14th Nov 2013 08:54
LONDON (Alliance News) - Amlin PLC Thursday said it is expecting to beat its target return on equity for the full year, after delivering "excellent" overall underwriting returns in the third quarter, aided by low catastrophe losses and continued improvement by Amlin Europe.
Return on equity, a measure of profitability based on how much profit it generates with the money shareholders invest, is expected to exceed the full year cross-cycle target of 15%.
"Amlin has had a good third quarter and we expect to deliver an above target return on equity in 2013. Our core businesses are performing well in demanding market conditions," Chief Executive Charles Philipps said in a statement.
"Amlin is well positioned to take advantage of the opportunities created by changes in the reinsurance market and the improving returns on our investments in Amlin Europe, Amlin Re Europe and Leadenhall Capital will increase the benefit of the diversity they bring to the group," he added.
The Lloyd's of London reinsurer and insurer, which also operates in the UK, Continental Europe and Bermudian markets, said it wrote GBP2.195 billion in gross premium for the nine months ended September 30, compared with GBP2.199 billion for the corresponding period the year prior, after there was no repeat of last year's increase in renewals, though the renewal retention ratio was at 86.5% compared with last year's 85.3%.
However, Amlin said that for the 2013 underwriting year, gross written premium was up 4.8% at GBP2.28 bilion for the nine month period to September 30, 2013. Amlin UK reduced its estimates for its property and package accounts by GBP33.2 million, saying it has become increasingly hard to judge those estimates because of the significant levels of new business recently.
Amlin said it is seeing increasing profitability in Amlin Europe, Amlin Re Europe and Amlin UK, as well as a growing contribution to earnings from its investment in Leadenhall Capital Partners, which it expects to help offset lower catastrophe reinsurance margins in 2014.
Amlin said large risk losses in the third quarter were higher than normal, amounting to GBP28.6 million, bringing the nine month total to GBP41.6 million. However, these were more than offset by there being no major catastrophe losses in the third quarter, though the European flood losses in May and June, as well as smaller catastrophe losses, including European hailstorm and Mexican flood losses, took the nine month total to GBP37.0 million.
Although Amlin expects reinsurance pricing to be pressured by higher capital levels in the industry, resulting from growth in alternative capital market competition and the limited claim payouts of late, the reinsurer said rates for both US and international catastrophe business remain at near peak levels, and that, even with recent and anticipated rate reductions, catastrophe reinsurance business remains attractive.
Investment returns for the nine months to September 30 were 2.0%.
The weakening of the US dollar during the third quarter generated GBP68.2 million of foreign exchange losses, according to Amlin.
Amlin shares were Thursday quoted at 451.20 pence, up 4.5%.
By Samuel Agini; [email protected]; @samuelagini
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