Trading Statement

RNS Number : 4419L

Amlin PLC

12 January 2009

 



AMLIN PLC

PRESS RELEASE

For immediate release

12 January 2009

TRADING STATEMENT

Amlin plc ('Amlin' or 'the Group'), the leading insurer, is today providing an update on current trading as set out below. 

2009 underwriting

1 January is a major renewal date for a number of our key classes.  Amlin has written total income to date (before deduction of brokerage) of £389.0 million, a 30.6% increase on the prior year.  Overall renewal rates for the Group have increased by 4.0% (2008: reduction of 8%) with a retention rate of 84.1% (2008: 87%).  This is analysed by division as follows:

Division	Premium income £m	Renewal rate movement %	Retention rate %
Reinsurance	160.8	5.1	88.9
Property and Casualty	53.8	(0.1)	75.7
Marine	76.5	4.3	79.4
Aviation	15.1	(0.7)	82.9
UK Commercial	5.2	2.7*	78.1
Amlin Bermuda	77.6	5.6	98.4
	389.0	4.0	84.1

*represents renewal rate movement for month of December 2008

As expected, the impact of last year's hurricane activity and the recent dislocation in capital markets has started to drive firmer reinsurance rates, reversing last year's falling trend.  At 1 January, our US catastrophe accounts, written in the London Reinsurance division and Amlin Bermuda, experienced a rate increase of 9.6%, with our international catastrophe book improving by 3.1%.  

Looking forward we expect the rating environment in this area will continue to improve.  Retrocessional capacity is limited this year following the withdrawal of a number of market participants.  This is likely to have a further impact on available primary reinsurance capacity through 2009, particularly for peak exposures.  Also, US windstorm renewals are concentrated in the middle of the year and we would expect that, with capacity constrained, this will lead to stronger rating levels.  

Our Property and Casualty division rating levels at 1 January were relatively stable compared to the sharp downward trend seen in 2008. The level of income renewed at this stage is relatively modest and we have conserved capacity as we expect rates to improve through the year as higher reinsurance costs and lower risk appetites begin to impact.  

Our Marine business is experiencing positive rate movements, with energy rates up by 22.0% and hull insurance rates rising by 8.9%. 

Group update

In light of market developments, on 16 December 2008, Amlin announced the completion of its first special purpose syndicate, Syndicate 6106, established to write a 15% quota share contract of the excess of loss reinsurance account of Amlin's Syndicate 2001. This transaction provides alternative protection to retrocessional capacity which, as referred to above, is in scarce supply and will help Amlin to take advantage of strong opportunities in the key peak zones in the US, Japan and Europe, despite the dramatic fall in value of sterling. 

Separately, in November, following a detailed review of our trade credit insurance business, the Group decided that it would no longer be offering renewals to customers or seeking new business opportunities.  The decision reflects Group risk appetite for this business and the medium to long term view of the profitability of the business.  Net premium income to the Group was less than £12 million.  An additional provision of £8.0 million will be made for the year ended 31 December 2008 including the associated expenses of closing down the portfolio.

2008 underwriting

The Group's gross written premium (before deduction of brokerage) in the year ended 31 December 2008 was £1.02 billion (2007: £1.04 billion), a decrease of 1.9% on the prior year.

Syndicate 2001's gross written premium was £833.9 million (2007: £900.6 million). This includes £38.5 million of business specifically written to be ceded to Amlin Bermuda with up to a further 12.5% ceded through the renewal of a whole account quota share reinsurance contract.  In addition, Amlin Bermuda produced direct income of $352.1 million (£190.3 million), an increase of 23.5% on the prior year.

64% of gross written premium in the year was US dollar premium, translated at an average exchange rate of $1.85:£1.  There has been a material weakening of sterling relative to the US dollar since September and applying a year end rate of $1.46:£1 would result in increased total gross written premium of £1.2 billion.

The average rate of renewal decrease for the year was 7.7% with renewal retention of 83.8%. The main renewal season for the 2008 account since our last interim management statement has been for the airline account, where rates increased by 4.3%. 

There have been no major claims affecting the Group beyond those reported in our interim management statement in November 2008. 

Investment return

Fourth quarter investment return is estimated to be 0.2%.  Consequently, the weighted average investment return for 2008 is estimated to be 0.6% on average funds under management of £2.6 billion.  The bond portfolio, which on average represented 58% of the total portfolio, returned 3.2%.  Equities, which on average accounted for 9% of the portfolio, produced a negative return of 26.5%. 29%, on average, was held in cash which returned 3.6% across all currencies. 

As part of the hedging strategy for the Group's net investment in Bermuda, Amlin Bermuda, which reports in US dollars, held sterling assets at the year end of £204.8 million.  These produced a foreign exchange loss of £41.3 million in 2008 in Amlin Bermuda's income statement which will be consolidated into the Group income statement.  An offsetting foreign exchange gain is recognised in the Statement of Changes in Equity.  In addition gains on the unhedged Bermuda net investment will increase consolidated net assets.  The income statement also reflects other foreign exchange gains, including gains relating to the foreign exchange translation of net non-monetary liabilities, which offset the loss on Bermuda's sterling assets.

Charles Philipps, Chief Executive of Amlin, stated:

'We are through the bottom of the insurance cycle with strong prospects for hardening rates across our business. We have a strong balance sheet and we are in an excellent position to take advantage of opportunities to grow the Group over this next phase of the cycle.'

  Enquiries:

Charles Philipps	020 7746 1000
Chief Executive, Amlin plc
Richard Hextall	020 7746 1000
Finance Director, Amlin plc
Hannah Bale	020 7746 1118
Group Communications, Amlin plc
David Haggie/Peter Rigby	020 7417 8989
Haggie Financial

Notes to Editors:

Amlin plc is a recognised leader in the London insurance and reinsurance market, providing a global client base with risk management solutions.  Amlin has five business areas: Aviation; Marine; UK commercial; International Property and Casualty; and Reinsurance.  A FTSE-100 quoted company, Amlin owns 100% of its £825m Lloyd's capacity for 2008, which is written through Syndicate 2001.  Syndicate 2001 is rated 'A+' (Excellent) by AM Best and 'A1' (Stable) by Moody's.

In 2005, the company established Amlin Bermuda Ltd as a reinsurance business capitalised at US$1 billion. In 2007 Amlin Bermuda had net earned premium of $432 million and is now rated A (Excellent) by A.M. Best and A by Standard & Poor's. Amlin has also set up operations in Singapore and in Illinois, USA, in 2007 and 2008 respectively, to service regional and local clients.

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