Bermuda market maintains profitability in second quarter

The Bermuda market shows no signs of waning profitability, even as rates in several key lines begin to soften, according to results compiled by Benfield Group. In its quarterly analysis of the top 16 listed Bermuda companies, Benfield finds net income up by 33% to US$4.1 billion in the first half of the year. One factor was that the second quarter of 2004 represented the eleventh successive quarter of low catastrophe losses. Early estimates for Hurricane Charley’s indicate losses will be 18% of net income reported in the first half of 2004. Premium growth continued in the first half of this year, up by 21% to US$30.3 billion, however the pace of growth has faltered from the impressive 67% growth seen in the first half of last year. This is not surprising given that most Bermuda companies are reporting flattening to decreasing rates for property and property catastrophe covers, and even increasing competition in lines such as U.S. directors and officers.Nonetheless, Benfield notes, company CEOs report rates are technically adequate and show a resolve to maintain price discipline. “To this end, the stated determination of companies to manage capital and underwriting exposure actively, coupled with the continuing repairs to damaged balance sheets, is encouraging, but the newer companies remain to be tested by the more challenging phases of the underwriting cycle,” the report notes.In fact, companies’ average combined ratio dropped further in the first half of 2004 to 76.3% from 80.5% a year earlier. And companies appear focused on balancesheet maintenance with an18% increase in aggregate shareholders’ funds in the first half of 2004.