MS Amlin Underwriting: a return to profit

MS Amlin Underwriting chief executive officer Johan Slabbert’s year-and-a-half tenure at the Lloyd’s re/insurer has been a busy time. From notching up £7.9 million in profit in 2021, to drawing a line under the majority of its regulatory remediation, to making key hires, it’s safe to say MS Amlin Underwriting is not sitting back quietly.

In addition to securing the nearly £8 million profit, the Lloyd’s re/insurer saw improvements in its claims ratio during 2021, delivering 59 percent, compared with 76 percent in 2020.

Speaking to Intelligent Insurer, Slabbert said: “There’s been a substantial amount of focus on re-underwriting the existing classes of business, rather than trying to seek growth for the sake of growing out of our problems.”

He added: “It’s important to distinguish the discontinued classes which resulted in a £99 million loss versus a £108 million profit on continued classes.

"The expense ratio remains above the market, but as you can imagine, we’ve come from a £2.6 billion premium syndicate to one of £1.5 billion, and we haven’t quite focused on the underlying platform or infrastructure yet. That will be the next focus.”

The insurance and reinsurance classes on continued lines delivered a 91 percent and 92 percent combined ratio, respectively. Overall, including the discontinued classes, the re/insurer delivered a 102 percent combined ratio.

“We’re drawing a line under the majority of our regulatory remediation (the legal entity restructuring and legal entity separation) which allows us ultimately to be able to segment the business between our continued classes and the discontinued classes,” said Slabbert.

MS Amlin Underwriting has proactively sought to resolve some of those discontinued classes through either a loss portfolio transfer or a reinsurer-to-close transaction.

Strategies and sustainability

In February 2022, MS Amlin Underwriting agreed a split reinsurance-to-close transaction with legacy specialist Riverstone International for the UK property and casualty portfolio of the 2019 and prior years of account.

“It’s a substantial amount of reduction in reserves off our balance sheet, which ultimately drives the capital model and therefore improves our capital requirements,” said Slabbert.

He added that the transfer improved the re/insurer’s operating expenses.

“As the business was built, we acquired UK-domiciled businesses and instead of integrating them, we just added those platforms to our existing platform. Switching those systems off once we’d transferred the data to Riverstone had a significant improvement to our operating expenses,” he explained.

Lessons learned from the transaction will be applied in future for other discontinued classes.

“As a result of that, we’ve taken a better look at our reserve adequacy which then gives us more options as to what we do with the rest of our continued classes,” he added.

Turning to the future, Slabbert explained that the re/insurer didn’t have a growth strategy “because we need to demonstrate for ourselves, for our parent, and for Lloyd’s that we can produce sustainable profits and that just going into the black doesn’t allow us simply to take a different approach and start growing”.

According to Slabbert, any growth strategy is dependent on Lloyd’s giving the re/insurer the approval to proceed with growth. Currently, the re/insurer is more focused on the profit and the bottom line than the top line.

“We still believe there’s more value out of the existing portfolio than we currently harness from it,” said Slabbert.

However, ambitions are not dampened—the group does have a desire to expand in the US.

“Across all of our licences we’re at about $3 billion premium, which is 0.4 percent of the US market. It’s a natural step for Mitsui Sumitomo Insurance to proceed in that direction. We will essentially take advantage of the acquisitions they make to see if there is better business, or business that fits with our existing underwriting philosophy, that we can take advantage of,” he concluded.