Interim Management Statement

RNS Number : 8364E

Amlin PLC

16 May 2013

 



Amlin plc

PRESS RELEASE

For immediate release

16 May 2013

Interim Management Statement for the period to 15 May 2013

Amlin has had a good start to 2013. In the four months to 30 April, healthy rate increases were achieved in a number of key classes underwritten by the Group, catastrophe and large loss activity was benign and a higher than expected investment return of 1.8% was achieved.

The profitability of Amlin London and Amlin Bermuda remains strong and, in line with expectations, the underlying profitability of Amlin UK, Amlin Europe and Amlin Re Europe has continued to improve.

Growth in income across 2012 and 2013 is providing positive earnings momentum and changes made to our retrocessional programme for 2013, with lower premiums and significantly lower retentions, are expected to further increase reinsurance margins.

Underwriting

Gross written premium for 2013 underwriting was up 7.1% at £1,542.6 million for the four months ended 30 April 2013 (30 April 2012: £1,440.9 million), with average renewal rate increases of 1.1% (30 April 2012: 4.3%) and a strong renewal retention ratio of 88.7% (30 April 2012: 86.1%). 

Reductions in income estimates on binding authorities in Amlin UK and Amlin Europe were made for 2012 underwriting. However, growth in gross written premium, and changes in business mix, across 2012 and 2013 are providing healthy momentum to earned income. Notably, catastrophe reinsurance income (before reinstatement premium) has increased by 33.0% since 30 April 2011, all of which has been written at strong or near peak margins.

Performance by division is analysed in the table below.

	Gross written premium to 30 April 2013 £ million	Percentage written of full year business plan %	Renewal rate change  to 30 April 2013 %	Renewal retention ratio to 30 April 2013 %	Gross written premium to 30 April 2012 £ million	Renewal rate change to  30 April 2012 %
Amlin London	639.6	50.9	1.0	87.9	571.8	6.5
Amlin UK	183.3	39.7	3.2	87.6	172.1	5.0
Amlin Europe (Direct)	346.1	66.8	0.2	90.8	368.5	(0.1)
Amlin Bermuda (Direct)	194.9	59.5	0.3	88.0	173.8	9.9
Amlin Re Europe	178.7	80.1	2.6	89.4	154.7	2.1
Total / average	1,542.6	55.8	1.1	88.7	1,440.9	4.3

US catastrophe reinsurance rates responded positively to losses resulting from Hurricane Sandy, with average renewal rate increases of 3.3%. International catastrophe reinsurance rates were stable and rates for both US and international catastrophe remain at or close to peak levels. However, increased competition from capital market entrants and the absence of major loss activity in the period is now generating downward pressure on catastrophe rates.

Against this backdrop, we are pleased to see improvement in rating for insurance classes.

Steady improvement in our UK commercial business, particularly for UK motor, has continued with increasingly positive signs for other classes. Fleet motor rates have increased by an average of 8.0% in the first four months of 2013. Other UK commercial classes, with the exception of professional indemnity which remains highly competitive, have had more modest increases. 

Rate increases for US property and casualty classes have continued to develop gradually and some £26.9 million (after acquisition costs) of new business has been added in the four month period.

Renewal rates for Amlin London's Marine business, which has traded exceptionally well over recent years, were marginally up overall, driven mainly by marine liability rate increases of 8.9% following the Costa Concordia loss in the first quarter of 2012.

Continental European insurance markets remain competitive although rates have held steady. Retention ratios have been high and we are starting to see an uptick in new business which is encouraging. Importantly, we continue to see improvement in the underlying performance of Amlin Europe and further progress towards sustainable profitability.

Amlin Re Europe continued to develop positively, adding £27.8 million (after acquisition costs) of new income in the period. The average renewal rate increase was 2.6%. We expect the business to make a positive contribution to the performance of the Group in 2013 as earned premium grows and the expense ratio stabilises.

Outwards reinsurance

In 2012, the Group modified its risk appetite following the major catastrophe claims in 2011. This included the purchase of additional protection for Amlin Bermuda and Syndicate 2001, together with the issue of a catastrophe bond. With the benefit of a strong performance in 2012 and an influx of capital into the retrocession market through 2012 putting downward pressure on rates, we have been able to renew our retrocession programme at lower premium and with significantly lower retentions for 2013. This is expected to further benefit already strong reinsurance margins.

Claims and reserves

The period to 30 April saw limited catastrophe loss activity and there were also few large risk losses.

