Syndicate results 2018 #16 Antares Syndicate 1274

The Lloyd’s syndicates have now published their results and, in some cases, added detail and an outlook for 2019. As last year, IMN is summarizing the results from all syndicates that have a marine interest which have provided some information on the marine side. Antarest Syndicate 1274 is part of QIC Global. The Active Underwriter is Jonathan A Battle.

Managing Director Stephen Redmond said that 2018 had been “the most challenging year for Antares in its history”.

He noted that, despite the significant events to hit the global insurance industry in 2017, “markets did not react materially to improve the trading environment in 2018”. Although the hurricane activity of 2017 was not repeated, the Syndicate did have exposure to the major events of the Lürssen Shipyard, typhoon activity in Asia, and the Californian wildfires.

The catastrophe losses had made 2017 and 2018 the worst consecutive two years on record for the global industry, producing losses calculated at around $230bn. Antares reported a loss of $42.8m for 2018. Redmond said that, for the extreme events which occurred, a loss of this size was “completely as the business expects and in line with risk tolerance”.

Redmond reported early signs of improving market conditions. He said that Antares was and continued to be supportive of the Decile 10 activities undertaken by Lloyd’s.

“Market modernization is long overdue and continues to move at a pace regarded by many as too slow.”

Earned gross premium for the Syndicate increased by 10% to $557m in 2018 ($503m: 2017). The gross combined ratio improved to 92.4% (2017: 106.6%), but the net combined ratio was virtually flat at 108.2% (2017: 108.4%).

Redmond said that the difference between the two ratios was “a direct reflection of the general statement that losses tended to remain within retention levels rather than at least in part being reduced by reinsurance recoveries”.

Pure underwriting income for the Syndicate produced a profitable gross performance of $6.8m, with three of the six sector classifications contributing positively. However, the Marine Aviation and Transport division produced a loss of $40.1m. This was heavily influenced by the mega-yacht under construction at the Lürssen Shipyard, which suffered a catastrophic fire as it was nearing completion.

The Syndicate also had exposure to the Macy’s warehouse fire within its Cargo portfolio.

The Reinsurance division was affected by the Californian wildfires, as well as the Lürssen Shipyard fire and typhoons in Asia, generating in total a loss of $15.7m.

Antares’ first full year at 21 Lime Street was termed “very successful”, despite the major flood experienced at the beginning of the year. Redmond said that Antares needed to invoke its Business Continuity Plan for an extended period. “It is testimony to the comprehensive approach within Antares that the business was able to successfully trade through this major disruption. It was almost three months before full services were brought back to the building.”

Active Underwriter JA Battle said that the MAT division, which offers a marine insurance and reinsurance portfolio comprising Hull, Energy, Marine Liability, Cargo, Specie and Aviation products, saw improved trading conditions across all the sub classes with the exception of Specie. Competition in the Marine market remained strong, but the syndicate saw improved terms and conditions in Cargo, Aviation, Energy and Hull during the year.

Premium income for 2018 in the sector was up 7% at $172m (2017: $161m).

Within the Hull portfolio, overcapacity remained a key feature. Pricing had improved across our portfolio by 3.2% but it remained below Antares’ forecast of 6.8% for the year. Income from Hull increased 12% to $58m (2017: $52m).

Battle said that the 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 dropped to 55% as Antares reduced exposures in the Yacht sub-class and reversed its strategy in Lat-Am Brown Water business, where prospects of achieving desired profitability were not met.

The portfolio was impacted most notably by the Sassi Yacht fire in Bremen.

Offshore Energy

Income in the Offshore Energy account increased in 2018 by 5% to $34.5m (2017: $33m). An uptick in oil price led to an increase in drilling activity which, when coupled with a reduction in available capacity, led to an uptick in pricing. Pricing strength came in below forecast rates were up 11.7% across our portfolio. This led to an increased retention ratio from to 75% in 2018, from 55% the year before.

Cargo & Specie

Despite continued headwinds in market overcapacity, the historical underperformance of the cargo sub-class led to firmer pricing. Premium income in the class grew by 8% to $53m (2017: $49m). Pricing was up 4.7% across the portfolio. The retention declined from 76% to 68% with the underwriting team continuing to optimize the portfolio.

“The strategy of expanding the Specie portfolio continues to be hampered, broker facilitization continues to impact our ability to execute our long term strategy as we had planned.”

Consequently, Battle said that Antares 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.

Reinsurance

The Reinsurance division comprises both Property, Marine Excess and Casualty Treaty written on a worldwide basis. Premium income increased by 35% during 2018 to $108m (2017: $80m), primarily due to the inclusion of Casualty. .

A balanced Marine XL book continued to be underwritten for both London Market (LMX) and Foreign Market (FMX) business where good synergies with direct Hull, Cargo and Specie and Energy accounts existed. Market conditions improved during 2018 post the HIM event of 2017, with pricing for the portfolio up 7%.

$00020182017
Gross Premium Written586,374539,603
Net Premium Earned475,173418,872
Net Claims Incurred(347,541)(316,612)
Net Commission(120,863)(96,269)
Net Underwriting Result6,7695,991
Operating Expenses(46,163)(41,248)
Net Foreign Exchange(191)(147)
Investment Return(3,206)15,902
Net (Loss)/Profit(42,791)(19,502)
Claims Ratio73.1%75.6%
Commission Ratio25.4%23.0%
Expense Ratio *9.7%9.8%
Combined Ratio108.2%108.4%

*Excludes FX

MAT $00020182017
Gross Premium Written175,710161,130
Net Premium Earned164,981157,579
Net Claims Incurred(147,497)(112,579)
Net Commission(41,922)(36,571)
Net Underwriting Result(24,438)8,429
Claims Ratio89.4%71.4%
Commission Ratio25.4%23.2%

The MAT division represents 30% (2017: 30%) of the Syndicate’s business and produced an underwriting loss of $24.4m (2017: $8.4m profit).

Over-capacity in the market continued to put pressure on prices and worse than expected attritional and large claims experience reduced the division to a significant overall loss. This was illustrated most starkly by Lürssen in Hull where a 146-metre mega yacht in its final stage of construction was destroyed by fire.

There were also disappointingly high levels of attrition in Cargo but in particular Aviation and Hull which have been undergoing an in depth strategic review of their accounts. Energy was the exception and the only class to return a profit in the division, “continuing its sustained turnaround and demonstrating its success in re-underwriting the book”, the syndicate said.

https://www.lloyds.com/investor-relations/financial-performance/syndicate-reports-and-accounts/2010/03/1274