Pre-close trading statement
Amlin PLC
10 January 2005
Press Release
10 January 2005
AMLIN PLC
Amlin reports continued good trading conditions
Amlin plc ('Amlin'), the leading Lloyd's insurer, today released the following
statement on trading conditions.
Current trading
Syndicate 2001's gross written premium (net of brokerage) for the year ended 31
December 2004 was £780 million (at exchange rates $1.92:£1). This compares to
£742 million in the previous year, net of quota share reinsurance and converted
at the same exchange rate. The average renewal rate reduction for the 2004 year
was 4%, weighted across premium by business class. For 2004 Amlin owned 100% of
Syndicate 2001 compared to 86.2% for 2003.
The major class of business renewing in the fourth quarter was the airline
account. Premium rate reductions in this class were limited to an average of
10%. Taking into account increased passenger volumes for the industry, premium
income for this class is estimated to be reduced by 6%.
1 January is a major renewal period for a number of key classes of business
underwritten by Syndicate 2001. Competition in the industry is increasing as,
generally, insurance companies rebuild balance sheets depleted in recent years
by past underwriting and investment losses.
Overall, this 2005 renewal period for Amlin has been satisfactory with premium
volume of £168 million written to date, only 4% down on the previous period.
International property catastrophe and other large property risks have come
under some pressure but US catastrophe reinsurance renewals have seen only small
reductions in rates. This is encouraging given that the principal renewals of
programmes impacted by the hurricane and typhoon losses are later in the year.
Other classes have remained relatively stable.
We have also completed the placement of the syndicate's reinsurance programme in
line with our intentions. The cost of the programme is marginally higher than
2004. In view of the high level of loss activity in the year for the property
programmes this is a satisfactory outcome.
Loss activity
2004 was the costliest year on record for natural catastrophes. Current
industry estimates place the insurance cost at approximately $40 billion.
Amlin's net estimate of the impact of Hurricanes Charley, Frances, Ivan and
Jeanne together with Typhoon Songda remains materially unchanged from that
announced previously.
At the end of the year the Asian earthquake and tsunami produced further tragic
loss of life and destruction. There are no reliable insured loss estimates at
this time because the damage is still being assessed. However, we have received
few loss advices and although we have some exposure in the region, this is not a
major part of our portfolio. Accordingly, we do not expect our results for 2004
to be materially affected by this loss.
Other loss activity has continued to be low with development within expectations
for the 2002 to 2004 underwriting years.
Investment portfolio
Strong performance of the global equity portfolio during 2004 led to an
estimated total return of between 7% and 8% for the corporate assets, i.e.
excluding syndicate funds.
The investment performance for the syndicate assets is estimated to be 3% to
3.5%. The strategy of progressively switching US dollar surpluses into sterling
cash helped to boost performance, as did actively managing the tactical asset
allocation between bonds and cash. In total $282 million were sold during the
year at an average rate of $1.82:£1.
During the fourth quarter the composition of the investment portfolio for the
corporate assets of the company was reviewed. After taking account of adjusted
risk appetite and our medium term expectations of asset class performance, it
was decided to change the strategic benchmark allocation to 50% global equities
and 50% cash, compared with the previous 25% global equities, 70% cash and 5%
bonds. As at the end of December 2004, the equity allocation had been increased
to 37%. When fully implemented, the equity allocation would increase to around
7% of total cash and investments, including syndicate funds, currently held by
the group.
Charles Philipps, Chief Executive, stated: 'Following the highly satisfactory
pricing conditions in 2004, the 1 January renewal season has been written
largely in line with expectations. This gives us confidence that another
satisfactory underwriting year is in prospect, which, together with a strong
pipeline of unearned premium from 2004, should provide a solid platform for
2005.'
Contact
Charles Philipps, Amlin plc 020 7746 1000
Richard Hextall, Amlin plc 020 7746 1000
David Haggie, Haggie Financial 020 7417 8989
Peter Rigby, Haggie Financial 020 7417 8989
This information is provided by RNS
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