Syndicate Results 2019 #46 Syndicate 1969 Apollo Underwriting

Active Underwriter N G Jones

The Lloyd’s syndicates have now published their results and, in some cases, added detail and an outlook for 2020. As in the past two years, IMN is summarizing the results from all syndicates that have a marine interest which have provided some information on the marine side.

KPIs $m 2019 2018 Change
Gross premium written 522.2 416.2 25%
Net premium written 274.2 250.2 10%
Net premium earned 265.6 242.5 9%
Profit/(Loss) for the financial year 4.3 (57.7)  
Claims ratio 67% 89% (22pp)
Expense ratio 35% 36% (1pp)
Combined ratio 102% 125% (23pp)

Highlights:

  • Apollo said that its remediation efforts had yielded significant results, strengthening the syndicate portfolio and materially improving the resilience of the business. The combined ratio for Syndicate 1969 improved by 23 points and further positive movement was projected for 2020;
  • Natural catastrophes did not contribute significantly to the 2019 result. Apollo said that “a careful risk selection strategy benefitted the syndicate overall”;
  • The syndicate felt that positive pricing momentum in 2020 across a range of classes presented significant opportunities;
  • “We are pleased the remediation efforts we have put into the syndicate have yielded results, returning the syndicate to profitability after a challenging period of catastrophic events.”

The most significant growth areas were IBOTT (“Insuring Businesses of Tomorrow, Today”) Rover ($92.5m) and Property Treaty ($9.1m). These two classes are supported by SPA syndicates 1971 and 6133 respectively. The underlying growth for other business was $4.4m. Apollo said that it had “taken a significant number of remedial underwriting actions over the last 18 months, strengthening the Apollo portfolio and materially improving the resilience of the business”.

The Syndicate said that it had seen positive pricing momentum across most of its classes of business in 2019, which it anticipated would continue in 2020. Rate increases across the syndicate averaged 9.4% in 2019, following increases of 5.9% in 2018. In 2019 there were significant rate increases in Property D&F (18.5%), Non-Marine Liability (11.0%), Aviation (15.2%) and Marine Hull (29.0%).

The 2019 calendar year result aggregates the performance during the year of all open years of account (2017, 2018 and 2019) and movements from prior closed years.

The 2019 calendar year was not affected by the same level of substantial catastrophe events as were seen in 2018 and 2017, with catastrophe losses in 2019 caused by a number of smaller and medium-sized events. The most heavily affected areas in 2019 were Japan, the Caribbean and North America.

While these are areas where the syndicate has a significant proportion of its exposure, natural catastrophe events did not contribute to a significant extent to the syndicate’s overall result for the year. Hurricane Dorian affected the Property Direct and Facultative Property Binders and Property Treaty classes, whilst Typhoons Faxai and Hagibis further affected the Property Treaty class, 90% of which is ceded to SPA 6133.

Following Apollo’s withdrawal from Caribbean exposures as part of the remediation actions for the 2019 underwriting year, the Property D&F account did not suffer losses from the Bahamas. However, it incurred a small number of losses from the US mainland. The total net cost to Syndicate 1969 of Hurricane Dorian and Typhoons Faxai and Hagibis for the 2019 calendar year was $5.2m, of which $3.0m was from Property D&F and Property Binders for Hurricane Dorian. The remaining $2.2m was for the three events from the 10% net retained share of the Property Treaty class. This compared to $21.7m of natural catastrophe losses to the syndicate for the 2018 calendar year.

The losses arising from the Australian bushfires were not expected to be significant for the syndicate. The earned result for the 2019 year of account in the calendar year was a profit of $3.1m.

The calendar year result was also impacted by adverse incurred claims development on prior accident years in the Non-Marine Liability class. Apollo said that it had exited from segments that it perceived to be most highly exposed, such as pharmaceuticals and chemicals.

For the 2019 account Lloyd’s approved an 11.1% pre-emption increasing the syndicate stamp to £250.0m. The general rating environment improved significantly in 2019 with an actual risk adjusted rate improvement of 9.4%, significantly above plan. Significant rate improvement were achieved on Property D&F and Marine Hull, and of the other classes all but one showed improvements that were substantially better than plan.

For 2017 The Marine & Energy Liability account suffered losses from the adverse performance of one particular facility , whilst the performance of the core book of the account was within expectations. The facility has subsequently been non-renewed. The performance of the Marine Hull class and the Specie & Cargo class in this year of account were marginal, given their limited size. All other classes of business in the 2017 year of account contributed positively to the overall 2017 pure year result.

Apollo said that the Marine & Energy Liability class, written by the syndicate since 2015, was now showing signs of an improving rating environment ahead. Following on from modest improvements in 2018, the class achieved rate increases of 5.9% in 2019. A consortium has been in place since 2016 and has been renewed for 2020.

Apollo said that Marine Hull found itself at a turning point in 2019, after a sustained soft market. The withdrawal of key players from the class and the subsequent reduction in capacity had an effect on pricing. The syndicate said that it had seen risk adjusted rate changes in the yachts sector of around 95% in 2019, and the overall rate rise for the class in 2019 was 29.0%.

“The syndicate has been well positioned to take advantage of this significant market hardening in 2019 and we have therefore been able to re-forecast our income upwards for this class. The account is well balanced with the largest sectors being blue water, yachts, brown water and offshore. A consortium was put in place during 2019 and has been renewed for 2020”, the syndicate said.

Sectors

2019 £000s GPW GPE GCI Op exps Reins Bal Total
Direct MAT 35,692 38,845 (31,246) (10,486) 1,414 (1,473)
Total Direct 329,685 292,263 (236,763) (78,894) 11,734 (11,660)
Reinsurance 192,512 166,076 (70,824) (44,831) (44,505) 5,916
Grand Total 522,197 458,339 (307,587) (123,725) (32,771) (5,744)
2018 £000s GPW GPE GCI Op exps Reins Bal Total
Direct MAT 44,127 43,875 (34,661) (11,967) 2,782 29
Total Direct 269,456 270,776 (311,182) (73,470) 59,503 (54,373)
Reinsurance 146,765 107,827 (98,986) (30,808) 15,389 (6,578)
Grand Total 416,221 378,603 (410,168) (104,278) 74,892 (60,951)

https://www.lloyds.com/investor-relations/financial-performance/syndicate-reports-and-accounts/2016/1969