Advent blames Ike for loss

Property insurance and reinsurance Lloyd's insurer Advent announced an £14.4m pre-tax loss for 2008 blamed in hurricane Ike, but said its reinsurance arm made a profit.

Highlights

• Loss after tax of £8.9m (2007: profit of £19.2m).
• Underwriting loss of £24.2m and combined ratio of 115.4%.
• Increased profits from Syndicate 780’s 2006 and 2007 years of account, resulting from an improvement in prior years’ reserves of £6.4m and the stronger US dollar.
• Investment return of 4.8%.
• Advent Re reporting second year of profits.
• Improved market conditions evident at 1 January 2009.
• Unexpected costs of £1.0m relating to Fairfax offer.
• Long term debt with no refinancing requirements until 2026 and 2035.
• 2008 figures compared with 2007
• Profit (loss) before tax (£14.4)m compared with £25.2m
• Profit (loss) after tax (£8.9)m compared with £19.2m
• Net premiums earned £157.3m compare with £96.0m
• Net premiums earned (excluding RITC) £123.1m compared with£89.9m
• Combined ratio 115% compared with 79%
• Earnings (loss) per share (22.0)p compared with 47.2p
• Return on equity (8.5%) compared with 21.6%
• Net assets per 233p compared with 267p
• Net tangible assets per share 216p compared with 249p

The company said: “Trading conditions for 1 January 2009 renewals were more attractive than 2009 business plan assumptions, with premiums written of £86.8m at year end exchange rates and in line with the 2009 plan.”

Brian Caudle, chairman, said: “Advent had a challenging year with the high frequency of single risk property losses and two major catastrophes. The unexpected level of losses from our offshore energy account on Hurricane Ike, cost us £19.7m before tax and caused us to lose £8.9m after tax for 2008. This unacceptable result was primarily caused by a significantly higher level than expected of subsea losses, representing 60% of the energy account's incurred loss, which exhausted its reinsurance protection. We believe that decisive action is required in the energy market, and specifically to Gulf of Mexico windstorm exposures, in terms of coverage and policy wording, not simply increasing rates. Until such time that we see clear evidence that this has taken place, and not just on a short term basis, we will not expose the Company to these risks. Our Reinsurance and Property accounts performed within our expectations and remain well within their respective reinsurance programmes.

“Syndicate 780 has closed the 2006 underwriting year of account with one of its highest ever profits of £51.4m, representing 33% of underwriting capacity and is forecasting another good profit for the 2007 underwriting year of account.

“Advent Re, although affected by Hurricane Ike, had another successful year with a combined ratio of 71.6% on net earned premiums of £8.0m and a profit of £3.7m.

“Market conditions have improved, particularly in the reinsurance market following the loss experience in 2008. This year will be challenging as we manage our US dollar catastrophe exposures within our risk appetite while meeting our underwriting profit objective.”