Syndicate 0260 moves from B- below average to B average
Moody's Investors Service (Moody's) has upgraded the B - below average performance rating of Lloyd's syndicate 0260 (KGM Underwriting Agencies) to B Average.
The rating agency said that the upgrade was based on the syndicate's above average profitability in recent years and the potential for future returns and continuity prospects to have the potential to be consistent with a B average performance rating. The outlook for the rating is stable.
The syndicate, around 60% backed by private investment vehicle Perseverance, and with a capacity of £54m, writes a specialist UK Motor account. Moody's stated that the syndicate has recently out-performed its B- performance rating peer group in recording profits of 6%, 3%, 5%, 11% and 14% of capacity for the 2001 though 2005 years of account.
Additionally, for 2004 to 2007 the syndicate has reported an above average annually accounted profit of 14% of net premium earned (NPE), recently reporting a profit of 7% NPE for 2007 on a combined ratio of 106% (2006 16% NPE, combined ratio 103%). It is currently forecasting a profit of 5.6% of capacity for 2006 under three-year accounting.
The forecast open year profit and annually accounted profits are despite the syndicate expanding and refocusing its account on specialist comprehensive business, in the motor insurance market downturn. Its cross-cycle, nine-year average return to 2006, including its mid-point forecast for 2006 of 5.6%, is an average profit of 7% of capacity under three-year accounting.
Moody's has previously had concerns over the long-term nature of one private investment vehicle allocating a significant proportion of capital to this business, with third party support having reduced since 2002, combined with the likelihood of further consolidation in the motor market.
But with above average performance in recent years, and the potential for third party support based on recent results should the dedicated vehicle reduce its involvement, Moody's has upgraded the performance to reflect its view of relative performance and continuity prospects for the syndicate over the insurance cycle.
