Neon Underwriting in run-off as parent AFG exits Lloyd’s

Managing agency Neon Underwriting, a subsidiary of American Financial Group (AFG), has been placed in run-off as part of plans by AFG to exit the Lloyd’s of London insurance market this year.

Parent group AFG said it will work with Neon and regulators to ensure that the Lloyd’s managing agency meets its obligations to policyholders during run-off.

Following run-off, AFG plans to reallocate capital to its other insurance businesses and take up opportunities with “the potential to earn targeted returns on investment”, the company said.

Neon, and its forerunner Marketform, had not hit profitability objectives since AFG purchase of Marketform in 2008, a statement said. A review of the subsidiary's performance in 2019 and expected results for 2020 showed that Neon would fall short of the group’s return expectations. Neon produced approximately 7 percent of AFG’s property and casualty net written premiums in 2019.

AFG has estimated it will incur a non-core after-tax charge between $50 million and $60 million in the fourth quarter of 2019 as a result of the move. This will cover reserve strengthening and expenses related to exit costs associated with Neon’s run-off.

A statement from the group said it expects to report around $60 million to $75 million in after-tax earnings from other non-core items in the fourth quarter of 2019, including realised gains from the mark to market of equity securities and annuity non-core earnings, which reflect the impact of fair value accounting on its fixed-indexed annuity business.