The Bermuda Stock Exchange last month launched its “Own Your Share of Bermuda” campaign to raise awareness of opportunities to invest in the island’s public companies. The Royal Gazette is supporting the effort by publishing weekly features on each of the 13 domestic companies listed on the BSX. In the fourth of the series, Raymond Hainey looks at BF&M.

Insurance is by nature a risky business — but BF&M Ltd CEO John Wight said his company and its success were built on rock-solid foundations.

Mr Wight said BF&M, the island’s biggest insurer, had consistently provided good returns in excess of 9 per cent every year for the last 13 years, even in the depths of recession, and dividends had increased.

He added: “We have a very good track record and our share price over that period reflects that.”

And he said the firm’s move into the Caribbean had helped spread risk, with other lines of business picking up any shortfalls.

The company posted net income of $19.2 million for the first nine months of 2016, up nearly $2 million from the same period the year before.

The results translated to a 9.6 per cent return on shareholder equity for the Bermuda Stock Exchange-listed company.

The results for the third quarter included claims from the massive fire which gutted the Ann Cartwright DeCouto building on Front Street, which was insured by BF&M, in July last year.

Claims for Hurricane Nicole, which hit Bermuda last October, and Hurricane Matthew, which caused major damage in some areas of the 15 islands in which the company does business in the Caribbean, will not show up until the fourth-quarter results.

Mr Wight said the company share price, which stood at $20.50 yesterday, undervalued the company.

He added: “We are still undervalued — $20 reflects less than three quarters of book value. I think we’re undervalued and I think that’s because many people don’t track the fortunes of BF&M and other companies on the BSX.

“Looking at our continued successful track record and dividends, it’s a very strong record. We certainly feel the company is not valued at what it should be.”

And he pointed out: “Insurance is the type of business everybody requires — in some cases, it’s mandatory. If you have a bike, a car, need health insurance or need a pension, these are all mandated insurances.

“This isn’t the type of business that comes and goes. It’s the foundation for how we operate — that’s not going to change.”

Mr Wight said the company offered every kind of insurance required in Bermuda, as well as pensions administration and investment advisory services.

He added: “We operate in 15 islands in the Caribbean. In each of those we operate property and casualty business and in Barbados and the Bahamas we also offer non-property and casualty insurance.

“Our headquarters will always be in Bermuda, but we have extensive operations in the Caymans, Barbados, Bahamas and Halifax, Nova Scotia.”

And he added: “Some companies venture outside their core skill sets — we’ve never done that.

“We know our skill is in underwriting risk and pensions and advisory services. We stick to what we’re good at and we have a great track record in doing that.

“Just in terms of dollars and cents, our dividend is currently more than four per cent. Compare that to what you might receive on a bank account, that’s a nice return.”

Anyone who invested at the start of 2010, when BF&M’s share price was $15.05, would have seen capital growth of 36 per cent over the seven years since. In addition, they would have received $5.62 per share in dividends through the end of last year, worth a further 37 per cent return on the original investment.

And Mr Wight said prospects for capital appreciation were good, backed with a business plan for the future.

He added: “We have a strong business plan to continue that success, to continue it beyond 2017 into the future.”

According to the latest available figures, BF&M generates 70 per cent of its earnings in Bermuda, with 54 per cent from property and casualty business, 40 per cent of health, life, annuities, pensions and investment advisory services and six per cent from Bermuda real estate.

Equity attributable to shareholders at the end of the third quarter last year was $271 million, while general fund assets totalled $1.1 billion, of which nearly $119 million was held in cash and cash equivalents.

Gross premiums written for the period totalled $274.4 million, an increase of 5 per cent on the same period in 2015.

Investment income for the nine months showed an increase of more than $19 million in the value of investments on an overall year-to-date decline in US interest rates.

Commission and other income was in line with the previous year at $30.4 million and operating expenses increased by three per cent to $48.8 million.

Mr Wight said: “It all starts with the people we have in our company and we have independent verification of our success. BF&M is the only company in Bermuda to have been in the Top Ten Outstanding Employers in The Bottom Line magazine every year.”

He added the company was also the first on the island to achieve Investors in People gold status, while ratings agencies gave the business higher ratings than any others doing business in Bermuda or the Caribbean.

Mr Wight said: “Through our financial success, we’re also able to assist the community. In 2016, we contributed to 65 charities in Bermuda. It’s very meaningful for our staff to share our good fortune with those less fortunate in our community.”

Disclaimer: This material is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. Past performance is no guarantee of future results