Best Affirms Lloyd’s Syndicate 2001 ‘A’ Ratings

A.M. Best Co. announced that it has affirmed its “A” (Excellent) Syndicate Rating and the issuer credit rating of “a+” of Lloyd’s Syndicate 2001, which is managed by Amlin Underwriting Limited (AUL). The outlook for both ratings is stable.

“The syndicate benefits from the financial strength of the Lloyd’s market, which underpins the security of all Lloyd’s syndicates,” Best said. It also noted that its syndicate ratings are based on specific syndicate criteria. (See A.M. Best’s Rating Methodology for Lloyd’s Syndicates at: http://europe.ambest.com/lloydsmethodology.pdf). The rating agency also indicated that “the syndicate’s financial flexibility is enhanced by the support provided by its parent company, Amlin plc, which A.M. Best believes remains committed to the syndicate.”

Best described Syndicate 2001 as the “the largest syndicate in Lloyd’s with allocated capacity of £$1 billion ($1.85 billion) in 2004.” It also has “an excellent market profile and leadership position (leading approximately 55 percent of business by premium volume) for most of the classes that it writes. The syndicate writes a well diversified account across four main divisions (Non-Marine, Amlin Insurance Services, Marine and Aviation), all of which benefit from strong brands within their respective markets.”

Best said it “believes the syndicate has a robust business profile notwithstanding a modest projected reduction in premium income between 2003 and 2005 resulting from the management’s strategy of cutting back on business in classes where rating conditions are weakening.” It also said the “syndicate has a strong internal risk management and control infrastructure that is likely to provide a clear focus on any emerging performance issues.”

Syndicate 2001 “is projected to be profitable in each of the 2002 – 2004 underwriting years despite estimated losses from the United States, Caribbean and Japanese windstorms in the second half of 2004 of $263 million gross and $133 million net,” the bulletin continued. The earnings projections are forecast “to produce solid profits of between 15 and 20 percent on capacity (after personal expenses) for the 2002 and 2003 years of account, with the syndicate benefiting from a relative absence of any significant catastrophe losses and a positive rating environment.

“Although the Amlin plc half-year 2004 combined ratio–which reflects the syndicate’s performance–improved by 10 percentage points to 73 percent, A.M. Best believes the estimated windstorm losses will likely result in a year-end ratio largely comparable to the previous year (2003 year-end combined ratio of 83 percent). The syndicate is somewhat dependent upon the availability of retrocession cover, and A.M. Best will closely monitor the syndicate’s maintenance of good quality retrocession cover going forward.”