Performance
Profitability and return
Underwriting performance
Catastrophe insured losses in 2008 were the second largest in history contrasting sharply with a benign 2006 and 2007. Inevitably, a number of these losses impacted the Group’s financial performance. In that context, the combined ratio of 76% is impressive (2007: 63%).
Gross written premium was £1,034.0 million, largely consistent with the prior year (2007: £1,044.7 million). Overall, the renewal rate reduction was 6.8%, with a renewal retention ratio of 84% (2007: reduction of 5.5% and 77% respectively). This was offset by the positive impact of foreign exchange.
Syndicate 2001’s gross written premium was £842.5 million (2007: £900.6 million). This includes £36.3 million (2007:£31.0 million) of business specifically written to be ceded to Amlin Bermuda. The reduction in Syndicate premium reflects the impact of rate reductions across divisions offset by foreign exchange gains. In contrast, Amlin Bermuda increased its direct written premium by 23.4% to US$353.3 million (2007: US$286.3 million), as the company benefited from increased shares of client’s reinsurance programmes following the improvement in its financial strength rating in October 2007.
Syndicate 2001 purchased additional retrocessional reinsurance in 2008, as the availability of cover increased in the first half. For 2008, reinsurance expenditure as a proportion of gross written premium was 11.4% (2007: 10.2%).
Net earned premium was 6.0% lower at £913.5 million (2007: £972.3 million), reflecting the purchase of additional reinsurance in the year. However, net unearned premium now stands at £518.4 million (2007: £474.3 million), the increase arising mostly from the stronger US dollar.
The claims ratio for the year was 55% (2007: 36%). As noted above natural catastrophe activity was significant. In the second half, Hurricanes Gustav and Ike were major losses, with the Group incurring total losses of US$302.3 million across both events. Hurricane Ike is expected to be the third most costly hurricane in recorded history, with current industry losses estimated at US$21 billion.
The first half also witnessed some notable catastrophe losses and an increase in the number of individual large risk losses. However, Amlin’s estimated exposure to these events was modest, reflecting in part our relatively small line size. Elsewhere, there have been only a small number of risk losses as detailed in ‘The business’ sections of this Review.
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