Interim Management Statement for the period to 16 May 2012
17 May 2012
The trading environment for the period from 1 January has
been considerably more encouraging, with strong rate
improvements evident in key classes underwritten by the
Group. Catastrophe loss activity has also been limited in
the first quarter of the year.
More than 75% of our portfolio has achieved rate increases
in the period to 30 April. As expected, the rating
environment for catastrophe reinsurance has developed
strongly, with margins at or close to peak levels.
Within insurance markets, we continue to see improvement in
our UK commercial business, particularly for UK motor. Rate
increases for US commercial property have continued to
improve, building on the modest increases experienced at 1
January, while US liability business has begun to show
signs of improvement.
Investment markets, however, clearly remain volatile and we
continue to hold a cautious position.
Amlin is in a strong financial position and is well
capitalised to support growth as conditions continue to
improve and opportunities present themselves. The
underlying profitability of our London and Bermuda
businesses is strong, profitability is improving in our UK
business and there are signs that the action taken at ACI
is having a positive effect. Profit focused
underwriting remains at the core of our strategy which, in
a challenging investment environment, should allow the
business to prosper.
The Group's gross written premium for the four months ended
30 April 2012 was up 10.5% at £1,440.9 million (30 April
2011: £1,304.0 million). At constant rates of exchange,
written premium increased by 11.6% (30 April 2011: £1,291.5
The average renewal rate increase for the Group during the
four months was 4.3% (30 April 2011: decrease of 0.4%). The
renewal retention ratio for the same period was 86.1% (30
April 2011: 84.6%).
The underlying increase in gross written premium of £104.0
million, after taking account of foreign exchange and
renewal rate movements, was attributable to growth in Amlin
London, Amlin UK, Amlin Bermuda and Amlin Re Europe.
ACI's premium income decreased with further portfolio
adjustments in its marine business continuing into the
start of 2012.
We believe that the major changes to ACI's marine portfolio
are very largely complete and that, with increased profit
focus and direction, it is now in a position to grow income
when market conditions in the Benelux improve.
Performance by division is analysed in the table below.
Gross written premium to 30 April 2012
full year business plan
Renewal rate change to
30 April 2012
retention ratio to
Gross written premium to 30 April 2011
Renewal rate change to
30 April 2011
Amlin Corporate Insurance
(Direct and incl. Amlin France)
Amlin Bermuda (Direct)
Amlin Re Europe
As anticipated, following the extraordinary catastrophe loss
activity of 2011, the four month period witnessed a notable
increase in catastrophe rates. US catastrophe reinsurance
renewal rates improved by an average of 13.7%, while renewal
rates for our international business increased by an average
of 16.7%. For the international book, rate increases have
been more marked in loss affected territories, such as New
Zealand and Japan. Margins across our catastrophe
reinsurance business are strong and our US and international
books are trading at near peak levels. In the four months to
30 April catastrophe reinsurance gross written premium
amounted to £307.3 million, a 20.3% increase relative to the
same period in 2011. Elsewhere, following recent flood losses
in Thailand, our international risk excess account achieved
an average renewal rate increase of 16.6%.
We are seeing a welcome improvement in US Property and
Casualty rates and recorded an average renewal rate increase
of 3.3% to 30 April with the rate of increase strengthening
through the period, particularly for direct and facultative
property risks on which average renewal rate increases of
7.7% have been achieved. New business opportunities
added £18.6 million of income.
Our London Marine business achieved an average renewal rate
increase of 0.7% for the period to 30 April with some
variation across classes. Liability and yacht business
had average rate increases of 3.8% and 2.4%
The trading environment for Amlin UK has continued to improve
in the first four months with an average renewal rate
increase of 5.0%. Increases to fleet motor rates
averaged 9.4%. Elsewhere, property rates increased by
1.7% and rates for some liability classes are beginning to
show signs of improvement. Recent investments in new
distribution channels and the addition of a new high net
worth underwriting team, contributed more than £40 million of
Continental European insurance markets remain competitive
although rating levels are holding steady. We have continued
to take action to improve the profitability of ACI's marine
business, including the non-renewal of approximately €32.1
million of marine business in the four month period.
