I am delighted to announce that Barents Re produced a solid set of financial results in 2017. We delivered a net profit margin of 25.2% and our total assets grew to USD590,996,110 (2016: USD514,554,924). As a result of our prudent financial management, we delivered a further improvement in our Shareholders’ Equity to USD463,300,370 (2016: USD429,883,822). Discipline and a resolute focus on profitability have always been the hallmarks of Barents Re’s underwriting and our performance was especially pleasing in light of the competitive trading conditions in 2017. Our strong balance sheet and capitalization put Barents Re in an excellent position to take advantage of the opportunities ahead.
We witnessed one of the most active hurricane seasons in the Caribbean and Latin America in 2017 with the typhoon season in Asia also contributing to the pressure on underwriting results. Increasing weather pattern volatility coupled with a benign rate environment all made for another tough year for reinsurers. Barents Re dealt with these difficult conditions with care and skill resulting in the solid financial performance highlighted above and throughout this year’s Annual Report.
The reinsurance market will be keeping a keen eye not only on market and CAT events themselves, natural or otherwise, but their ensuing impact on rates and ultimately on their business performance. Whilst the events of 2017 have not had a significant influence on rates in 2018, there are political and economic factors which are affecting the way in which reinsurers are able to run their business.
The implementation or even just the threat of economic sanctions are prime examples of the increasing political tension worldwide. While it is impossible to predict with absolute certainty the financial cost of sanctions, we can foresee the impact on the reinsurance market through policies covering business interruption, political risk and the like. Perhaps less discussed but of equal importance is that reinsurers may need to change the way they trade: licenses around the world may be subject to cancellation with different ways of accessing specific markets needing detailed consideration and execution.
An intriguing development is that reinsurers will also have to adapt to a less global world. It is not inevitable that the world will become forever more global. On the contrary, I believe that the world is becoming less global in certain geo-political terms. Countries are retrenching: sanctions, trade wars and tariffs are at the forefront of this retrenchment trend. We may see the formation of new economic blocks, possibly smaller and with more trade restrictions which will impact the flow of business. A further example is Brexit which, although potentially presenting both challenges and opportunities, is unquestionably a cause for uncertainty in so many regards.
Added together, we have the sources of a disconnect between the political apparatus around the world and the economic function. It is this disconnect which is causing disruption in the way that businesses can plan for the future in the mid to long term basis. Barents Re has proven to be resilient in the face of the many and varied economic, political and market challenges which we have addressed and overcome over the years. It is this resilience which gives us the confidence that we will manage judiciously the challenges I describe here.
We are living in an age of uncertainty. With the desire for certainty in an uncertain world, the opportunity for our business is to demonstrate our value by maintaining the strategic direction which has served our clients, business partners, shareholders and staff so well for over two decades now. Our clients trust in our disciplined underwriting in the lines of business and industry sectors which have become our specialist areas of expertise. We will look to strengthen our access to and distribution within certain European countries alongside some of the Middle East and Asian markets which we believe offer the opportunity for profitable growth.
In 2018 we are taking an opportunity of a different nature. In 2017 we began to consider our options to redomicile the company to an alternative jurisdiction. Following extensive research and analysis of a number of jurisdictions, we completed the redomestication process to the Cayman Islands in 2018. We believe that this move will be important to maintain our reputation and credibility with clients, business partners, regulators and rating agencies.
Our clients and stakeholders can be certain that we will continue to provide the levels of expertise and service for which we have become rightly renowned. Our excellent reputation was independently recognised in 2017 with the award of industry accolades including Company of the Year at the Global Banking & Finance Awards and Top 20 Most Influential Company by CEO Insight which identifies those companies which are at the summit of achievement in terms of excellence and influence. This is therefore the perfect opportunity for me to pay tribute and express my thanks to all our fantastic staff around the world who deserve the credit for Barents Re’s successes.
We look forward to working with all our clients, partners and stakeholders in the year ahead.
President & CEO
Note: The 2017 numbers have been prepared in accordance with IFRS