27 April 2017 Insurance

Syndicate Research downgrades Lloyd's Syndicate 2001

Syndicate Research Limited (SRL) downgraded the Continuity Opinion of Lloyd’s Syndicate 2001 due to its financial underperformance.

SRL downgraded the A^ (Very Good) Continuity Opinion of Lloyd's syndicate 2001 (MS Amlin Underwriting) to A-^ (Good) in light of the syndicate’s continued underperformance relative to its Continuity Opinion peer group, with its recently announced 2016 result materially below expectations.

Syndicate 2001 is 100 percent backed by Mitsui Sumitomo Insurance Company (MSI) with a 2017 capacity of £1.85 billion, and writes a composite, short-tail orientated account with a strong franchise in the Lloyd’s market.

MSI, ultimately owned by MS&AD Insurance Group Holdings, acquired Amlin in February 2016 and has merged its existing Lloyd’s syndicate 3210 into syndicate 2001 for 2017, having run the syndicates as a joint operation under a predominately legacy Amlin management team since May 2016. The combined operation represented 7 percent of the Lloyd’s market’s 2016 net premium written.

SRL stated that with the combined operation’s underwriting management based on the legacy Amlin team, SRL’s analytical focus was on syndicate 2001’s stand-alone track record.

The syndicate recently recorded a loss, excluding investment returns on Funds at Lloyd’s deposited at the syndicate level (FIS), of 5 percent of net premium earned (NPE) on an annually accounted basis for 2016 on a combined ratio of 106 percent (including forex & all personal expenses). This compares to a market average profit excluding FIS of 5 percent of NPE for 2016.

SRL commented that, in terms of reported results, on a cross-cycle basis syndicate 2001 had recorded average profits excluding FIS of 13 percent of NPE for 2008 to 2016 under annual accounting but had recorded more recent 5-year average results of 6 percent NPE.

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