Syndicate results 2018 #58 Syndicate 4472 Liberty

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.

Syndicate 4472’s Managing Agent (Active Underwriter Peter Smith) is wholly owned by Liberty Mutual Group. The Syndicate is part of the Liberty Specialty Markets (LSM) segment, which is part of the Global Risk Solutions business unit.

The underwriting result after expenses, excluding investment return, was a profit of $14.4m, compared with a loss of $244.4m in 2017. The combined ratio decreased from 116% in 2017 to 99% in 2018. The result for the calendar year was a loss of $9.1m, down from a loss of $118.7m the previous year. The syndicate noted that, after a relatively benign start to 2018, “we saw a number of natural catastrophes and market losses in the second half”.

$m 2018 2017
Gross Premiums Written 1,837.7 2,135.8
Net Earned Premium 1,028.7 1,488.9
Underwriting Result 14.4 (244.4)
Loss for the Financial Year (9.1) (118.7)
Claims Ratio 60% 79%
Expense Ratio 39% 37%
Combined Ratio 99% 116%

The Syndicate experienced a fall in gross written premiums of 14% compared to 2017. This was largely due to a portfolio of business previously written by Syndicate 4472 in 2017 being written by Syndicate 1980 in 2018.

The Syndicate continued to experience strong business growth across its reinsurance portfolio, but there were reductions within the Specialty book, following action taken to reduce or exit from unprofitable lines.

The significant increase in ceded written premiums was attributable to the loss portfolio of Pioneer business transferred to Syndicate 1980, and new quota share reinsurance arrangements.

The Syndicate’s net earned premiums decreased by 31% to $1,028.7m (2017: $1,488.9m) in line with net written premiums. The decrease in the Syndicate’s claims ratio to 60% (2017: 79%) was due to better loss experience and a focus on profitable business.

In 2017 Syndicate 4472 experienced a high volume of large losses, with the Syndicate exposed to Hurricanes Harvey, Irma and Maria. The fall in net earned premiums pushed up the expense ratio from 37% to 39%. The expense ratio comprises 23% net acquisition cost ratio and 16% operating expenses ratio. The gross operating expenses ratio reduced from 9% in 2017 to 8% in 2018.

Financial investments decreased from $4,305.9m to $3,930.1m due to the recognition of unrealized gains and losses within the portfolio at December 2018 and the strengthening of the US Dollar against Sterling.

Reinsurers’ share of technical provisions increased from $1,023.5m to $1,271.9m, largely due to the loss portfolio transfer and new quota share arrangements entered into in 2018. Gross technical provisions decreased from $4,952.1m to $4,829.0m as the catastrophe losses experienced in 2017 continued to settle.

Total investment return decreased from $84.9m in 2017 to $14.5m in 2018, driven by the rise in US yield curves in early 2018. Gross investment income, including net gains on the realization of investments, declined year on year from $130.6m in 2017 to $113.2m in 2018. Net unrealised gains/losses on investments fell from a net gain of $1.7m in 2017 to a net loss of $96.8m.

Pioneer Underwriters, launched incidental sub Syndicate 1980 on 1 January 2014 in conjunction with Liberty Syndicate 4472. It received approval in 2017 to establish its own Lloyd’s of London syndicate with effect from 2018. Pioneer business, comprising a broad cross-section of business including Property, Casualty, Marine and Energy for the 2018 underwriting year, is written by Syndicate 1980. In addition, in 2018 Syndicate 4472 entered into a loss portfolio transfer agreement with Syndicate 1980 to transfer the Pioneer business relating to 2014-2017 underwriting years to Syndicate 1980.

The syndicate said that the Lloyd’s insurance market remained highly competitive. Segmental analysis

2018 $m Gross premiums written Gross premiums earned Gross claims incurred Gross operating expenses Reinsurance balance Total
Direct MAT 140.6 150.9 (79.7) (35.6) (17.6) 18.0
Total Direct 839.2 929.5 (672.8) (181.0) (160.9) (85.2)
Reinsurance 998.5 1,014.8 (616.9) (451.4) 153.1 99.6
Total 1,837.7 1,944.3 (1,289.7) (632.4) (7.8) 14.4
2017 $m Gross premiums written Gross premiums earned Gross claims incurred Gross operating expenses Reinsurance balance Total
Direct MAT 193.7 177.5 (161.7) (56.6) (13.3) (54.1)
Total Direct 1,382.9 1,324.1 (983.5) (393.9) (97.1) (150.4)
Reinsurance 752.9 721.5 (570.0) (307.3) 61.8 (94.0)
Total 2,135.8 2,045.6 (1,553.5) (701.2) (35.3) (244.4)