Syndicate results 2021 #31 Axa 2003 (formerly Catlin)

The Lloyd’s syndicates have now published their results for 2021 and, in some cases, added detail and an outlook for 2022. Some have stuck to the bare bones. 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.

Active underwriter   L Prato Jaen

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

KPI £m 2021 2020
Syndicate capacity 1,163.1 1,349.0
Gross premiums written 1,363.4 1,676.2
Net premium written 920.6 1,132.7
Net premium earned 1,053.4 1,314.0
Underwriting Profit/(loss) 267.3 (444.0)
Total recognised Profit/(Loss) for the year 367.9 (333.9)
Claims ratio (%) 39.2 95.4
Expense ratio (%) 35.4 38.4
Combined ratio (%) 74.6 133.8
Investment rate of return (%) 1.5 3.6

The gross written premiums reductions were primarily a result of business remediation which has been ongoing, in which the Syndicate withdrew from less profitable lines. During 2021 AXA XL initiated an internal reorganization to simplify the legal entity structure within its Reinsurance segment and make it more consistent with AXA Group’s structure (which aligns businesses to legal entities).

As part of the reorganization plans it was decided that, as of January 1st 2022, all new and renewal contracts would be written via dedicated legal entities within the Reinsurance segment. As a consequence, no Reinsurance segment business will be written on the Syndicate’s 2022 Year of Account.

The Syndicate entered into a retrocession agreement with AXA XL Reinsurance Ltd on December 21st 2021 (effective Dec 31st), providing a 100% Quota share protection of the net liabilities of the Reinsurance segment business for the 2021 and prior years of account. This contract removes future volatility from the reinsurance segment to the Syndicate. The impact of this 100% Quota share Retrocession is to reinsure net balance sheet liabilities of £1,308m at a net impact of £12.8m cost.

The Syndicate reported a strong underwriting result, with an underwriting profit of £267.3m against an underwriting loss of £444.0m in 2020. The Syndicate’s combined ratio improved from 133.8% to 74.6%.

The underwriting result in 2021 benefited from prior year releases relating to Covid-19, predominantly London Wholesale Property and Crisis Management. CAT and large loss experience was not as significant as it was in 2020.

The 2019 year of account was closed at the end of 2021 with a loss of £75.6m (equivalent to a negative return of 5.5% of capacity). This year of account suffered the greatest impact of the Covid-19 loss occurring in 2020 and significant CAT exposure, including Typhoons Faxai and Hagibis. These losses were offset by positive prior year development of £150m occurring during 2021.

The 2020 year of account wrote less premium than was anticipated due to the remediation of less profitable lines of business and withdrawal from the International Financial Lines and Portfolio Deals classes.

2020 year of account was again significantly impacted by Covid-19 losses, especially on the Crisis Management class, and the year was currently anticipated to close with a small loss.

The 2021 year of account has yet to make a profit but was expected to reach profitability within the next calendar year.

The Syndicate has commuted the Whole Account Stop Loss protections it previously purchased from another group company on all years other than the 2021 Year of Account. The commutations had no income statement impact other than the normal bookings of these contracts until the dates they were commuted.

The 2018 and 2019 Years of Account policies were commuted at September 30th 2021 with a final settlement of £172m being received and the 2015, 2016 and 2020 Years of Account policies were commuted at June 30th 2021 with a final settlement of £17m being paid.

The Syndicate continues to purchase a Whole Account Stop Loss reinsurance contract from XL Bermuda Ltd.

In light of recent developments in and surrounding the Ukraine, the Syndicate undertook a review of its exposures in the area (war, terrorism, political violence, marine, aerospace and energy) which are limited but are being actively monitored. The Syndicate has immaterial exposure to investments in Ukraine and Russia .

The underwriting result was impacted by positive developments on prior year claims estimates of £230m (2020: £98m strengthening). The most significant contributors were London Wholesale Property, Crisis Management, Reinsurance and Marine.

Segmental Analysis

2021 £000s GPW GPE GCI GOE Reins Bal Total
Direct MAT 298,038 300,128 (85,854) (88,203) (83,790) 42,281
Total Direct 898,675 939,374 (248,206) (296,680) (150,872) 243,616
Reinsurance 464,768 498,052 (263,007) (122,004) (89,351) 23,690
Total 1,363,44 31,437,426 (511,213) (418,684) (240,223) 267,306
2020 £000s GPW GPE GCI GOE Reins Bal Total
Direct MAT 234,071 227,322 (135,837) (73,512) 7,800 25,773
Total Direct 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)
Total 1,676,221 1,853,452 (2,078,030) (572,484) 353,108 (443,954)

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

£000s 2021 2020
Aggregate emoluments and other benefits 315 282
Pension contributions 14 14
Total 329 296