AGM Statement and update on current trading
25 May 2006
At its Annual General Meeting held today, Amlin plc ("Amlin" or
"the Group"),
the leading insurer, will provide an update on current trading as
set out below.
Premiums written and pricing
The Group's
gross written premium (before brokerage costs) in the four
months
ended 30 April 2006 was £647 million, up 25% over the same
period in 2005.
Of this, Syndicate 2001's gross written premium was £591
million (at rates of
$1.73:£1), compared to £519 million for the previous
year. Syndicate 2001 has
increased its lines on selected business in a small number of
classes with a
view to ceding these additional lines to Amlin Bermuda. In the
first four months
it ceded £19 million of such premiums.
Amlin Bermuda has written £75 million (at rates of
$1.73:£) of new premium
income to the Group in the first four months of 2006. This includes
business it
has written directly and the cessions referred to above. It is
below our
original expectations because of the late start and greater
competition than
anticipated for international catastrophe business for the 1
January renewal
season, and, significantly, a reduction in risk appetite for Amlin
Bermuda
following the decision not to renew a large proportion of Syndicate
2001's
retrocessional reinsurance programme in 2006. Nevertheless, we are
pleased with
the level of support shown for our new company and, in particular,
with the
quality and spread of its portfolio.
The Group has increased its premiums most in property reinsurance,
property
insurance and energy classes, for which conditions have been
strengthening
progressively during 2006 to date. With the commencement of
Amlin Bermuda and
growth in Syndicate 2001, property reinsurance income has increased
by £98
million compared to the first four months in 2005.
The average renewal rate increase for Syndicate 2001 for the first
quarter was
6% with renewal retention at 84%. This is analysed by
division below:
| Renewal Rate Change % |
Renewal Retention Ratio % | |
| Aviation | 0.7 | 88 |
| Marine | 9.1 | 84 |
| Non-Marine | 7.1 | 86 |
| UK Commercial | (2.0) | 80 |
| Average | 6.0 | 84 |
With the exception of energy and war, marine classes have seen
steady rate
improvements during the quarter. The energy account has averaged
renewal rate
increases of 82% for the year to date. Conversely the war
account continues to
see rate reductions. However this class has been relatively
loss free and
offers diversification benefits.
Property and reinsurance rate improvements in the non-marine area
have been
strengthening through the year, particularly for catastrophe
exposed
territories. We expect that significant rate increases will
be achieved on our
Florida and Caribbean exposures which renew over the next two
months.
The UK commercial division continues to operate in a highly
competitive
environment.
Management of exposures
As previously reported, less reinsurance has been bought to protect
Syndicate
2001's own reinsurance exposures. We have continued to
explore proposals to
purchase more cover but the alternative risk management strategy of
reducing and
reshaping our peak underwriting exposures has continued to be the
main focus.
For example, Syndicate 2001's Gulf of Mexico direct property
exposures to our
modelled disaster scenario have been reduced by 30% by 1 April 2006
when
compared to 1 January 2006. Windstorm exposed catastrophe
reinsurance aggregate
is currently being reduced as programmes come up for renewal.
Additionally, as referred to above, Amlin Bermuda has reduced its
maximum risk
appetite for catastrophes to $200 million from $250 million for a
single zone,
and to $250 million from $300 million for contiguous zones.
Major claims and loss development
The underwriting loss ratios for the first quarter are excellent
for most lines
of business.
The first quarter was a benign period for catastrophic loss events,
although a
small number of large property claims were incurred. However
these are covered
by reinsurance and the property portfolio is performing in line
with
expectations.
Development of prior year claims has continued to be healthy and
ahead of our
expectations, with overall gross and net movements to 2005
hurricane losses
being immaterial.
Investment returns
Investment returns from different asset classes in the portfolio
were mixed in
the first quarter. Our global equity portfolio returned
10%. Short sterling
bonds returned 0.3% and US dollars a loss of 0.1% as bond markets
lost ground in
the face of rising interest rate expectations. All of
Bermuda's capital
remained invested in cash equivalents during the period and these
returned 1.1%.
The weighted average return on average cash and investments, of
£2.2 billion,
was 1.1%.
On 7 April 2006 an equity put option was acquired to protect
approximately 20%
of the equity portfolio from a fall below its then value.
Overall cash and investments at 31 March 2006 rose to £2.3
billion from £2.1
billion at the end of the year. This was helped by the final
closure of the
2003 and prior years of the Syndicate into Amlin companies with net
investments
to the Group increasing as a result by £200
million.
Roger Taylor, Chairman of Amlin, added: "We have had a strong first
quarter
underwriting return. As we enter the critical renewal season
for US windstorm
risk we are well placed to benefit from an anticipated further
hardening of the
market, mindful of the need to manage our exposures."
