Amlin syndicate 2001 gets negative outlook

Syndicate Research (SRL) has changed the outlook for the Continuity Opinion of Lloyd's syndicate 2001 (MS Amlin Underwriting) to negative due to the “difficulty in turning around” the operation.

At the same time, SRL confirmed the Continuity Opinion of syndicate 2001 at B+^ (Above Average) following the conclusion of a review for possible downgrade.

The syndicate had recorded a loss, excluding investment returns on funds at Lloyd’s deposited at the syndicate level (FIS), of £556 million or 40 percent of net premium earned (NPE) on an annually accounted basis for 2017 on a combined ratio of 141 percent (including forex & all personal expenses). This compared to a market average loss excluding FIS of 20 percent of NPE for 2017, SRL noted.

The syndicate’s assigned Continuity Opinion benefited from an adjustment for group support following MSI’s acquisition of the Amlin group, reflecting the significant resources and diversified nature of the MSI group, with syndicate 2001 remaining a material element of that group, together with an adjustment for syndicate 2001’s franchise within the Lloyd’s market, SRL explained.

The agency added that following the losses, MS Amlin (incorporating syndicate 2001) had set out its plan to turn the business round based on a strengthened management team, withdrawing from or re-underwriting some portfolios, with a premium reduction of 5 percent of the portfolio, and reducing both expenses and catastrophe risk management net exposures.

MS Amlin has recorded a combined ratio of 98 percent for the first half of 2018 compared to a combined ratio of 135 percent (107 percent excluding losses from hurricanes Harvey, Irma, Maria and the Mexico earthquake) in the first half of 2017. MS Amlin’s non-catastrophe risks loss ratio have improved by -3 percent and the expense ratio by -4 percent in the first half of 2018, SRL noted.

However, in light of the significant element of unearned premium, from prior to the realignment of the account, carried forward at year-end 2017 and the difficulty in quickly turning around a syndicate of the size of syndicate 2001, SRL expects that the effect of the changes being made are only likely to be clearly demonstrated when syndicate 2001 reported its 2019 results.

With SRL considering that syndicate 2001’s underwriting team should be able to record future results in line with the B (Average) peer group, and with the material benefit of the syndicate’s group backing and its Lloyd’s franchise, SRL has confirmed syndicate 2001’s Continuity Opinion at B+^ (Above Average). The outlook for the Continuity Opinion has been changed to negative, reflecting SRL’s view of the difficulty in turning around an operation of this size and the potential for the syndicate’s results to continue to be in line with the B- (Below Average) Continuity Opinion peer group.

Amlin Syndicate 2001 is a composite, short-tail orientated syndicate backed 100 percent by Mitsui Sumitomo Insurance Company with a 2018 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 (MS&AD), acquired Amlin plc in February 2016 and merged its existing Lloyd’s syndicate 3210 into syndicate 2001 in 2017. The combined operation represented 6 percent of the Lloyd’s market’s 2017 net premium written.