AM Best downgrades Lloyd’s Syndicate 2001 on deteriorating performance

Ratings agency AM Best has downgraded the Financial Strength Rating (FSR) of MS Amlin Underwriting managed Lloyd’s Syndicate 2001 due to what it describes as deteriorating technical performance.

MS Amlin Underwriting Limited, the Lloyd’s Syndicate 2001, reported a loss for 2016 as the claims ratio jumped on catastrophe losses and the Ogden discount rate change.

The loss for the full year of 2016 was £35.1 million compared to a profit of £134.3 million in 2015.

AM Best has removed from under review with developing implications and downgraded the FSR of Lloyd’s Syndicate 2001 to A (Excellent) from A+ (Superior).

The ratings for Lloyd’s Syndicate 2001, MS Amlin AG and MS Amlin plc had been placed under review with developing implications following the announcement in September 2015 that MS Amlin plc (then Amlin plc) had agreed to be acquired by Mitsui Sumitomo Insurance Company Limited (MSI), a major operating subsidiary of MS&AD Insurance Group Holdings (MS&AD). The acquisition closed on Feb. 1, 2016.

The downgrade of Lloyd’s Syndicate 2001 primarily reflects the view that its technical performance is no longer supportive of the Long-Term issuer credit rating (ICR) of “aa-” (one notch above the Long-Term ICR of the Lloyd’s market), AM Best explained. The syndicate reported an underwriting loss in 2011 and performance has not returned to the strong level anticipated by AM Best. Prior to 2011, Syndicate 2001 outperformed the overall Lloyd’s market, reporting a five-year average combined ratio for 2006-2010 of 79 percent compared with the market’s 88 percent. In contrast, the five-year average combined ratio for 2011-2015 is in line with that of Lloyd’s.

The syndicate continues to benefit from a strong business profile as one of the largest Lloyd’s syndicates, AM Best said. MS&AD’s Lloyd’s Syndicate 3210 was merged into Syndicate 2001 for the 2017 year of account. In addition, the syndicate’s ratings benefit from the financial strength of Lloyd’s, which underpins the security of all syndicates. Financial flexibility is enhanced by MS&AD, the ultimate parent of its corporate member.

AM Best has also downgraded the Long-Term ICR to “bbb+” from “a-” of MS Amlin plc which is the intermediate, non-operating, holding company of the MS Amlin Group of companies. The downgrade of MS Amlin plc reflects the same deterioration in performance as described for the syndicate.

At the same time, the ratings agency affirmed the FSR of A (Excellent) and the Long-Term ICR of “a+” of MS Amlin AG (Switzerland).

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