Best Affirms Amlin AG, Amlin plc, Lloyd’s Syndicate 2001 Ratings; Outlook Stable

January 11, 2013

A.M. Best Europe – Rating Services Limited has affirmed the financial strength rating (FSR) of ‘A+’ (Superior) and issuer credit rating (ICR) of “aa-” of Lloyd’s Syndicate 2001, which is managed by Amlin Underwriting Limited, and the FSR of ‘A’ (Excellent) and ICR of “a” of Swiss-based Amlin AG.

Best has also affirmed the ICR of “a-” of the UK’s Amlin plc, the non-operating holding company of the Amlin group of companies, as well as the debt ratings of “bbb+” on Amlin’s £230 million [$370 million] 6.5 percent subordinated debt, its $50 million 7.28 percent subordinated debt and its $50 million 7.11 percent subordinated debt. The outlook for all of the ratings is stable.

The financial strength of both Amlin AG and syndicate 2001 “benefits from the support of Amlin, which owns 100 percent of the syndicate’s capacity and provides assets in the form of bonds and equities to support the syndicate’s funds at Lloyd’s,” Best explained. “Amlin maintains strong consolidated risk-adjusted capitalization, supported by a generally superior operating performance.”

However, Best also indicated that the series of natural catastrophes during 2011, together with a weak operating performance from Amlin Corporate Insurance N.V. (ACI),” led to a substantial operating loss for the group and a significant decrease in the level of consolidated risk-adjusted capitalization. In the light of the catastrophes that occurred in both 2011 and 2010, the Amlin group has taken positive steps to enhance its management of catastrophe risk, through improved catastrophe modeling, the purchase of additional reinsurance protection and the issue in December 2011 of a $150 million catastrophe bond.”

Best noted that while the decrease in the level of consolidated risk-adjusted capitalization is a cause for concern, it believes “these measures and the steps taken to improve performance at ACI are likely to provide some protection to the consolidated risk-adjusted capitalization from further material reduction. In more normal trading conditions, good operating performance is expected to restore risk-adjusted capitalization progressively towards the level prior to the 2011 losses.”

Best also said the “stand-alone risk-adjusted capitalization of Amlin AG (formerly Amlin Bermuda Limited) has been reduced, firstly by its change of domicile to Switzerland from Bermuda and the establishment of its Amlin Re Europe division in October 2010, which gave rise to an increase in expenses and underwriting risk, and secondly by a catastrophe-affected operating performance in 2011. However, the company’s risk-adjusted capitalization remains at an excellent level and is expected to continue to do so throughout 2013.”

Amlin’s syndicate 2001 is one of the largest at Lloyd’s, and Best described its market profile as “excellent,” noting that it “writes the majority of its business from a lead position. The syndicate continues to be the main underwriting platform for the Amlin group and is expected to have provided nearly 60 percent of consolidated gross premiums in 2012.

“Amlin AG also has an excellent business profile. The company’s Amlin Bermuda division, established in 2005, writes predominantly a property reinsurance account comprising catastrophe, risk excess and proportional business, while Amlin Re Europe underwrites property catastrophe, property risk, marine, liability and motor business on a proportional and non-proportional basis. Approximately 60 percent of Amlin Bermuda’s business in 2011 was derived from the United States.

“Amlin Re Europe was established to write European non-life reinsurance and over time is expected to improve business diversification and earnings stability. Both the syndicate and Amlin AG continue to benefit from a strong risk management framework”, which, Best said it “believes is fully embedded.

“Positive rating actions for the Amlin group are unlikely in the near future. Factors that may lead to negative rating actions include a failure to rebuild risk-adjusted capitalization after the losses of 2011, a significant weakening of operating performance or deterioration in the group’s reserves.”

Source: A.M. Best

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