24 August 2015 Insurance

Amlin grows in H1 despite challenging conditions

Profits at UK re/insurer Amlin dipped slightly in the first half of 2015 due to accountancy changes. It also enjoyed solid growth despite what it called significant transformation and challenging conditions in a number of markets.

The firm made a net profit of £132.8 million in the first half of the year, compared with a profit of £136 million in the first half of 2014. This was partly due to a change in the way it accounts for the seasonality of catastrophe reinsurance earned premium, Charles Philipps, Amlin chief executive, said.

Its combined ratio increased slightly in the first half to 91 percent, compared with 87 percent in the same period last year, due to higher expense ratio on lower net earned premium.

But the company enjoyed solid growth in the first half of the year. Its gross written premiums (GWP) increased by 6.3 percent to just over £2 billion in the first half compared with £1.9 billion a year earlier.

Its reinsurance unit also enjoyed growth despite the very competitive market conditions. GWP in this unit increased by 12.9 percent to £1 billion in H1 of this year compared with £935.2 million last year.

Amlin said the unit benefitted from new business growth and the strength of the US dollar. It added that competition within reinsurance lines remains challenging and it was being selective about the new business it is writing.

“Amlin has continued to be selective, focusing on areas where pricing meets acceptable rates of return and reducing lines where we believe prices to be marginal or inadequate,” it said.

It added that, overall, reinsurance renewal rates decreased by 6.4 percent (2014: 6 percent decrease). US and international catastrophe renewal rates were particularly hard hit with reductions of an average of 8.5 percent and 10 percent respectively.

Charles Philipps, Amlin chief executive, said: “This is a solid set of results in the more challenging market which prevails. Were it not for our change in accounting for the seasonality of catastrophe reinsurance earned premium, profit before tax would have been considerably ahead of the first half of last year.”

Amlin’s results also contained some interesting insights into how it sees the markets developing going forward. Specifically, it seems to believe that diversification is more important than ever.

“The markets in which Amlin operates are undergoing significant transformation. Capital is abundant, regulation is changing and technology is increasingly influencing how business is conducted,” the company said.

“The strength of Amlin’s franchise, the diversity of its business model and the skill and experience of our people are critical ingredients for success in this environment.

“Diversification of our business has been a key feature of our strategy in recent times. We have actively sought opportunities to adapt the balance of our portfolio, new product offerings have been developed and new markets and regions have been accessed.

“This increased diversification allows us to respond to changing markets, take advantage of opportunities for growth and to deliver returns.

“In Reinsurance, rating pressure has been significant but profitability has remained good. While average renewal rates for catastrophe reinsurance decreased by 6.4 percent in the period, broadly in line with budget expectations, we have reduced lines or come off business where we consider pricing to be below acceptable levels but have successfully increased exposure to those layers of programmes which we believe offer better rates and risk adjusted margin potential.

“The recent Florida renewals provided a glimmer of hope that the rate of decrease may be slowing. However, in the absence of material catastrophe activity in the second half, catastrophe reinsurance markets are expected to remain challenging for the foreseeable future.”

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