Lloyd’s syndicate results 2017 (13): Antares Syndicate 1274

With the 2017 numbers for the Lloyd’s syndicates now in, IMN over the next few weeks will report on the marine numbers for those syndicates with a significant interest in this area.

Stephen Redmond, Managing Director of Antares Syndicate 1274, described 2017 as “a year of two halves”, with the catastrophes of the second half pushing the syndicate into a loss of $19.5m for the year, compared with a gain of $30.2m in 2016. Redmond said that the 2017 result was “well within the Syndicate’s tolerances”. Its forecast ultimate claims as a result of hurricanes Harvey, Irma and Maria were $109m, ($51m net).

Redmond noted that “it quickly became clear the losses were more earnings events than capital ones”, which indicated ” just how overcapitalized the insurance and reinsurance market actually is, and indeed remains.”

For 2017 Marine, Aviation and Transport (MAT) became the second-largest premium producer, losing top spot to the Specialty class. MAT generated a loss of $2.3m for the year, heavily influenced by the three major Atlantic hurricanes.

Trading conditions were described as “difficult” in 2017, “with a number of new entrants into the marine market leading to continually increasing levels of competition ultimately driving down rates in all classes”.

Antares said that in some cases this also led to a softening of terms and conditions. MAT made up 30% of the syndicate’s premiums in 2017.

Hull made up 32% of MAT in 2017, with cargo close behind on 30%. Energy was 20% and Aviation was 18%. There was a build-out of Hull in 2017, as well as further resource added to Cargo and Energy lines.

Premium income for 2017 was almost unchanged at $161m (2016: $168m).

Within the Hull portfolio, Antares said that overcapacity remained a key feature in keeping the rating environment soft. Across the Hull portfolio as a whole, pricing was down 1.9%. Income from Hull decreased by 3% to $52m (2016: $54m).

Antares said that its syndicate strategy was to develop the key sub-classes of Hull, Marine Liability & War, adjusting the portfolio business mix dependent upon market conditions. The retention ratio was 73%. The portfolio in 2017 was impacted by losses arising out of Hurricane’s Irma and Maria in the Yacht portfolio as well as risk losses in the Blue Water Hull book.

Hull incurred hurricane losses of $5.5m, mostly relating to Caribbean yachts destroyed by Irma. Beyond this there were a number of large losses including the sinking of the Stellar Daisy cargo ship and the sinking of the new Seikongen fishing vessel among others. The run of losses were unrelated and, although unusually high, not considered systemic.

As in previous years, the cargo insurance market also experienced excess capacity at a time when the global economy was struggling. Antares said that there was an increasing trend for broking houses to facilitize their business with a limited number of preferred carriers. Despite this, premium income for the class grew 6% to $49m (2016: $46m). Pricing was down 1.9% across the portfolio.

The retention ratio was 76%.

Cargo & Specie returned a $2.5m profit (2016: $6.7m profit) with the reduction largely attributable to $2.0m hurricane related claims but it was Hull that saw the largest reduction from a profit of $6.3m in 2016 to a loss of $7.5m in 2017.

Antares said that the strategy of expanding the Specie portfolio continued to be hampered, with broker facilitization continuing to impact the syndicate’s ability to execute the long-term strategy as planned. Antares said that it would maintain its selective approach to underwriting, deploying capital to support those areas offering the best opportunity for appropriate return, whilst maintaining a well-diversified portfolio.

The Offshore Energy account income increased in 2017 by 4% to $33m (2016: $31m). As in the prior year, the relatively depressed oil price and significant levels of over-capacity served to push down prices and intensified competition for business. Antares said that its portfolio was largely unaffected by the hurricane activity, but the syndicate “saw significant rate improvement” in its portfolio during Q4 2017. The retention ratio was 55%, with pricing down by 3.7% across the portfolio.

The $14.4m profit in Energy was termed “an excellent result in a class largely unscathed by the hurricanes and particularly notable for its sustained turnaround” (2016: $8.3m profit, 2015: $0.7m profit, 2014: $6.0m loss), “demonstrating the success of re-underwriting the book in recent years”.

In the reinsurance division Antares Syndicate 1274 has a balanced Marine XL book (44% of the total reinsurance book), which continues to be underwritten for both London Market (LMX) and Foreign Market (FMX) business where the syndicate said that good synergies with direct Hull, Cargo and Specie and Energy accounts existed.

Antares said that “competitive market conditions prevailed during 2017, with greater levels of capacity chasing fewer risks as cedants looked to retain more themselves and consolidate underwriting panels”.

As a consequence the syndicate said that pricing for the portfolio, whilst better than planned, still fell by 5%. The syndicate said that it continued to grow its portfolios in the Asian market through offerings in Singapore and Shanghai on the Lloyd’s platforms. This resulted in premium income increase by 9% to $35m (2016: $33m). Marine XL booked a loss of $3.3m (2016: $11.2m profit).

MAT numbers

Gross Premium Written161,130167,621
Net Premium Earned157,579157,610
Net Claims Incurred(112,579)(98,244)
Net Commission(36,571)(38,676)
Net Underwriting Result8,42920,689
Claims Ratio71.4%62.3%
Commission Ratio23.2%24.5%