Amlin: ‘It Has Been A Demanding Year’
Lloyd’s firm Amlin – which has a major Bermuda presence – today [Mar.2] reported its annual income was down by half in 2010 to £259.2 million as a result of “significant” natural catastrophe claims, with the firm incurring £204 million in losses from Chile and New Zealand earthquakes last year.
Reserve releases of £156.5 million were down on 2009’s £174.1 million but still significant at nearly 40% of income. Amlin’s investment return fell to 4% of average invested assets compared to 5.8% in 2009; return on equity was 13.9% compared to 37% in the previous year.
Chairman Roger Taylor said: ”It has been a demanding year for Amlin, with challenging trading conditions, heightened claims activity and a rigorous focus on regulatory matters. We have continued to make real progress due to the positive leadership of Charles Philipps and his management colleagues, and the ready response of our employees. I would like to thank them all for their energy and commitment.
“… 2010 was a year with both substantial catastrophe claims and a high incidence of large risk losses. Pre-tax profits of £259.2 million, with a return on equity of 13.9%, were as a consequence lower than in 2009. Earthquakes in Chile and New Zealand accounted for just over £200 million of catastrophe claims, while storms in Europe and floods in Australia, together with the Deepwater Horizon oil spill added to the incremental level of claims.”
Amlin CEO Charles Philipps, said: “With significant natural catastrophe claims and a more challenging trading environment, we have delivered a highly creditable return on equity. We remain confident of being able to trade successfully through the trough of the insurance trading cycle and to continue to generate attractive returns for our shareholders”.
He added that over the longer term, the group’s performance has been “excellent”, with a weighted average return on equity since 2006 of 24.7%.
“This continues to materially exceed our cross cycle target of 15% and our estimated cost of capital over that period of around 10%.”
During 2010, Amlin established a reinsurance business in Switzerland by re-domiciling Amlin Bermuda to Zurich and recruiting a team of reinsurance specialists to create a new division which trades as Amlin Re Europe. At the time Amlin said its Bermuda operations will remain and it is committed to Bermuda, where it has 32 staff and expects that total to grow.
Amlin Bermuda was formed in 2005 and in 2009 reported gross written premiums of $628.3 million.
Mr. Philipps said that Solvency II is further expected to increase demand for reinsurance as it is the most accessible source of extra capital for small and mid-sized insurers who may need to source additional capital.
“Also, it is expected to reinforce the desire to spread counterparty risk. This presents an attractive opportunity for a new and strongly capitalised entrant to offer improved choice to existing European cedants.”
The firm has invested a significant amount of its assets into insurance-linked securities (ILS). Its portfolio, managed by Leadenhall Capital Partners in the form of two standalone investment funds, increased to $111.9m across both funds in 2010. The return on $109.9m of average ILS funds under management was $11.4m or 10.4%
