Syndicate results 2021 #56 Syndicate 4472 Liberty

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 Underwriters

Jane Warren (appointed April 1st 2021)

Peter Smith (resigned April 1st 2021)

The Syndicate is managed by Liberty Managing Agency Limited, a wholly owned subsidiary of Liberty Mutual Group Inc. Functionally the Group conducts substantially all of its business through two business units: Global Retail Markets (GRM) and Global Risk Solutions (GRS). The Syndicate operates as part of the Liberty Specialty Markets segment within the GRS business unit.

The Syndicate has changed its presentational currency from US Dollars to Great Britain Pounds. It said that the reason for this was “to enhance consistency with Lloyd’s reporting, which is in GBP”.

Prior year comparatives have been restated accordingly.

The Syndicate’s combined ratio for 2021 improved to 89.4% (2020: 98.5%). The result for the calendar year was a profit of £89.7m (2020: £157.1m) driven by an underwriting profit of £92.0m (2020: £13.4m). Foreign exchange gains were £0.6m (2020: £5.5m loss), and the Syndicate recorded an investment return loss of £2.9m (2020: £149.2m profit).

The Syndicate entered into a Loss Portfolio Transfer (LPT) agreement to transfer the Motor Excess of Loss (XL) book of business, valued at £136.9m, to Riverstone Managing Agency Ltd on behalf of Lloyd’s Syndicate 3500. This transaction did not impact profit for the year, as the additional £136.9m of reinsurance premium was compensated by equivalent recoveries, but did impact the performance ratios.

KPIs

£m 2021 2020 (restated)
Gross Written Premium 1,423.8 1,364.7
Net Earned Premium 867.3 896.1
Underwriting Result 92.0 13.4
Profit/(loss) for the Financial Year 89.7 157.1
Combined Ratio 89.4% 98.5%

Gross written premium increased by 4.3% year on year, predominantly driven by double digit rate growth of 10.2% in 2021, along with some strategic growth initiatives in RI Property, Financial Risks, LMR, London Marine, and DUAL. This was partly offset by planned reduction in international insurance business and remediation activity across RI Casualty and Financial Lines.

The Syndicate’s underwriting result for 2021 improved by £78.6m on 2020, largely driven by a reduction in the net loss ratio of 15.9%. Excluding the impact of the Motor XL LPT, the net loss ratio improved by 9.2%. A key factor was a reduction in the attritional loss ratio, supported by material rate increases and improvements to portfolio business mix.

Notable releases were made from London Specialty and Financial Risk due to expiring risks and favourable loss experience. Additionally, there were releases in Treaty Casualty and LMR classes following benign activity. There was also benefit from remedial action in Specialty & Market Facilities classes.

These improvements were in part offset by material catastrophe loss experience inclusive of Hurricane Ida (net £109.4m), Storm Bernd (net £35.0m) and the Texas Freeze (net £15.0m).

The Syndicate’s investment portfolio generated a loss of £2.9m in 2021, compared to a profit of £149.2m in the prior year. The deterioration reflected unrealized losses triggered by significant yield and inflation increases as major economies grew as they emerged post lockdown.

The expense ratio increased by 6.8%. However, excluding the impact of the Motor XL LPT the deterioration reduced to 1.4%. This uplift was mainly driven by an increase in the acquisition cost ratio following a reduction in inward reinsurance commissions. This was due to the non-renewal of certain reinsurance quota share contracts. This in turn was partly offset by a small improvement in the admin expense ratio, despite an increase in quantum of costs due to an increase in IT and staff related expenditure.

Total assets and liabilities decreased by £145.7m. For assets, this was largely driven by a £77.5m decrease in technical debtors following settlement of recoveries outstanding at the end of prior year in relation to Covid-19, D&O and Specialty claims activity.

There was also a net decrease of £51.0m in financial investments and cash. The cash position has reduced due to investments made along with funding of normal operational activities. There was a smaller increase in investments due to the impact of unrealised losses.

Additionally, there was a decrease in the reinsurers’ share of unearned premiums of £51.4m following reductions in ceded premiums written in 2021. This was partly offset by an increase in reinsurers’ share of claims outstanding of £45.9m which is predominately driven by the Motor XL LPT agreement and associated recoveries relating to the gross loss experience to date.

On the liability side, there was an increase in gross technical provisions of £117.6m. This was driven by catastrophe loss experience during the year and an uplift in unearned premiums as a result of a higher written premium base. The profit in the year increased the member’s balance by £99.3m. This was offset by a decrease in creditors of £346.4m in the year following settlements of reinsurance premium, investments held in transit and intercompany balances.

The Syndicate said that the ongoing Covid-19 global pandemic made 2021 “another challenging period for our people, our customers and economies around the world”. Significant work took place around Operational Resilience during 2021, driven both by LMAL’s strategy and the increased regulatory focus.

Segmental analysis

2021 £m GPW GPE GCI Op Exps Reins Bal Total
Direct MAT 172.9 161.0 (62.7) (65.9) 8.8 41.2
Energy – Marine 3.9 3.2 (1.8) (1.2) (0.1) 0.1
Total Direct 641.7 606.0 (379.6) (194.4) (30.9) 1.1
Reinsurance 782.1 754.4 (435.7) (202.1) (25.7) 90.9
Total 1,423.8 1,360.4 (815.3) (396.5) (56.6) 92.0
2020 £m (restated) GPW GPE GCI Op Exps Reins Bal Total
Direct MAT 195.9 185.5 (116.1) (59.2) 1.2 11.4
Energy – Marine 3.7 3.0 (0.6) (0.6) (0.5) 1.3
Total Direct 691.9 668.3 (705.2) (199.9) 137.7 (99.1)
Reinsurance 672.8 702.8 (401.8) (191.0) 2.5 112.5
Total 1,364.7 1,371.1 (1,107.0) (390.9) 140.2 13.4
Claims Development £m 2021 2020
Direct MAT 17.1 7.7
Energy- Marine 0.2
Total Direct (34.3) (36.9)
Reinsurance 201.0 1.4
Total 166.7 (35.5)

Active underwriter emoluments The position of Active Underwriter received remuneration of £322,940 (2020 (restated)*: £318,124) charged to the Syndicate and included within net operating expenses.

https://assets.lloyds.com/media/771ecf01-b32f-4254-aa09-d899f34734ed/SRA4472a.pdf