Arista gross premium leaps as it aims for first-ever profit

Arista, the commercial lines managing general agent (MGA), has set itself a modest profit target of £500,000 for 2010 after posting losses for its first three years, said the company’s chief executive, Charles Earle.

The company, which started operating in 2007 with capacity and investment from Lloyd’s insurer Canopius and Equity Insurance Group, posted an operating loss of £1.5m in 2009, down from a £3.8m loss the previous year. Arista made an EBITDA profit in the second half of 2009, which Earle describes as “not a huge amount” and not enough to counteract the negative result in the first half of the year. However, he added that it was an encouraging sight after two-and-a-half years of red ink.

Earle said the £500,000 profit target for 2010 “is quite a small margin for a business our size. It is a target we aim for but we are not going to be slavish and miss opportunities”.

Arista’s 2009 gross written premium was £60m, a 67% increase on the £36m it wrote in 2008, despite continued soft conditions in the UK commercial lines market. While admitting that the 2009 growth was speedy, Earle said he is confident of the quality of the business underwritten. “We have got reasonable results out of it,” he said. He acknowledged that the results from liability business may not be immediately visible, but said: “There is a reasonable amount of liability but it is not

high-hazard business, and we look at it very closely. The development patterns are familiar to us. We believe we have got the business reserved accurately and in a conservative manner at a case and incurred-but-not-reported level.”

Earle credited Arista’s underwriting discipline to its experienced team and its IT system, which enables management to monitor what business is being written, loss ratios, claims frequency and average paid claims.

He attributed some of the growth to Arista’s increasing broker relationships. Its broker panel grew by 100 in 2009 to 330.

Earle said Arista has a less aggressive growth target for 2010. “We are in a very soft marketplace. Writing an awful lot of new business at some of the rates we are seeing doesn’t seem the smartest thing to do,” he said. “We will grow steadily. If we grow 10% and bring in the underwriting profits, then I will be quite happy.”

While not looking to grow quickly in 2010, Earle said he was considering setting up an office in Leeds to serve the North-East. He also noted the firm’s lack of presence in Scotland. “Inevitably we will want to do something there,” he said.

The firm will also explore opportunities to expand its underwriting footprint. Earle said that the company currently only writes a small amount of professional indemnity business and would like to write more. He added that growth may also come from acquisitions. An acquisition this year is possible,” he said. “We are not out searching but we are certainly willing to listen to people to see if their business might fit with ours.”