Best Affirms Amlin and Lloyd’s Syndicate 2001 Ratings

A.M. Best Co. has affirmed the financial strength rating (FSR) of ‘A’ (Excellent) and the issuer credit rating (ICR) of “a” of Amlin Bermuda Limited (ABL) with a stable outlook.

Best also affirmed its Syndicate Rating of ‘A+’ (Superior) and the issuer credit rating (ICR) of “aa-” of Lloyd’s Syndicate 2001, which is managed by Amlin Underwriting Limited (AUL). In addition Best has affirmed the ICR of “a-” of UK-based Amlin plc, the non-operating holding company of the Amlin group of companies, and the debt ratings of “bbb+” on the fixed-to-floating rate subordinated notes issued by Amlin as follows: $50 million due in 2019, $50 million due in 2020 and £230 million ($338 million) due in 2026. The outlook for all of these ratings is stable.

For ABL, Best said it “believes that the company’s risk-adjusted capitalization is supported by its prudent approach to exposure management and by full retention of earnings. ABL’s exposure monitoring and underwriting approach, including the spread of business written by the company in its target sectors, support the absence of a reinsurance program in 2008. This in turn has the effect of eliminating reinsurer counterparty credit risk.”

Best also indicated that it expects ABL “to report an underwriting profit for 2008 despite exposure to losses from hurricanes Gustav and Ike. Performance will be supported by low management expenses and the quality of ABL’s account, which largely comprises participation on profitable business already underwritten by Lloyd’s Syndicate 2001.”

However Best also noted that it “believes that technical profits will be more than offset by investment losses and losses on foreign exchange in 2008, resulting in an overall loss for the year.”

Concerning Syndicate 2001, Best said that its “financial strength benefits from the support of Amlin plc, which maintains strong consolidated risk-adjusted capitalization. Amlin plc owns 100 percent of the syndicate’s capacity and provides assets in the form of bonds and equities to support the syndicate’s funds at Lloyd’s. Syndicate 2001 remains the main underwriting platform for the Amlin group and is expected to provide approximately 85 percent of consolidated gross premiums for 2008. Additionally, the syndicate maintains a prudent level of reserves and has a history of reserves releases since 1998.”

Best also noted that “Syndicate 2001 has consistently produced superior underwriting results with a positive return on capacity every year since 2001.” Best said it “believes that despite exposure to hurricanes Gustav and Ike, this profitable trend is likely to continue in 2008, with a positive return likely to be supported by releases from prior years’ reserves and investment income. The conservative nature of the syndicate’s investment portfolio, which largely consists of high quality bonds, helps insulate the syndicate from losses experienced during weak economic conditions and produces a steady income.”

In addition Best pointed out that “as one of the largest syndicates in Lloyd’s, Syndicate 2001 maintains an excellent market profile writing the majority of business from a lead position. The syndicate continues to benefit from a strong risk management framework, which A.M. Best believes is fully embedded across the Amlin group.”

Source: A.M. Best – www.ambest.com