Low US rates depress profits at JIB Group
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Your support makes all the difference.A POOR US insurance market and lower dollar interest and exchange rates held back JIB Group, the international insurance broker floated off from the Jardine Matheson empire last year.
John Barton, chief executive, said the lower rates had cost the group pounds 2.5m in revenue, leading to a pounds 10.7m first-half profit before tax, pounds 400,000 lower than a year earlier.
The group has substantial dollar deposits in the US and to a lesser extent in the UK. In the US, where JIB has 20 offices, insurance premium rates have weakened a further 5 per cent in the latest six months.
Mr Barton said Hurricane Andrew did not yet appear to have pushed insurance rates up again, possibly because the costs were so heavily concentrated on one or two large local insurers in Florida.
'At the moment it has not made the market anywhere less competitive,' he added.
The most important mechanism for recovery in the US would be rising premiums, but his guess at when that would happen was 'before the turn of the century'.
However, retail broking rates in the UK and Australia, which had a successful first half, appeared to have turned upwards.
Mr Barton did not expect group profits to improve rapidly, saying full-year earnings would fall short of earlier - though unpublished - hopes. Reinsurance earnings in the London market declined, also partly because of the dollar and US interest rates, and the Lloyd's members' agency was unprofitable.
International wholesale business did better than last year, with rates higher though there were some capacity shortages. Soft premium rates in the US also stopped some business coming to London.
However, the group's business in Asia grew strongly, particularly in Hong Kong, where Jardine's parentage helped it become one of the leading regional brokers.
Rodney Leach, chairman, said the unfavourable conditions facing the company were common to all London brokers. The big firms have all reported lower profits because of the poor market.
Turnover in the latest six months rose pounds 1.4m to pounds 85.2m compared with a year ago, but operating profit was down pounds 2.4m to pounds 11.2m.
The after-tax profit was pounds 6.4m compared with pounds 8m a year ago, and earnings per share fell from 9.4p to 5.8p. The dividend was 2.5p, and for the full year it will be an unchanged 5p. The shares closed 1p down at 118p.
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