Amlin PLC AML Interim Management Statement

  Amlin PLC (AML) - Interim Management Statement

RNS Number : 1660R
Amlin PLC
15 November 2012




Amlin plc



PRESS RELEASE



For immediate release

15 November 2012



Interim Management Statement for the period from 1 July 2012



The underwriting environment for the period from 1 July was encouraging,  with 
rate improvements  and limited  catastrophe loss  activity. Rate  improvements 
have been achieved for  more than 80%  of the portfolio  during the ten  month 
period to 31 October and overall, renewal rate increases have averaged 3.8% in
the period. 



As previously reported,  pricing for catastrophe  reinsurance during 2012  has 
reacted strongly to the extraordinary loss activity of 2011. In our insurance
markets, rates  for  US commercial  property  have steadily  improved  and  we 
continue to achieve improvement in our UK commercial business.



Investment markets have continued to  prove challenging, but Amlin's  balanced 
portfolio of assets delivered good returns for the quarter.



Hurricane Sandy, which made landfall in  the United States on 29 October,  has 
caused material damage to the US  east coast. Given the timing and  magnitude 
of the event, and the fact that ongoing disruption in the affected area  means 
information is limited, Sandy's impact is  still to be determined. However,  a 
favourable first nine months means we are well placed to absorb claims.



Amlin remains  in a  healthy financial  position and  is well  capitalised  to 
support growth as conditions improve and opportunities materialise. The  core 
profitability of our London and  Bermuda business is strong and  profitability 
continues to improve in  our UK business.  Additionally, there is  increasing 
evidence that the action taken  at ACI is having a  positive effect. In a  low 
interest rate  environment, our  profit focused  underwriting strategy  should 
encourage the business to prosper.



Underwriting environment



The Group's gross written premium for the ten months ended 31 October 2012 was
up 11.1% at £2,278.8 million (31 October 2011: £2,051.9 million). The  average 
renewal rate  increase  was  3.8%  (31 October  2011:  0.9%)  with  a  renewal 
retention ratio of 84.5% (31 October 2011: 82.1%).



The underlying  increase in  gross written  premium of  £161.0million,  after 
taking account of renewal rate movements, was attributable to growth in  Amlin 
London, Amlin UK, Amlin Bermuda and Amlin Re Europe.



The changes to premium by division are analysed in the table below



                                                                          

                                                                          

                             Renewal      Renewal          Renewal   Renewal

                Gross written    rate    retention     Gross  rate   retention
                premium to 31  change        ratio   written change      ratio
                 October 2012                        premium
                                  to        to 31        to      to     to 31
                    £ million         October 2012                     October
                                   31                     31      31      2011
                              October            %   October October
                                 2012                   2011    2011         %

                                    %              £ million       %
Amlin London            981.0     4.9         84.3     880.8     1.1      83.5
Amlin UK                342.8     5.2         78.2     269.7     5.2      83.7
Amlin
European                458.3     0.2         85.0     497.6   (0.5)      73.8
Insurance
Amlin                   330.4     6.2         87.5     305.4     0.5      90.1
Bermuda
Amlin Re                166.3     2.2         91.0      98.4       -         -
Europe
Total      /          2,278.8     3.8         84.5   2,051.9     0.9      82.1
average



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



As previously reported, the period  to the end of  October 2012 saw a  healthy 
increase in catastrophe  reinsurance rates, following  the extraordinary  loss 
activity of  2011. North  American catastrophe  business achieved  an  average 
renewal rate increase  of8.1%,whilst our  international reinsurance  account 
achieved an average  increase of 15.0%.  Rate increases were  more marked  in 
loss affected  territories,  such as  Australasia  and Japan.  Rate  increases 
slowed from the second quarter, reflecting limited loss activity in the period
and the fact that  for a number of  contracts, significant rate increases  had 
been achieved in 2011.  We expect catastrophe  reinsurance pricing to  remain 
strong, with our US and international books trading at near peak levels,  with 
Hurricane Sandy helping to limit downward pressure.



Property and Casualty  rates have continued  to improve since  the half  year, 
generating an average renewal rate increase  of 3.8% in the ten month  period. 
The direct and facultative property business achieved an average increase  of 
8.2%.We expect that  losses from  Hurricane Sandy will  add further  positive 
momentum to US property rates.



Rates within our London Marine business  were stable, with an average  renewal 
rate increase  of 0.5%  to  30 October.  Variation continued  across  classes. 
Liability and yacht  business had  average rate  increases of  2.9% and  1.6% 
respectively, whereas  war  and  specie classes  experienced  respective  rate 
decreases of 2.4% and 1.9%. 



The trading environment for  Amlin UK remains  positive,with an average  rate 
increase of 5.2%for  the year to  date. Increases to  fleet motor rates  now 
average9.4%. Elsewhere, property rates  increased by1.9%in the period  and 
liability classes  have also  begun  to show  signs of  improvement.  Notably, 
employer's liability and public liability business achieved rate increases  of 
3.4% and  7.3%  respectively  for  the ten  month  period.  Recent  strategic 
initiatives,  including  investment  in  new  distribution  channels  and  the 
addition of  a new  high net  worth underwriting  team, contributed  to  £99.6 
million of new business.



