£500m cat bill and poor ACI performance trigger loss

Charles Philipps, Amlin

Lloyd’s insurer Amlin has made a £150m loss after tax in 2011 after what chief executive Charles Philipps describes as the company’s worst year since 2001.

The loss compared with a profit after tax of £221.9m in 2010. On a pre tax basis, Amlin’s 2011 loss was £193.8m (2010: profit of £259.2m).

The main cause of the loss was £500.8m in catastrophe claims from the high level of catastrophe activity in 2011, including the New Zealand and Japanese earthquakes, US tornadoes and the Thailand flooding.

As a result, Amlin’s 2011 combined ratio was a loss-making 108% (2010: 89%).

“The combination of an extreme frequency and severity of natural catastrophes at a low point in the insurance cycle, a difficult climate for investments and poor performance from ACI, resulted in 2011 being the worst year on record for Amlin since 2001,” Philipps said in a statement.

Amlin Corporate Insurance (ACI), which Amlin bought from Fortis (now Ageas) in July 2009, made an underwriting loss of £56m in 2011, and posted a combined ratio of 112%.

Amlin attributed the continuing poor performance at ACI to an unusual concentration of losses in the first half of the year. The bulk of the losses emanated from the company’s marine division. ACI also had to strengthen reserves for its ship-building account, “where it became evident that ACI had taken more profit than it should have done in 2007 and 2008.”

“[ACI’s] disappointing result for 2011 does not reflect the sustained effort and substantial resource being applied both within ACI and the wider Group to integrate and improve this business, outgoing chairman Roger Taylor said. “Step-by-step progress towards sustainable profitability is being made and we remain confident of ACI’s strategic value to Amlin over the longer term.”

Despite the heavy losses and poor ACI performance, Philipps was upbeat about Amlin’s 2012 prospects.

“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,” he said.

Amlin 2011 results in £m (compared with 2010)

  • Gross written premium: £2.3bn (£2.17bn)
  • Investment return: £40.5m (£175m)
  • Result before tax: -£193.8m (+£259.2m)
  • Result after tax: -£149.5m (+£221.9m)
  • Combined ratio: 108% (89%)