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Amlin posts $250m loss

Amlin Plc, the biggest Lloyd’s of London insurer by market value, expects to recoup its record catastrophe losses in the second half as premiums increase, chief executive officer Charles Philipps said.

While the company’s Amlin Bermuda unit wrote more business, it made an underwriting loss, due to the record claims from natural disasters in Japan, New Zealand and Australia.

The insurer yesterday posted a group-wide net loss of £151.7 million ($250 million) in the first six months of the year, compared with a profit of £84.5 million in the year-earlier period, after record claims from natural disasters in Japan, New Zealand and Australia.

“We expect to materially or significantly recoup these losses,” Mr Philipps said on a call with reporters. “It is subject to the level of second-half catastrophe activity.”

Claims from earthquakes in Japan and New Zealand, floods in Australia and windstorms in the US have made the first six months of this year the most costly for insurers on record. Amlin writes more policies in these areas than rivals, Mr Philipps said. The insurer aims to return to profit by charging higher premium rates for those areas in the second half, he added.

Amlin Bermuda wrote gross premiums of $592.3 million in the first six months of the year, compared to $502.5 million in the same period in 2010.

The interim report said that the unit had seen a marked difference in rate movement as the catastrophe losses added up.

In the first three months of the year, Amlin Bermuda experienced average rate reductions on renewal business of 4.2 percent; in the April through July period, rates increased 4.2 percent. The division’s combined ratio, which reflects the proportion of premium dollars spent on claims and expenses, was 136 percent, indicating an underwriting loss.

“The company seem confident that rates are rising materially and that they will materially recoup the underwriting losses, and return to high levels of profitability,” Marcus Barnard, a London-based analyst at Oriel Securities Ltd with a “reduce” rating on the stock, wrote in a note to clients yesterday. “This sounds like wishful thinking.”

Amlin will pay a first-half dividend of 7.2 pence a share, the same as in the year-earlier period. Lloyd’s competitors Hiscox Ltd, Beazley Plc and Novae Group Plc all raised their first-half dividends.

“Exceptional catastrophe losses in the first half of 2011 have taken a heavy toll on the reinsurance industry, and Amlin has been no exception,” Mr Philipps said in yesterday’s statement. “While our results are disappointing, the core underwriting businesses in London and Bermuda are well placed to take advantage of an improving rating environment, particularly in catastrophe lines.”

The pretax loss of £192.3 million was wider than the £174 million median loss estimated by eight analysts surveyed by Bloomberg.

The stock tumbled the most since the September 11 terrorist attacks on August 2 after the company said it was likely to miss profit forecasts this year. Claims from this year’s New Zealand earthquake were higher than expected and profits from Amlin Corporate Insurance, which the firm bought in 2009, will be lower than previously estimated, the insurer said this month.

“A lot of our peers are more concentrated in their exposures in the United States,” Philipps said. “It’s outside the US that we can have a little bit of a larger loss than our competitors.”

Amlin Corporate Insurance, which the insurer bought in 2009, made an underwriting loss of £43.1 million after paying out for four claims in its property and marine accounts.

“We believe that’s bad luck, as opposed to bad underwriting,” Philipps said, saying the firm had conducted a review of ACI’s operations.

Charles Philipps

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Published August 23, 2011 at 2:00 am (Updated August 23, 2011 at 10:02 am)

Amlin posts $250m loss

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