Lloyd’s Canopius syndicate 4444 gets downgraded
Syndicate Research (SRL) has downgraded the B+^ (Above Average) Continuity Opinion of Lloyd's syndicate 4444 (Canopius Managing Agents) to B^ (Average).
The move follows the Canopius group acquisition by a private equity consortium under a management buy-out from Sompo Holdings.
Sompo acquired Endurance Specialty Holdings, which provides 100 percent of the capital to Lloyd’s syndicate 5151, in March 2017 and subsequently announced the proposed sale of Sompo Canopius to a private equity consortium led by Centerbridge Partners.
In September 2017, a private equity consortium led by Centerbridge Partners, and including the private investment firm Gallatin Point Capital, decided to acquire Sompo Canopius for $952 million.The sale was concluded in March 2018.
Syndicate 4444 is ultimately 77 percent backed by Fortuna Topco (Jersey) and 23 percent by third party capital, with a 2018 capacity of £1.05 billion, and writes a composite book of business.
Syndicate 4444 recorded a loss of 18 percent of net premium earned (NPE) on an annually accounted basis for 2017 on a combined ratio of 119 percent (including forex), the overall loss including catastrophe losses of 20 percent of NPE. SRL stated that, in terms of reported results, on a cross-cycle basis syndicate 4444 had recorded average profits of 4 percent of NPE for 2009 to 2017 under annual accounting.
The syndicate had performed in line with the B (Average) peer group in terms of indicative average annual returns on capital on a cross-cycle basis. SRL commented that syndicate 4444’s B+^ (Above Average) Continuity Opinion had previously reflected the benefit of group support from Sompo, with the syndicate’s Continuity Opinion only having been considered to be in the B+ peer group after consideration of group support. However, with Sompo’s support having been replaced by private equity capital, and syndicate 4444’s indicative average returns on capital on a cross-cycle basis in line with the B (Average) peer group, SRL considers that the syndicate’s Continuity Opinion is better positioned in the B (Average) peer group. Syndicate 4444’s B+^ (Above Average) Continuity Opinion has therefore been downgraded to B^ (Average), reflecting SRL’s view of relative performance and continuity prospects for the syndicate over the insurance cycle. The outlook for the Continuity Opinion is stable.
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