Amlin Chairman To Retire After Losses

March 5, 2012

Lloyd’s of London insurer Amlin — which operates a major Bermuda subsidiary — today [Mar.5] reported net catastrophe losses of £500.8 million when it expected £170 million and its combined ratio was 108% (2010: 89%), with 27 points generated by major catastrophe losses.

Investment return plummeted to £40.5 million, equivalent to 0.9% (2010: £175.0m, 4.0%) and the firm released £112.6 million of reserves (2010: £156.5m).

Charles Philipps, chief executive, said: “2011 was an exceptionally challenging year for Amlin in which the quality and professionalism of our service to clients was amply demonstrated.

“While catastrophe claims were a primary focus during the year, importantly we continued to make strategic progress. Our strong balance sheet and leading market position means that we are already benefiting from the improving trading environment and are well placed to resume the delivery of good returns for shareholders.

“Overall, with the underlying profitability of our core business in London in 2011, an improving rating environment in reinsurance and UK motor in particular, the expectation of better performance at ACI and the capital to support our planned growth in premiums, we expect to return to a good level of profitability in 2012.”

Roger Taylor, chairman, said: “In a difficult year, the strength of our balance sheet and the quality of our people enabled us to rise to the challenge of multiple catastrophe events and demonstrate our commitment to our clients. We are well positioned to benefit from improving markets.”

The company announced Mr. Taylor is to retire as chairman following the 2012 annual general meeting with Richard Davey succeeding him.

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Amlin in figures (2010 in brackets)

  • Gross written premiums £2,304.1m (£2,172.5m)
  • Net written premium £2,013.2m (£1,910.3m)
  • Net earned premium £1,927.4m (£1,748.1m)
  • Underwriting contribution -£146.0 (£185.6m)
  • Profit/loss before tax -£193.8m (£259.2m)
  • Combined ratio 108% (89%)
  • Catastrophe losses
  • New Zealand earthquake (February) $13,000m
  • Japanese earthquake $35-40,000m
  • US tornado Tuscaloosa $7,300m
  • US tornado Joplin $6,900m
  • New Zealand earthquake (June) $1,800m
  • Danish cloudburst $1,090m
  • Thai floods $10,000m

The company said: “Amlin London’s underwriting result of a £13.9 million loss with a combined ratio of 102%, after £247.3 million of catastrophe losses, net of reinsurance recoveries and reinstatement premiums, demonstrates the solid underlying performance of its diverse account where 33.6% of its premium income is catastrophe and property reinsurance.

“Amlin Bermuda’s loss of £58.1 million and a combined ratio of 112% largely reflects the fact that since its start up in 2005, it has purchased less retrocessional reinsurance protection than Amlin London, but it is also a more catastrophe orientated business.

“Amlin UK continued to grow its income, assisted by the acquisition of J R Clare whose accounts performed well. Its full year underwriting loss of £7.9 million and combined ratio of 103% was better than in the first half of the year, helped by improving margins on its fleet motor account and the prudent reaction to unusual prior year claims development on its property and motor accounts at the half year proving to be over cautious.

“ACI and Amlin France performed poorly with underwriting losses and combined ratios of £56.0 million and £10.6 million and 112% and 124% respectively. Amlin France was affected by exposure to overseas French property interests which suffered losses from the February New Zealand and March Japanese earthquakes and tsunami [pictured below] and the Thai floods, without which performance would have been satisfactory.

“ACI’s marine business performed considerably worse than expected, while its non-marine businesses delivered respectable results given the competitive nature of their markets. With the considerable changes and corrective action taken at ACI’s marine business over the previous two years, we started 2011 with the expectation of seeing an improvement on 2010′s performance.

“It was materially adversely affected, however, by three principal factors. There were an exceptional level of large claims, claims on long term contracts, particularly in the commodities cargo account, which expire in 2012, and the need to strengthen reserves on its long tail shipbuilding account, where it became evident that ACI had taken more profit than it should have done in 2007 and 2008.

“Amlin Re Europe, our new Zurich-based European reinsurer, was well received by brokers and clients and wrote £107.4 million of premium income in its first full year, 81.6% of the group’s overall growth in premiums.

“However, with only £50.9 million of its net premium income having been earned in 2011 and a full year of operating expenses, it contributed an underwriting loss of £2.6 million and a combined ratio of 105%, a respectable result for a start-up year.

“The combination of low interest rates and, in the latter part of the year, the growing eurozone crisis, made the generation of an investment return difficult, whilst managing our portfolios against a risk of a reversal in long term interest rate trends and a banking crisis. In this environment we were pleased to end the year in positive territory.”

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