fluctuations. In the first quarter, the firm said it made an $11.2 million increase in the value of life and health policyholder benefits under the matching policy.
Gross premiums written for the quarter were $86.5 million, an increase of 7 per cent from the corresponding 2015 period.
Commission and other income increased 5 per cent to $9.7 million from improved reinsurance commission income.
Short-term claims and adjustment expenses decreased by 6 per cent to $5.6 million due to limited storm and fire claim related activity in 2016 as well as favourable development on motor losses.
Life and health policy benefits, which are recorded at fair value, increased by 19 per cent to $36 million, primarily as a result of the asset-liability matching policy moves. Higher health claims were also reported in Bermuda.
BF&M said operating expenses increased by 4 per cent to $15.6 million.
Shareholders' equity at March 31, 2016 was $263 million and general fund assets totalled $1.1 billion of which $121.9 million was held in cash and cash equivalents.
BF&M operates in Bermuda and 15 Caribbean islands. In the first quarter, the company said around half of the company's earnings were generated in Bermuda, and half throughout the Caribbean.
Approximately half was generated from property and casualty business, and half from health, life, annuities, pensions, and investment advisory services.
“This model of diversification has served the company extremely well in the past and will continue to in the future,” the company statement added.