Interim Management Statement

RNS Number : 7527H

Amlin PLC

22 May 2014

 



22 May 2014

Amlin plc

Interim Management Statement for the period to 31 March 2014

Amlin has had a good start to 2014. Growth in gross written premium of 5.1% was achieved and, following the changes made in outwards reinsurance at the beginning of the year, net written premium increased by 11.9%. Catastrophe and large loss activity was limited and a solid investment return of 0.6% was achieved.

Underwriting

Gross written premium for the three months ended 31 March 2014 was up 5.1% at £1,276.7 million (31 March 2013: £1,215.0 million).  At constant rates of exchange gross written premium increased by 8.3%.  Renewal retentions improved to a healthy 88.2% (31 March 2013: 87.5%) and average renewal rates decreased by only 2.3% (31 March 2013: increase 1.2%).

Net written premium increased 11.9% to £1,049.9 million (31 March 2013: £938.3 million).

Performance by division is analysed in the table below.

	Gross written premium to 31 Mar 2014 £ million	% written of full year business plan	Renewal rate change to 31 Mar 2014 %	Renewal retention ratio to 31 Mar 2014 %	Gross written premium to 31 Mar  2013 £ million	Renewal rate change to 31 Mar 2013 %	Renewal retention ratio to 31 Mar 2013 %
Amlin London	507.2	43.5	(4.1)	88.4	456.4	1.4	87.7
Amlin Bermuda	167.4	52.9	(6.7)	86.7	146.1	0.8	83.1
Amlin Re Europe	197.6	83.5	(1.0)	92.6	157.9	2.7	89.4
Amlin UK	127.6	29.9	2.1	79.3	141.2	2.2	85.2
Amlin Europe	276.9	61.5	0.3	90.1	313.4	0.2	89.9
Total / average	1,276.7	49.6	(2.3)	88.2	1,215.0	1.2	87.5

Note: Gross written premium by division is shown excluding the impact of intra-group transactions.

There is clear evidence of increasing competition in a number of business lines, most notably catastrophe reinsurance. However, good margins remain possible and, in this more challenging environment, Amlin achieved growth in catastrophe reinsurance gross written premium of 3.7% in the three month period, while recording an average renewal rate decline of 8.8%. US catastrophe renewal rates reduced by an average of 10.3%, while international catastrophe renewals experienced average rate decreases of 7.3%.

These rate reductions are believed to be lower than the catastrophe reinsurance market as a whole and is a result of the combination of Amlin's highly respected traditional reinsurance offering with that of Leadenhall Capital Partners which has strengthened Amlin's client proposition: the result has been preferential signings, access to business which is not available in the open market and, on some business, better pricing.

Other reinsurance lines have not come under the same pressure as catastrophe reinsurance and Amlin Re Europe continued to develop positively, adding £30.3 million of new income in the period with an average renewal rate decrease of only 1.0%. Its first quarter result was promising, with growth in earned premium reducing the expense ratio.

Amlin London added £18.1 million of well rated US property and casualty business in the period.  Renewal rates, having increased by 1.2% in the first quarter of 2013, recorded an average decrease of 1.6% in the period. Marine and aviation, renewal rates also decreased by an average of 1.6%.

Income for Amlin UK was lower, reflecting reductions to income estimates on binding authorities made later in 2013. However, its fleet motor renewal rates have continued to rise, with an average increase of 6.1% recorded in the first three months. Most other UK commercial classes have had modest increases.

The reduction in written premium for Amlin Europe is the result of a timing difference in the recognition of £33.4 million of income from RaetsMarine, which prior to its acquisition, was treated as a binding authority; no impact is expected for the full year. Although Continental European insurance markets remain competitive, rates have been broadly stable. Amlin Europe's retention ratios have again been high and it is starting to succeed in its growth strategy, with £34.1 million of new business added across all lines in the quarter. The underlying performance of Amlin Europe continues to improve.

Outwards reinsurance

Reinsurance expenditure in the three months to 31 March 2014 was £226.8 million, representing 17.8% of gross written premium (31 March 2013: £276.7 million and 22.8%). The reduction reflects the closure of Special Purpose Syndicate 6106, which accounted for £17.1 million of reinsurance expenditure in the prior period (£35.9 million for the 2013 full calendar year). We also improved retrocessional purchase, benefitting from lower rates and improved cover available on attractive terms. In addition, outwards reinsurance spend for insurance classes has been reduced. With the assistance of more sophisticated modelling, we have taken the decision to internalise a proportion of a number of programmes. Given the diversifying nature of many of our insurance classes, this has the effect of increasing mean expected profitability whilst only modestly increasing extreme tail risk.  Overall a full year saving of approximately £70 million in reinsurance expenditure is expected. 

Claims and reserves

The period to 31 March 2014 saw limited catastrophe loss activity and few large risk losses. Net claims from prior catastrophe events remain materially in line with those previously disclosed.

Claims attributable to the UK floods, in Amlin UK's property account, amounted to £7.0 million. Amlin has modest exposure to both the Malaysian Flight 370 and the Sewol Korean passenger vessel disasters.

In the quarter to 31 March 2014, following the normal quarterly review of claims reserves, £17.4 million was released from reserves across the Group (31 March 2013: £14.7 million), predominantly due to positive claims development in Amlin Europe.

Leadenhall

We continue to develop synergies between Leadenhall Capital Partners and our own reinsurance business.  Over time, we expect that Leadenhall's growth, and its ability to supplement Amlin's reinsurance capacity, will help us grow our share of the global reinsurance market.

At 31 March 2013, Leadenhall had funds under management of $1,637.5 million (31 December 2013: $1,603.4 million).

Investment returns

The Group's investment return for the three month period to 31 March 2014 was 0.6% (31 March 2013: 1.1%) with average funds under management of £4.3 billion. The asset allocation (based on allocations to sub-advisors) at 31 March 2014 was 27% bonds - duration, 48% bonds - absolute return, 7% cash and cash equivalents, 13% equities and 5% property. 

Other developments

During January 2014 Amlin Europe opened an office in Hamburg, Germany. The focus is on building a portfolio of specialised, commercial SME Property and Casualty business as part of Amlin's long-term strategy to grow the profit of its Continental European insurance business. In the period to 31 March 2014, gross written premium was ahead of expectation at £3.3 million.

On 14 March, Standard and Poor's announced that it was uplifting its rating assessment of Syndicate 2001 to '4+' from '4' following revisions to its Lloyd's Syndicate Assessment criteria. The outlook remains Stable.

On 28 March, AM Best announced that it has upgraded the issuer credit rating of Amlin AG from 'a' to 'a+' and at the same time affirmed the financial strength of 'A' (Excellent).  The outlook remains stable.

On 3 March, Amlin announced that Sir Alan Collins is to step down from the Board with effect from the conclusion of the Annual General Meeting held 22 May 2014.

Charles Philipps, Amlin's Chief Executive, commented "The first quarter of 2014 has demonstrated that Amlin remains well-positioned in a mixed trading environment. We continue to benefit from the strength of our reinsurance franchise and our partnership with Leadenhall Capital, which are creating new opportunities for Amlin as the market evolves. Elsewhere, the quality and diversity of our portfolio and our investment in broadening the footprint of Amlin's business, continue to offer scope for long-term 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 & Media Relations, Amlin plc	0207 746 1961
Media
Ed Berry, FTI Consulting	0203 727 1046

 

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