10th Sep 2015 08:19
LONDON (Alliance News) - Gable Holdings Inc, a European non-life insurance company, on Thursday reported that it swung to a loss in the first half as it set aside additional reserves, and ruled out paying a dividend for the time being as it seeks to bolster its capital levels ahead of new insurance rules to be introduced across the EU from January 2016.
The AIM-listed insurer's preparations for the Solvency II insurance rules covering capital requirements, reporting and transparency have prompted the board to put earnings retention high on the list of its priorities.
Having already ruled out an equity fundraising as a means to raise capital under its Solvency II preparations, Gable said it is looking at quota share arrangements with two major reinsurers and "structured debt solutions" with two financial capital institutions in an effort to bolster its capital levels. The additional capital will come from "one or both" of those two sources.
"The group's preparations for the introduction of the Solvency II regime are well advanced and we have introduced additional Solvency II compliant internal risk and control systems in advance of the proposed timetable," Chief Executive William Dewsall said in a statement.
The insurer had previously said it intended to review its dividend policy in the fourth quarter, with a view to initiating dividend payments to shareholders in 2016. Now, Gable's objective is to "declare a maiden dividend at the earliest opportunity, as and when conditions permit".
The insurer reported an underlying pretax profit of GBP1.4 million in the six months to June 30, down from GBP4.9 million in the corresponding half the prior year. After setting aside additional reserves of GBP3.8 million, the company swung to a GBP2.4 million pretax loss of GBP2.4 million against a GBP2.5 million pretax profit the prior year.
"Our claims experience during the first half of 2015 has been broadly in line with actuarial expectations and our policy is to set aside provisions at actuarial best estimate to ensure that we carry sufficient reserves to meet claims as they fall due," Dewsall said.
Gable increased claims provisions by more than GBP11.0 million in the half, including the GBP3.8 million of additional reserve set-aside provision. That GBP3.8 million is equivalent to half the remaining historical gap between carried reserves and actuarial best estimate relating to 2012 and prior periods.
That gap, which stood at GBP7.5 million at the end of 2014, is to be eliminated entirely in the second half of 2015, Gable said.
Dewsall said that Gable's claims were "unusual" in 2014, with a few individually material claims and a spike in attritional claims in the European market, particularly France. That resulted in a higher actuarial reserve requirement.
"Our continued growth will help provide scale to ride out similar events in the future and our reinsurance program has been tightened to reduce our net limits and provide additional protection for our balance sheet. We regularly review our risk profile to consider ways to protect our balance sheet through underwriting limits, policy terms and conditions and reinsurance protection," Dewsall said.
The fall in underlying pretax profit came as the insurer's underlying insurance result rose to GBP6.3 million from GBP5.7 million, and was more than offset by historical exchange rate adjustments due to accounting rules.
The GBP4.1 million charge for the adjustment was due to weakness of currencies such as the euro, the Danish Krone and the Norwegian krone against sterling, as more of the insurer's premiums were represented by non-sterling business.
Gross written premiums increased to GBP51.7 million in the half, from GBP39.0 million in the prior year period.
"Growth in the business has continued in the second half of 2015 to date, both in the UK and our European markets, and we are hopeful that this momentum should continue through the remainder of the year and for the foreseeable future," Dewsall said.
Gable shares were down 11% at 22.77 pence on Thursday.
By Samuel Agini; [email protected]; @samuelagini
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