Importantly, there are signs that re-underwriting over the
last two years is having a positive impact on the underlying
performance of this business. ACI's non-marine business
continues to perform satisfactorily in competitive trading
Amlin Re Europe has continued to make positive progress,
building on a strong first year of trading. In the four
month period to 30 April, it wrote €186.0 million of gross
written premium, up 96.6% on the same period in 2011, with an
average rate increase of 2.1%. The business now supports a
broad client base, with approximately 300 clients from 34
different markets. With costs continuing to be incurred
ahead of the development of earned premium in 2012, we do not
expect the business to make a material contribution to the
Group in the current year, however, we are confident of its
long term prospects.
Amlin expects to increase outwards reinsurance expenditure in
2012. This not only reflects the increased costs of
retrocessional programmes since the losses of 2011, but also
the strengthened risk reward position for Amlin in comparison
to 2011 as a result of greater cover purchased for Amlin
Bermuda and the purchase of a catastrophe bond. The increased
expenditure is expected to be more than offset by increased
income, particularly from catastrophe reinsurance
Claims and reserves
In contrast to 2011, the period to 30 April represented a
relatively benign period for catastrophe losses. There
were also few large risk losses in the period.
The largest catastrophe event was the tornado activity
impacting the mid-western and southern US states during late
February and early March. The market loss estimate for this
event is between $1 billion and $2 billion (1). Amlin's
estimated exposure is contained within our attritional loss
Net claims from 2010 and 2011 catastrophe events, including
the New Zealand 'Christchurch' earthquake in February, the
Japanese earthquake in March and the Thailand flooding in the
second half of the year remain materially unchanged from
those disclosed in our 2011 Annual Report.
For ACI, there were no new large claims above €5.0 million in
the first quarter and attritional loss experience has shown
In the quarter to 31 March 2012, following the normal
quarterly review of claims reserves, £17.6 million was
released from reserves across the Group (31 March 2011: £25.0
The Group's investment return for the four month period
to 30 April is estimated to be 2.0%, with average funds under
management of £4.2 billion (2). During this period bonds
returned 1.9%, cash and cash equivalents 0.2%, absolute
return funds 2.5%, equities 8.7% and property 2.1%.
The asset allocation (based on allocations to sub-advisors)
at 30 April was 51% bonds, 19% absolute return funds, 21%
cash and cash equivalents, 6% equities and 3% property.
While acknowledging the strong start to the year for the
investment return, we remain acutely aware of the challenges
facing economies and markets, not least the debt crisis in
Europe, and we will adjust our portfolios as appropriate.
The Group continues to enjoy a strong capital position which
supports growth in the improving market conditions being
We have continued to strengthen the management team at ACI.
On 24 April we announced the appointment of Bert Nelen as
European Vice President Marine. He joins from ACE European
The platform replacement programme for ACI has made good
progress in the period and is on track to formally cut
across to the new system infrastructure by the end of
Since the start of 2012 Leadenhall Capital Partners has
continued to produce good results. The top quartile
performance of the insurance linked investment funds run by
Leadenhall has been recognised by external investors, with
over $80 million subscribed in the Leadenhall Diversified and
Value funds since the beginning of 2012. The net asset value
of the combined funds at 30 April was $330 million, meaning
Amlin's shareholding in the funds has reduced to under 40%.
Additionally, at the beginning of 2012 Leadenhall won a
mandate to make insurance linked investments on behalf of a
major UK pension scheme, which at the beginning of May took
the total assets under management of the firm to over $650
million. The funds have continued their strong performance in
the period since 1 January, posting positive results every
month to date and therefore demonstrating the strength of
Leadenhall's capabilities and the diversifying, low
correlation benefits of the insurance linked securities
As reported in our 2011 Annual Report, Roger Taylor has
decided to retire as Chairman following the 2012 AGM. Richard
Davey will succeed him.
Charles Philipps, Amlin's Chief Executive, commented "Amlin
has had a good start to 2012 and the trading environment
continues to improve, with more than 75% of our portfolio
achieving rate increases in the period to 30 April. Amlin is
in a sound financial position and well capitalised to support
profitable growth into more favourable market conditions. The
transition of ACI onto Amlin's systems will be a significant
step forward, which should further improve operating
performance in the medium term. We remain well positioned to
return to a good level of profitability during 2012."
(1) Eqecat press release, 5 March 2012.
(2) Excluding investments held in Leadenhall funds.