Amlin's net exposure to Hurricane Sandy is materially unchanged from that reported in Amlin's 2012 Annual Report. Whilst a number of additional notifications have been received for our Risk Excess account, these are not considered significant. Loss estimates for other catastrophe classes are stable.

Net claims from 2010 and 2011 catastrophe events remain materially in line with those previously disclosed.

Elsewhere, loss activity was low. Amlin Europe experienced a light quarter for large claims, although Amlin France incurred a number of property claims.

In the quarter to 31 March 2013, following the normal quarterly review of claims reserves, £14.7 million was released from reserves across the Group (31 March 2012: £17.6 million).

Investment returns

The Group's investment return for the four month period to 30 April 2013 is estimated to be 1.8% with average funds under management of £4.3 billion. During this period bonds returned 0.7%, cash and cash equivalents 0.1%, absolute return funds 1.7%, equities 11.8% and property 4.0%.

The asset allocation (based on allocations to sub-advisors) at 30 April 2013 was 49% bonds, 27% absolute return funds, 12% cash and cash equivalents, 8% equities and 4% property.

Other developments

On 4 March 2013, Amlin announced that it had entered into an agreement to acquire RaetsMarine, a managing general agent ranked in the top three global providers of fixed premium marine liability protection and indemnity (P&I) business. Amlin has written the majority of RaetsMarine's business for the last ten years.

The acquisition is a part of Amlin's strategy to grow its Marine business and provide its clients with a comprehensive range of marine insurance products. As an acknowledged leader in the fixed premium P&I market, RaetsMarine is well placed to see further growth. There continues to be an increase in the number of ship owners moving away from traditional sources of cover provided by P&I mutuals to seek fixed premium programmes. In addition, Amlin will be able to leverage its existing presence in London and Singapore to attract new business to RaetsMarine.

Following a material downsizing of its unprofitable commodities cargo account, Amlin Europe announced a decision to refocus its strategy for the Belgian marine market. The new strategy will shift the focus in Belgium to the Belgian SME market and away from worldwide commodity traders, with the business focused on attracting local business through local producers. Amlin Europe has appointed a new Leading Class Underwriter and at the same time announced a small number of redundancies in the Antwerp office. Belgium is the 12^th largest cargo market in the world, with a gross cargo premium of more than €250 million, and we believe that the changes made will position Amlin Europe well.

On 10 May, Fitch Ratings upgraded Amlin Europe N.V.'s Insurer Financial Strength (IFS) rating to 'A+' with a Stable Outlook. Fitch also affirmed Amlin AG's IFS rating at 'A+' and Amlin plc's Long-term Issuer Default Rating (IDR) at 'A-'. Amlin plc's subordinated notes were affirmed at 'BBB-'. The Outlooks on the IFS ratings and IDR remain Stable.

On 18 January, Amlin announced that its Senior Independent Director, Nigel Buchanan, is to step down from the Board with effect from the conclusion of the Annual General Meeting held 16 May 2013. Shonaid Jemmett-Page will be appointed Chairman of the Audit Committee in place of Nigel Buchanan at that date. On 4 March, it was announced that Marty Feinstein would become the Group's Senior Independent Director. 

Further to the announcement made on 20 September 2012 concerning changes in the Board and management in Amlin Underwriting Ltd ('AUL'), the wholly owned subsidiary which is responsible for Syndicate 2001, on 17 January 2013 the Board of AUL approved the appointment of Nigel Buchanan as its Chairman with immediate effect. In addition, Gilles Bonvarlet joined the Board of AUL as a Non-Executive director with effect from 18 January. Richard Davey and Marty Feinstein stepped down from the AUL Board as of that date.

Charles Philipps, Amlin's Chief Executive, commented "Amlin has made a positive start to 2013 with improvement in performance across all key areas of the business. We continue to benefit from the diversity of our portfolio, which gives Amlin exposure to favourable market conditions across a range of insurance and reinsurance classes. The Group is well capitalised and in a strong position to exploit further opportunities for profitable growth."

Enquiries:
Enquiries:
Charles Philipps, Chief Executive, Amlin plc	0207 746 1000
Richard Hextall, Group Finance & Operations Director, Amlin plc	0207 746 1000
Analysts and Investors
Julianne Jessup, Head of Investor Relations, Amlin plc	0207 746 1961
Media
Ed Berry, FTI Consulting	0207 269 7297

 

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