Combined ratio improved across several lines, helping transform a £17.1m loss into a £14.4 profit, but there is more to do says syndicate
The return to profitability of Lloyd's Syndicate 3210, ultimately owned by Japanese insurer Mitsui Sumitomo, was caused in part by reserve release-driven falls in incurred claims in certain classes, as well as an improved investment result. There are still several problem areas in its portfolio that the syndicate is looking to improve, however.
Syndicate 3210 made a profit of £14.4m for the full year of 2009, compared with a £17.1m loss in 2008. This allowed its capital provider, MSI Corporate Capital Ltd, to post a pre-tax profit of £18.6m for 2009, compared with a 2008 loss of £14.9m.
A big contributor to the turnaround was the fact that investment income almost doubled to £27.7m from £15.2m, but also a narrowing of the technical loss to £9m from £30.1m. The improved technical result was helped by lower incurred claims of £208.6m, from £212.4m. The claims ratio improved to 69.8%, from 79.5%.
The syndicate reported that property claims activity had been benign, while specific case reserve releases contributed to an 82% reduction in net incurred claims, resulting in an overall combined ratio for the class of 52%. Syndicate 3120 also experienced a 47% reduction in claims in construction, greatly improving the line’s combined ratio to 88%, from 124% in 2008.
Other highlights included: casualty, where the combined ratio was 71% despite a 40% increase in claims; marine cargo, which posted a combined ratio of 78%; marine hull, which reported a 79% combined ratio; and the syndicate’s small nuclear account, whose combined ratio was 36%, down from 68% in 2008 thanks to a $100,000 (£63,000) reduction in claims.
Room for improvement
It was not all good news for Syndicate 3210 in 2009, however. Its motor book saw a 100% increase in claims, pushing the combined ratio for that class up to 171% in 2009, from 98% in 2008. The firm highlighted the reduction of its motor combined ratio to below 100% in 2010 as a priority for management.
Also a priority for reduction is the professional indemnity/directors’ and officers’ liability combined ratio, which jumped to 140% from 106% because of a number of large claims during the year that exceeded £1m.
Claims were higher than expected in commercial lines, increasing by 116% and resulting in a combined ratio for the class of 168%. While this was an improvement over the 267% reported in 2008, the company said it was still unacceptable and is aiming to reduce it to below 100% in 2010.
Mitsui also described the aviation combined ratio of 117% as unacceptable, though an improvement from 2008’s 138%.
Mitsui started a review of Syndicate 3210’s business in 2009, which it said has been accelerated in 2010 by the appointment of Eamon Brown, previously senior manager of the Lloyd's franchise performance division, as the syndicate’s new underwriting director. Brown joined the firm on 1 January this year.
“The syndicate is expecting the tough market conditions to persist in 2010, but this review, combined with actions already taken in 2009, is budgeted to provide a profit in 2010,” said MSI Corporate Capital’s Companies House filing.