In Continental Europe, market conditions continue to prove competitive, though
rating levels remain steady. Action taken to improve the profitability of
ACI's marine business is having a positive impact on the underlying
performance of the business. The majority of changes to ACI's marine
portfolio are complete and we believe that, with increased profit focus and
direction, it is now in a position to grow income when market conditions in
the Benelux improve. ACI's non-marine business continues to perform
satisfactorily in competitive trading conditions.



Amlin Re Europe  has continued  to make good  progress in  line with  original 
plans and has achieved significant growth in its client base. In the ten month
period to  30 October,  the  business wrote  €205.0million of  gross  written 
premium, with  the  rating  environment marginally  positive.  As  previously 
reported, with  the  initial  costs  of  start  up  being  incurred  ahead  of 
development of  earned  premium, we  do  not expect  the  business to  make  a 
material profit contribution  to the Group  in the current  year, however,  we 
remain confident of its long term prospects.



Outwards reinsurance



Reinsurance expenditure in the period to 30 September was £342.5 million, an
increase of 35.5%, representing 15.6% of gross written premium (Q3 2011:
£252.7 million and 12.9%). The increase in outwards reinsurance expenditure
reflects the increased costs of retrocessional programmes since the losses of
2011, greater cover bought by Amlin Bermuda, together with the purchase of a
catastrophe bond. The increased expenditure has been more than offset by
increased income in the nine months and this is expected to be the case for
the full year.



Claims and reserves



The period to  30 September  was a  relatively benign  period for  catastrophe 
activity, in contrast to the prior year.



The only significant catastrophe loss to the Group in the period was Hurricane
Isaac, impacting the US Gulf Coast in September. Estimated claims to Amlin
from this event amount to approximately US$25 million (net of reinsurance and
reinstatement premiums).



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
consistent with those disclosed in our 2011 Annual Report.

For Amlin European Insurance, there were no new large claims above €5.0m in
the period and attritional claims patterns have continued to show
improvement.



In the quarter to 30 September 2012, following the normal quarterly review  of 
claims reserves, £16.4million was released from reserves, bringing cumulative
releases for  the  nine months  to  30 September  2012  to £69.4  million  (30 
September 2011: £71.2 million).



Hurricane Sandy



During the  last  week  of  October, Hurricane  Sandy  travelled  through  the 
Caribbean and up the east coast of the United States causing extensive damage,
particularly after its landfall in New  Jersey. It is estimated to have  been 
the largest Atlantic storm by diameter on record, although the wind speeds  at 
the centre  of the  storm were  only at  category one  status. The  resultant 
damage is complicated, with multiple causes including wind damage, storm surge
and flooding from  rainfall. Damage  is also spread  over a  large number  of 
states. As  non  government  agency  insurance in  the  United  States  often 
excludes flood or in some cases storm surge damage, the actual insured  claims 
and,  in  particular  the  claims  impacting  Amlin  direct  or  through   its 
reinsurance client base, are at this stage unclear.



Investment returns



The Group's investment return  for the nine months  to 30 September was  3.6%, 
with average funds under management of £4.1 billion. During this period  bonds 
returned 3.9%, Libor plus 4.9%, cash and cash equivalents 0.4%, equities  9.5% 
and property 5.3%.



The asset allocation (based  on allocations to  sub-advisors) at 30  September 
2012 was 50% bonds, 17% Libor+, 24% cash and cash equivalents, 6% equities and
3% property.



Other developments



On 17 August, Amlin announced the appointment of Shonaid Jemmett-Page, FCA, MA
as an  independent  non-executive director  of  Amlin, effective  1  September 
2012. On the same date, it was announced that Martin Feinstein would join and
become Chairman of the Risk & Solvency Committee with effect from 1  September 
2012.



On 20 September,  Amlin announced  that Charles Philipps  and Richard  Hextall 
would resign as directors of Amlin Underwriting Limited (AUL) with effect from
1 October 2012  and that  Simon Beale would  hand over  his responsibility  as 
Underwriting Director of Amlin London to Kevin Allchorne with effect from  the 
same date.  Simon  Beale remains  on  the Board  of  AUL as  a  non-executive 
director.



As previously reported, Amlin Reinsurance Managers, Inc commenced trading on 1
October, operating from  offices in New  Jersey under the  leadership of  Paul 
Brauner. The  operation seeks  to  establish a  lead  US market  for  casualty 
reinsurance  targeting  nationwide  business  with  a  focus  on  general  and 
professional liability classes. The  business will be  sourced direct from  US 
brokers and underwritten on behalf of Syndicate 2001.



Charles Philipps, Amlin's Chief Executive, commented

"Our strong first half performance continued  in the third quarter with  solid 
progress achieved  on  a  number  of  fronts,  including  at  ACI.  While  the 
complexity surrounding  Hurricane  Sandy  means  that it  will  take  time  to 
establish a  meaningful  estimate of  loss,  we  believe it  will  be  readily 
absorbed and  that  it will  help  continue  the improvement  in  US  property 
insurance rates that has been evident so far this year"





Enquiries:


Enquiries:
Charles Philipps, Chief Executive, Amlin plc                0207 746 1000
Richard Hextall, Finance and Operations Director, Amlin plc 0207 746 1000
Analysts and Investors
Julianne Jessup, Head of Investor Relations, Amlin plc      0207 746 1961
Media
Hannah Bale, Head of Communications, Amlin plc              0207 746 1118
John Waples, FTI Consulting                                 0207 269 7292



                     This information is provided by RNS
           The company news service from the London Stock Exchange

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