Season’s Greetings and a very Happy New Year to you and yours!
Insofar as weather related catastrophe events are concerned, 2018 was a kinder year to the residents of the Caribbean Region. This stands in stark contrast to the experience elsewhere in 2018, which is the fourth costliest year on record for catastrophe losses, based on current cost estimates.
In The Bahamas, we welcomed the end to successive years of storm activity, following major hurricanes in each of the prior three years. Cayman also experienced a very quiet year in terms of significant claim events.
As a consequence of this much needed reprieve, our technical results in both The Bahamas and the Cayman Islands were either in line with expectations, or positively ahead of our original projections.
For the second year running, we were able to generate an increase in our gross written premiums, primarily fueled by increased property rates, in both locations, and the steady growth in business for our Health segment in Cayman. Competitive pressures, particularly around product pricing, are a constant in both jurisdictions but we remain focused on the need to maintain an appropriate balance between growth and margin integrity.
The economic environment in Cayman continues to be very encouraging and we expect fairly robust growth in the overall economy well into the future. In The Bahamas, the economic conditions have stabilized, and emerging signs of improvement continue to support a more promising outlook.
The mid-2018 increase in value added tax (VAT) to 12 %, from the previous 7.5%, was not a welcomed development, but the change seems to now be fully embedded into the daily reality of most residents of The Baha mas. The one positive aspect of the change in the VAT regime, from a consumer perspective, was the exemption of Private Householders’ Policies, which should result in lower prices, when compared to what would have been the case had VAT been payable on this product.
During the last quarter of 2018, the Company acquired two locally registered insurance intermediaries in separate transactions, and the respective portfolios will ultimately provide NUA Insurance Agents & Brokers Limited (NUA) with an expanded market share and a stronger platform for future development in 2019 and beyond. As previously reported, we expect both transactions to be immediately accretive to the bottom line of this subsidiary.
In keeping with our previously announced plans, we executed the redemption of the balance of the Series 1 Bonds during September of 2018, and this will have a positive impact on our expense ratio going forward. Despite the outlay of $3.75 million, our cash balances and liquidity, generally, remain strong.
The one disappointing element of our overall results in 2018 relates to the investment income segment, where we experienced unrealized losses in our Cayman based international bond portfolio, and the main equity investment we have in The Bahamas.
Notwithstanding the above, the unaudited result for 2018, points to a comprehensive income in the range of $10 million for the Group. At this level of income, the return on equity (ROE) would be approximately 13% for 2018, in isolation, and close to 15% for the average of the most recent three-year period. Having regard to the fact that two of the three years within this average calculation involved material natural catastrophe claims, we are confident that our current business model can consistently achieve the ROE targets set by the Board.
The underlying capital within our risk-taking entities of Bahamas First General Insurance Company Ltd., and Cayman First Insurance Ltd., remains strong, and this is reflected in the commentary provided by A. M. Best in their reaffirmation of our A- (Excellent) rating during 2018.
Accordingly, the Directors have approved the payment of an eight cents (8¢) dividend per ordinary share which was paid on the 19th December 2018. Prior to that, a dividend of five cents (5¢) was declared and paid in May 2018, bringing the total for the year to thirteen cents (13¢) per ordinary share, or$ 4,746,507, compared to $4,381,391 paid in 2017.
During the last quarter of 2018, we were proud to host the graduation ceremony for the fourth cycle of our Future Leaders Development Program participants. For the first time, we were able to accommodate candidates from our Cayman operation, thereby extending the reach of this important management development and succession planning initiative.
On a global basis, both the Property & Casualty (P&C) and Health insurance sectors continue to be subject to a relentless pace of disru ption, an d this will no doubt continue into the foreseeable future. Leveraging technology and innovation will be a key element of our strategic focus as we endeavor to thrive in this emerging environment.
We have already tak en active steps to implement more advanced systems for our P&C business segment during 2019, for full deployment in 2020. The successful completion of this project will provide us, and our business partners, with a platform for enhanced customer experiences and a more efficient operating environment, while bringing us closer to our digitization goal.
Your Board of Directors and Management are fully engaged in taking proactive steps to ensure that we are able to position your Company for sustainable success on all fronts. We very much appreciate and thank you for your continued support.