Syndicate Results 2022 #30 MS Amlin 2001 published Wednesday June 1st

The Lloyd’s syndicates have now published their results for 2022 and, in some cases, added detail and an outlook for 2023. Some have stuck to the bare bones. As in the previous few years, IMN is summarizing the results from all syndicates that have a notable marine interest, if they have provided some information on the marine side.

Active Underwriter   A J Carrier

Andrew Carrier assumed the role of CEO from January 1^st 2023, succeeding Johan Slabbert who moved within the Group to join MSIG in the US. Following Andrew’s appointment to CEO, Grant Baxter was appointed as interim CUO, joining the business from Liberty Mutual in December 2022. Neil Walker has been appointed co-deputy CUO and head of specialty insurance, taking responsibility for marine, casualty, natural resources and crisis management. Head of property and allied lines Sam Geddes was appointed as co-deputy CUO.

The Syndicate is, through MS Amlin Corporate Member Ltd MS ACM, a wholly aligned Syndicate of Mitsui Sumitomo Insurance Co Ltd (MSI). The ultimate parent company is MS&AD Insurance Group Holdings Inc (MS&AD).

Premium capacity for 2022 and 2023 was £1,600m.

The result for calendar year 2022 was a loss of £46.7m (2021: profit of £7.9m).

Since late 2019 MS Amlin has been reshaping its business radically. This has included a number of underwriting and operating actions to allow management to concentrate on supporting and developing its preferred classes of underwriting business and ceasing to underwrite certain classes. The syndicated noted that this had resulted in a first underwriting profit since 2015, albeit a marginal one.

This was achieved in a year with a number of market wide pressures (Ukraine War, Inflation, Hurricane Ian) and some challenges with MS Amlin’s discontinued portfolios. Absent the discontinued classes, the Syndicate would have reported a combined ratio of 96.2%.

The syndicate said that an underwriting profit of £41.0m would have absorbed much of the investment loss in a difficult year for portfolios as central banks raised interest rates to combat inflation. However, the discontinued classes continued to deteriorate, impacted by loss events and inflation. In 2022, the losses in these classes deteriorated the underwriting result to a combined ratio of 99.9%.

As a result of the impact of the discontinued classes on the result in 2021, which continued into 2022, Management decided to “set out on an ambitious plan to resolve the legacy reserves issue in two parts with two ground-breaking Reinsurance To Close contracts”.

UK Property and Casualty RITC (P&C UK 2019 & Prior YOA RITC) was with Riverstone Syndicate 3500, effective January 1^st 2022 but signed February 18^th 2022. A second 100% quota share contract for the 2020 year of account was concluded on February 13^th 2023.

The value of liabilities reinsured, net of related debtor balances transferred, under the P&C UK 2019 & Prior RITC was £187.3m. After a period of transition where MS Amlin acted as agent for Syndicate 3500, operational control was transferred to RiverStone on November 1^st 2022.

Although the actual impact on profit was immaterial, the outwards reinsurance premium paid has a distorting impact on the Combined Ratio components in the syndicate result and underwriting analysis by lowering the net earned premium upon which the ratio is calculated.

The 2020 YOA RITC signed on February 13^th is a post-balance sheet event and will be reflected in the 2023 results.

Secondly, although the P&C UK RITCs and quota shares had an impact on the balance sheet gave finalization to the impact of those reserves on future profitability, they represented less than 25% of discontinued reserves at December 31^st 2021.

MS Amlin began considering options for the wider discontinued book, but for this part there were wider Lloyd’s process challenges. Where Lloyd’s-wide centralized processes are involved for premium/claims settlement, it is not possible to partly RITC a year of account. As such, management had to decide an appropriate YOA cut-off for an RITC which could remove as much discontinued classes as possible, whilst maintaining relationships in its continuing books.

After due consideration for these factors, the managing agent commenced a further and much larger project to secure a further “Split” RITC contract for all associated liabilities for 2018 year of account and prior, across all product lines.

This second split RITC contract relates to £954.6m of net reserves, of which £392.5m related to discontinued classes. The syndicate said that it was the largest third-party RITC in the history of Lloyd’s.

With the assistance of Gallagher Re, ultimately the Board of MS Amlin approved the appointment of RiverStone International. For operational reasons the reserves for a small number of books of business, as well as certain Covid liabilities were reinsured back to Syndicate 2001.

Given the size and nature of the deal, approval from both Lloyd’s and the PRA was required. With this permission received, the RITC contract and associated transitional services agreement were signed on February 13^th 2023 (i.e., a post balance sheet event) taking effect from January 1^st 2023. Transition is planned to take approximately nine months with full operational control expected to transfer to RiverStone on October 1^st, 2023, although this date may change subject to the detailed operational planning of the project currently being undertaken.

Some of the now discontinued books of business continued to write business into the 2019 and 2020 YOAs. To protect these reserves, management have agreed a Loss Portfolio Transfer contract with RiverStone. The subject reserves amount to £149.5m.

Russia-Ukraine war

The Syndicate said that, as of December 31^st 2022, its estimate of the incurred gross loss totalled £168.3m, of which £164.4m was held in reserves. The net impact, net of reinstatements, is £60.6m. MS Amlin said that estimates of the losses for this event were unusually uncertain and could therefore have a wider than usual range of possible outcomes.

KPIs

Gross written premiums increased to £1,576.8m (2021: £1,339.7m), an increase of 17.6% driven by the impact of a strengthening of the US Dollar against Sterling, plus the benefits of pricing increases and agreed new business growth in the RI business unit.

Net earned premiums decreased by £53.3m to £909.1m (2021: £962.3m), which was driven by the P&C UK 2019 & Prior YOA RITC premium paid. Absent this RITC, net premiums earned increased by 13.2%, following the increase in gross premiums, but also due to a 10pp reduction in the Whole Account Quota Share (WAQS) cession to MS Amlin AG (Bermuda branch) for the 2022 underwriting year.

The Syndicate’s claims ratio improved to 53.5% (2021: 59.3%). On exclusion of the P&C UK 2019 & Prior YOA RITC premium and losses transferred this deteriorates to 61.0%.

MS Amlin said that on this more consistent basis the divergence from last year could largely be attributed to losses associated with the Ukraine conflict, coupled with the impact on loss reserves of increased economic inflation, partially offset by favourable performance on the most recent year of account.

The Syndicate investment result was a loss of £50.5m in the year (2021: gain of £36.1m).

Segmental Analysis

The active underwriter (2020: five active underwriters) during the year received the following remuneration charged as a Syndicate expense for the period they were appointed:

https://assets.lloyds.com/media/14f66130-4e6e-4194-bdc9-9c377752e23f/SRA2001a.pdf (2022)