Syndicate results 2020 #16 Syndicate 2003 Catlin

Active underwriters, R Littlemore, L Prato Jaen

The Lloyd’s syndicates have now published their results and, in some cases, added detail and an outlook for 2021. As in the past three years, IMN is summarizing the results from all syndicates that have a marine interest which have provided some information on the marine side.

Structure

Syndicate 2003 underwrites general insurance and reinsurance business. The main lines of business are Accident and Health, Aviation, Casualty, Marine and Offshore Energy, Equine, Specie, Crisis Management, Political Risks, Property and Construction.

CUAL, the managing agent of the Syndicate, is a company registered in England and Wales. CUAL is a wholly-owned subsidiary of its ultimate parent, France-registered AXA SA.

Catlin Syndicate Limited is the sole member of Syndicate 2003. The direct holding company of Catlin Syndicate Limited is Catlin (North America) Holdings Ltd. The ultimate parent undertaking and controlling party is AXA SA.

The Syndicate is wholly-aligned with capital provided by AXA XL, a division of AXA SA, through a subsidiary Catlin Syndicate Limited.

KPIs (£m) 2020 2019
Syndicate capacity 1,349.0 1,383.0
GWP 1,676.2 2,091.4
NWP 1,132.7 1,553.9
NEP 1,314.0 1,652.9
Underwriting results (444.0) (165.5)
Total recognized result for year (333.9) 26.9
Claims ratio (%) 95.4 71.5
Expense ratio (%) 38.4 38.5
Combined ratio (%) 133.8 110.0
Inv return (%) 3.6 6.0

Premiums

Syndicate GWP fell by 19.9% in 2020 to £1,676.2m, from £2,091.4m in 2019.

The syndicate said that GWP fell because of reduced economic activity following the Covid-19 pandemic, plus remedial action to reduce less profitable business and withdrawals from uneconomic classes. This was offset partially by rate increases on renewals. The Syndicate said that the overall reduction in GWP was in line with the 2020 plan.

Underwriting result

The underwriting result for 2020 was a loss of £444.0m, compared with an underwriting loss of £165.5m in 2019. The combined ratio deteriorated from 110% to 133.8%.

The Syndicate said that the underwriting result in 2020 was significantly affected by losses relating to Covid-19 which resulted in £523m of net claims. These mainly impacted the Crisis management, Accident & Health and Business interruption classes.

The Syndicate was also impacted by catastrophe events in the second half of the year, including Hurricane Laura, Delta, Zeta, Sally and Thunderstorm Derecho.

The Syndicate benefits from external catastrophe reinsurance protection and a whole-account stop loss agreement with XL Bermuda Ltd – another member of the Axa group.

The underwriting result was also impacted by adverse developments on prior year claims, estimated at £98m.

The most significant contributors were the International Financial Lines, International Casualty, Accident & Health and Wholesale Casualty. These were offset by favourable movements on Marine, Aerospace, Crisis management and Wholesale Property.

During 2020 the action taken to remediate underperforming businesses included the withdrawal from the International Financial Lines and Portfolio Deals.

Overall result

The total recognized loss for 2020 was £334m, down from a gain of £27m in 2019.

The overall investment return for the year was £123m, down from £186m the previous year. With effect from January 1st 2020 the Syndicate decided to change presentational currency from US Dollars to Sterling. The Directors said they believed that the presentation currency change would “allow greater comparability with other syndicates and operational simplicity”.

The stamp capacity for the 2021 underwriting year is £1,163m.

TECHNICAL ACCOUNT GENERAL BUSINESS $000’s 2020 2019
Gross premiums written 1,676,221 2,091,390
Outward reinsurance premiums (543,569) (537,531)
Net premiums written 1,132,652 1,553,859
Earned premiums, net of reinsurance 1,313,953 1,652,948
Allocated investment return 82,688 142,524
Total technical income 1,396,641 1,795,472
Gross claims paid (1,361,056) (1,684,409)
Reinsurers’ share 488,504 453,999
Total (872,552) (1,230,410)
Claims incurred, net of reinsurance (1,253,366) (1,181,651)
Net operating expenses (504,539) (636,785)
Balance on the technical account for general business (361,264) (22,964)

Sector analysis

2020 $’000s GPW GPE Gross Claims Gross Op exps Reins. Bal. Total
MAT 234,071 227,322 (135,837) (73,512) 7,800 25,773
Total 1,072,723 1,217,497 (1,595,515) (414,233) 467,602 (324,649)
Reinsurance 603,498 635,955 (482,515) (158,251) (114,494) (119,305)
Grand Total 1,676,221) 1,853,452 (2,078,030) (572,484) 353,108 (443,954
2019 $’000s GPW GPE Gross Claims Gross Op exps Reins. Bal. Total
MAT 366,231 400,724 (164,826) (114,685) (90,887) 30,326
Total 1,630,080 1,740,135 (1,053,415) (584,740) (201,922) (99,942)
Reinsurance 461,310    522,583 (445,837) (128,643) (13,650) (65,547)
Total 2,091,390 2,262,718 (1,499,252) (713,383) (215,572) (165,489)

The Syndicate has no direct employees. Staff working on the affairs of the Syndicate are employed by a group service company, XL Catlin Services SE, an approved Central Bank of Ireland regulated intermediary. The recharge of the expenses from the service company to the Syndicate is through a recharge model across the international network, including UK-domiciled entities. The recharge of the costs is dependent on the nature of the service performed for the Syndicate.

The Active Underwriters received the following aggregate remuneration charged to the Syndicate:

£’000s 2020 2019
Aggregate emoluments and other benefits 282 339
Pension contributions 14 18
Total 296 357

https://www.lloyds.com/about-lloyds/investor-relations/financial-performance/syndicate-reports-and-accounts/2006-2003