Interim Management Statement

RNS Number : 3877X

Amlin PLC

19 November 2014

 



Amlin plc

PRESS RELEASE

For immediate release

19 November 2014

Interim Management Statement for the nine month period to 30 September 2014

Amlin has continued to generate healthy returns despite the ongoing challenging trading environment, supported by its increasingly diversified nature and strong client proposition.

Underwriting

Gross written premium for the nine months ended 30 September 2014 was up 4.2% at £2,288.1 million (30 September 2013: £2,195.7 million). At constant rates of exchange, the increase was 9.9%. As previously reported, growth includes income attributable to multi-year reinsurance contracts, and adjusting for the premium attributable to future years, growth at constant rates of exchange was 7.9%.

Average renewal rates were down 3.5% (30 September 2013: flat) and the renewal retention ratio was healthy at 85.5% (30 September 2013: 86.5%).

Following the changes made to outwards reinsurance at the start of the year, net written premium increased by 8.8%.

Premium income by division is analysed in the table below.

	Gross written premium to 30 Sept 2014 £ million	Renewal rate change to  30 Sept  2014 %	Renewal retention ratio to 30 Sept 2014 %	Gross written premium to 30 Sept  2013 £ million	Renewal rate change to 30 Sept 2013 %	Renewal retention ratio to 30 Sept 2013 %
Amlin London	1,076.6	(5.3)	85.6	985.3	(0.8)	86.4
Amlin UK	257.4	2.9	78.8	269.6	4.2	86.2
Amlin Bermuda	340.2	(8.3)	85.1	331.3	(3.1)	83.3
Amlin Re Europe	242.5	(0.9)	92.3	196.3	2.4	90.3
Amlin Europe	371.4	(0.3)	86.6	413.2	0.1	88.0
Total / average	2,288.1	(3.5)	85.5	2,195.7	(0.1)	86.5

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

The underwriting environment has become more challenging in property catastrophe reinsurance. However, Amlin's strong client proposition, enhanced by Leadenhall Capital Partners, has enabled Amlin to achieve modest growth of 5.3% with a focus on those areas where pricing meets hurdle rates of return. The average renewal rate decrease was 8.2%.

Other reinsurance classes have not experienced the same degree of pressure and Amlin Re Europe has continued to develop positively, adding £41.1 million of new business for the nine months period, mostly from growth in non-catastrophe lines, which achieved an average rate increase of 0.3%. In addition, Amlin Bermuda added £16.8 million of new proportional reinsurance business. 

In our UK commercial business, UK fleet motor rates have continued to rise, with an average increase of 5.7% in the first nine months. Most other UK commercial classes have had more modest increases. 

Rates for Amlin London's Property & Casualty business declined by 1.2%.  However, new income of £64.5 million was added across classes. Renewal rates for Amlin's London Marine & Aviation business decreased by an average of 3.9%, with the energy class experiencing a rate reduction of 8.9%.  

Continental European insurance markets remain competitive but rates have been stable.

Outwards reinsurance

Reinsurance expenditure in the nine months to 30 September 2014 was £273.1 million, representing 11.9% of gross written premium (30 September 2013: £343.5 million and 15.6%). As previously reported, the reduction reflects the closure of Special Purpose Syndicate 6106, which accounted for £34.2 million of reinsurance expenditure in the prior period, together with improved retrocessional purchase, with lower rates and greater cover available on attractive terms. In addition, outwards reinsurance expenditure for insurance classes has been reduced. With the assistance of more sophisticated modelling, the Group decided to internalise a proportion of a number of programmes.

Claims and reserves

There were no major catastrophe losses in the third quarter. The largest loss events in the year to date remain the European hailstorms and Nebraska tornado, both in June.  Claims estimates for both these events have increased in the quarter, by £7.7 million to £32.9 million and £6.1 million to £29.8 million respectively.

Smaller catastrophe and large risk losses in the quarter, the most significant of which resulted from the terrorist attacks at Tripoli Airport, amounted to £33.4 million, bringing the nine month total to £59.9 million.

Claims reserves for prior years have continued to run-off positively with releases in the first nine months totalling £63.6 million (30 September 2013: £79.3 million). Releases in the third quarter of £23.5 million were predominantly due to positive claims development in Amlin London and Amlin Europe.

Investment returns and foreign exchange

The investment return for the nine month period was 1.8%, with average funds under management of £4.3 billion. During the period bonds - duration returned 1.4%, bonds - absolute return 1.5%, cash and cash equivalents 0.4%, equities 2.6% and property 5.8%.

The asset allocation (based on allocations to sub-advisors) at 30 September 2014 was 20% bonds - duration, 54% bonds - absolute return, 6% cash and cash equivalents, 14% equities and 6% property. 

The strengthening of the US dollar during the third quarter generated £28.0 million of foreignexchange gains on translation of foreign operations (net of designated hedges) through reserves, partially reversing previous translation losses.  

Other developments

On 24 October, Amlin announced that it had increased its existing interest in Leadenhall Capital Partners (LCP) from 40% to 75%. The remaining 25% interest will continue to be held by the individual partners of LCP.  The current management team of John Wells (Chairman) and Luca Albertini (CEO and CIO) will remain in their existing roles. The team manages $1.8 billion (as at September 2014) of assets across three separate funds and managed accounts.

LCP provides asset management solutions to institutional clients in the (re)insurance-linked securities (ILS) market. ILS has grown materially over recent years, particularly in reinsurance, and Amlin is one of only a few (re)insurers to have an aligned business in this area. Significant synergies have already been developed between LCP and Amlin's reinsurance business, and the increased stake provides both businesses with a valuable strategic advantage.

On 1 September, Amlin reorganised its client facing operations into three global strategic business units: Reinsurance, Marine and Aviation and Property and Casualty. This will allow an even greater focus on clients' needs and relationships and is expected to enhance our long term growth potential through a globally co-ordinated market approach. At the same time, the Group consolidated Amlin's claims and business support functions to improve service to our clients.  In addition, the changes will increase efficiency and scalability over the medium term.

On 21 August, Amlin appointed Oliver Peterken as an Independent Non-Executive Director.

Charles Philipps, Amlin's Chief Executive, commented: "We are pleased with our progress to date in 2014 and are confident that we can continue to deliver healthy returns for shareholders. Against a backdrop of intensifying competition as a result of increasing industry capital, we have successfully maintained underwriting discipline while making good progress in building a more diversified business which is better suited to meeting the challenges of the current environment."

Enquiries:
Charles Philipps, Chief Executive, Amlin plc	0207 746 1000
Richard Hextall, Chief Finance & Operations Officer, Amlin plc	0207 746 1000
Analysts and Investors
Julianne Jessup, Global Head of Investor & Media Relations, Amlin plc	0207 746 1961
Media
Ed Berry, FTI Consulting	0203 727 1046

 

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