2008 renewal rate down 8% but Amlin Bermuda grows
Amlin, the Lloyd's insurer, has released a trading update outlining its 2007 underwriting results and investment returns, and its progress so far in 2008.
The Group’s gross written premium (before deduction of brokerage) in the year ended 31 December 2007 was £1.03 billion, down by 5% over the same period in 2006.
Syndicate 2001’s gross written premium was £890 million (at rates of $1.98:£1) compared with £968 million for the previous year at similar rates of exchange. This includes £38.5 million of additional business written on behalf of Amlin Bermuda.
Amlin Bermuda’s gross written premium, including the business written in Lloyd’s but excluding the whole account reinsurance of Syndicate 2001, increased by 17% to $368 million.
The Group average renewal rate reduction for the year was 5% with renewal retention of 78%. The main renewal season for the 2007 account since the last update has been for the competitive airline account where rates fell a further 17%. However, the Amlin airline portfolio has been reduced to a core number of clients. It now accounts for approximately 1% of gross premium income and so these reductions have little effect on the expected financial prospects for the Group. We believe that the airline insurance market as a whole made a loss for 2007, despite a lack of major airline disasters, and this should increase pressure on our competitors to raise future rates to more appropriate risk adjusted levels.
1 January is a major renewal date for a number of key classes. Amlin has written total income (before deduction of brokerage) to date of £298 million. This is a 7% reduction on the previous year. Overall renewal rates for Amlin have declined by 8% with a retention ratio of 87%. We believe that at these rating levels we continue to write business which will produce an acceptable return. Amlin Bermuda increased gross written premium by 22% to $127 million (2006: $104 million).
Property reinsurance rates remained satisfactory across the whole portfolio. US catastrophe reinsurance rates fell by 10%, albeit from strong levels. International catastrophe rates reduced by 12% but discipline varied by territory. Overall the reinsurance market still offers an acceptable prospect for return.
Experience on other classes varied widely. Large commercial property insurance rates fell by as much as 20%, continuing the downward pressure seen in 2007. However, the marine account saw only a modest 1% fall in rates.
Fourth quarter 2007 investment returns were a good 1.9%, principally driven by strong bond returns of 2.4%.
The weighted average investment return for 2007 is estimated to be 6.7% on average Group cash and investments of £2.5 billion. The bond portfolio returned 6.3% with excellent returns on government bond holdings offset by weakness on the credit portfolio. The equity portfolio delivered a 10.2% return in volatile markets. Cash returned 5.5% for the year across all currencies.
Charles Philipps, Chief Executive of Amlin, said: “2007 was another excellent year for Amlin. Premium income was modestly lower but the claims environment was benign and investment returns were strong. The underwriting environment in 2008 is softening as expected but good margins exist for selective underwriters. Our underwriting team has a consistent history of outperformance, particularly in a softening market. This record, together with effective capital management as evidenced by the recent £120 million return of capital, gives us confidence that we can continue to deliver for shareholders.”