Run-off subsidiary MSIL caused greater £171m loss in 2008, following financial crisis woes

Mitsui Sumitomo Insurance (London Management) (MSILM), the holding company for Japanese insurer Mitsui Sumitomo’s London market business, made an after-tax loss of £19.1m in 2009 because of a £21.1m impairment in the value of run-off subsidiary Mitsui Sumitomo Insurance (London) (MSIL).

However, the loss is much smaller than the £171.1m loss MSILM made in 2008, which was caused by a £172.6m write-down at MSIL.

MSIL, which reports in US dollars, made a pre-tax loss of $13.8m (£8.7m) in 2009, compared with a loss of $309.6m in the previous year.

MSIL was placed into solvent run-off in October 2008 after being hit by heavy losses relating to the financial crisis in 2008. These claims continued to affect the firm in 2009.

MSIL incurred gross claims of $350.4m on its credit portfolio in 2008, with the collapse of banks Lehman Brothers, Washington Mutual, Glitnir, Kaupthing and Landsbanki. Of that amount, $322.5m remained unpaid at the end of 2008 and was settled in January 2009.

MSIL also incurred three new claims in 2009 in its credit enhancement line. While no payments were made in 2009, a provision of $23m has been made.

The company said outstanding policies cover a small number of large and volatile risks.

MSIL’s Companies House filing says: “As a result, the expected claims on these policies experienced significant volatility throughout 2009 and are expected to experience volatility in the future.”

Despite the continuing losses at MSIL, Mitsui’s Lloyd’s syndicate, 3210, enjoyed a turnaround in 2009. It made a profit before tax of £14.4m for the year, compared with a loss of £17.1m in 2008.

Its combined ratio improved 8.3 points to 103% from 111.3%. The company attributed the positive performance to an improved investment result and a lower incidence of large claims.

The weakness of sterling against the euro and US dollar also benefited the 2009 result, Mitsui said, because profits were made in those currencies.

However, the company added that 2009 had been another difficult year, and gross written premium was down 6% to £331.4m from £352.7m because of continued pricing pressure in the London market.