Syndicate results 2019 #22 Syndicate 2999, QBE

Active Underwriters: Colin O’Farrell and Jonathan Parry

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.

QBE Syndicate 2999 has several sub-syndicates, those being:

  • 566     Reinsurance: property; aviation; casualty treaty; personal accident; and marine
  • 1036   Marine insurance: hull; energy; liability; specie; cargo; war; ports; and political risks
  • 1886   Non-marine general liability; professional and financial lines; motor; specialty and marine P&I
  • 5555   Multi-line facility business

Structure:

The Managing Agent QUL, and the corporate member QBE Corporate Limited (QCORP), are wholly owned subsidiaries of the ultimate parent company QBE Insurance Group Ltd. The Syndicate is managed at the QBE EO level, which is headed by QBE European Operations plc. The immediate parent company of QUL and QCORP is QBE Holdings (EO) Limited (QHEO).

QHEO is a wholly owned subsidiary of QBE European Operations plc. QBE European Operations plc, QUL, QCORP and QHEO are incorporated in the UK.

KPI £m 2019 2018
Gross written premium 1,221.6 1,191.6
Net earned premiums 898.7 881.7
Net claims (518.2) (530.8)
Acquisition costs (250.5) (241.4)
Other net operating expenses (78.6) (92.0)
Net underwriting profit 51.4 17.4
Investment return 43.3 29.4
Non-technical account income / (expense) 14.6 (21.3)
Total profit for the year 109.3 25.5
Claims ratio 57.7% 60.2%
Combined operating ratio 94.3% 98.0%

QBE said that the increase in GWP to £1,222m in 2019 from £1,192m the year before reflected improved market conditions across all major product lines. Actual rate experience for the Syndicate’s 2019 underwriting year concluded at +8.1%, against a plan for +2.1%.

While the global (re)insurance market experienced a reduction in catastrophe losses for 2019, the year was far from catastrophe free. The Syndicate’s inwards reinsurance portfolio (sub-Syndicate 566) saw significant loss activity from Japanese Typhoons (Faxai & Hagibis), as well as Hurricane Dorian, which caused devastation in the Bahamas. QBE said that these losses were mitigated by strong management of attritional loss ratio and disciplined cycle management, producing a material profit contribution to the Syndicate.

The Syndicate’s insurance portfolio (sub-Syndicate’s 1036, 1886 and 5555) experienced adverse gross large losses in its Financial Lines and International Liability classes, although this was largely mitigated by the Syndicate’s reinsurance programme. This, coupled with the improved rating environment, resulted in a reduced net claims ratio of 57.7% for the Syndicate, down from 60.2% in 2018. This result included the impact of a change to the Ogden discount rate from +0.25% in 2018 to -0.25%, following the announcement by Ministry of Justice in July 2019.

An improved investment return of £43.3m (2018 £29.4m), together with a positive non-technical account contribution (principally comprising a foreign exchange profit arising from the revaluation of non-monetary balances), significantly contributed to the overall profit for the year of £109.3m.

Outlook

QBE said that the rating outlook continued to improve. Although excess capital prevailed in most markets, there had been “a demonstrable reduction in capacity deployment, with carriers utilising their capacity far more selectively, aligned to price adequacy”.

The syndicate said that this had helped maintain rate firming momentum into 2020, but that “due to the dynamic nature of the market, its sustainability is uncertain”. Stamp capacity for 2020 was unchanged at £1,100m. The Syndicate’s 2020 reinsurance programme cost and structure was also materially unchanged from 2019.

Sector details

2019 £m Gross premium written Gross premium earned Gross claims incurred Gross operating expenses Reinsurance balance Total
MAT 152.7 140.9 (77.1) (24.8) 3.4 42.4
Total Direct 744.1 726.2 (526.4) (241.3) 88.7 47.3
Reinsurance acceptances 477.5 471.3 (298.4) (113.2) (55.7) 4.1
Total 1,221.6 1,197.6 (824.8) (354.4) 33.0 51.4
2018 £m Gross premium written Gross premium earned Gross claims incurred Gross operating expenses Reinsurance balance Total
MAT 142.5 145.1 (75.3) (21.1) (48.0) 0.7
Total 779.3 753.6 (546.0) (250.3) 41.0 (1.7)
Reinsurance acceptances 412.3 437.5 (297.1) (108.5) (12.8) 19.1
Grand Total 1,191.6 1,191.1 (843.1) (358.8) 28.2 17.4

https://www.lloyds.com/investor-relations/financial-performance/syndicate-reports-and-accounts/2006/06/2999