Re/insurer Amlin, which has a big presence on Bermuda, has reported a slight dip in profits in the first half of 2015, compared with the same period last year.
The firm made a net profit of £132.8 million in the first half of this year, compared with a profit of £136 million in the same period a year earlier. Amlin said that the slight decrease in profits was due to accountancy changes.
Charles Philipps, Amlin chief executive, partly attributed this decline to a change in the way the firm accounts for the seasonality of catastrophe reinsurance earned premium.
But the company has enjoyed solid growth in the first half of the year, regardless of challenging market conditions. It posted gross written premiums (GWP) of just over £2 billion in the first half compared with £1.9 billion in 2014 – an increase of 6.3 percent.
Its combined ratio increased slightly in the first half of the year to 91 percent, compared with 87 percent in H1 of 2014, due to higher expense ratio on lower net earned premium.
Amlin’s reinsurance unit also enjoyed growth despite the very competitive market conditions. GWP in this unit was £1 billion in H1 of this year compared with £935.2 million last year, a 12.9 percent increase.
The firm said its reinsurance unit benefitted from new business growth and the strength of the US dollar. However, it said competition within reinsurance lines remains challenging and it was being selective about the new business it is writing.
“Amlin has continued to be selective, focusing on areas where pricing meets acceptable rates of return and reducing lines where we believe prices to be marginal or inadequate,” it said.
Overall, reinsurance renewal rates decreased by 6.4 percent (2014: 6 percent decrease). US and international catastrophe renewal rates saw particularly harsh reductions, at an average of 8.5 percent and 10 percent, respectively.
Charles Philipps, Amlin chief executive, said: “This is a solid set of results in the more challenging market which prevails. Were it not for our change in accounting for the seasonality of catastrophe reinsurance earned premium, profit before tax would have been considerably ahead of the first half of last year.”
Amlin’s results also contained some interesting insights into how it sees the markets developing going forward. Specifically, it seems to believe that diversification is more important than ever.
“The markets in which Amlin operates are undergoing significant transformation. Capital is abundant, regulation is changing and technology is increasingly influencing how business is conducted,” the company said.
“The strength of Amlin’s franchise, the diversity of its business model and the skill and experience of our people are critical ingredients for success in this environment.
“Diversification of our business has been a key feature of our strategy in recent times. We have actively sought opportunities to adapt the balance of our portfolio, new product offerings have been developed and new markets and regions have been accessed.
“This increased diversification allows us to respond to changing markets, take advantage of opportunities for growth and to deliver returns.
“In reinsurance, rating pressure has been significant but profitability has remained good. While average renewal rates for catastrophe reinsurance decreased by 6.4 percent in the period, broadly in line with budget expectations, we have reduced lines or come off business where we consider pricing to be below acceptable levels but have successfully increased exposure to those layers of programmes which we believe offer better rates and risk adjusted margin potential.
“The recent Florida renewals provided a glimmer of hope that the rate of decrease may be slowing. However, in the absence of material catastrophe activity in the second half, catastrophe reinsurance markets are expected to remain challenging for the foreseeable future.”
Amlin, First Half 2015 Results, Charles Philipps, Bermuda