Omega underwrites profit

Omega Insurance announced pre-tax profits up 67% to $47.1m (2008: $28.2m), based on gross written premiums of $265.8m ($265.4m). The pre-tax result included a profit of $36.5m (loss of $3.0m) from underwriting activities, $15.9m ($23.5m) from managing agency activities and $16.3m ($21.8m) from investment income. Profit for the year was $43.6m ($22.2m). Its combined ratio was 81.4% (101.4%)

Financial highlights (2008 in brackets)

• Gross written premium$ 265.8m $265.4m
• Group combined ratio 81.4% 101.4%
• Profit for the year $43.6m $22.2m

Group Underwriting Result $m (2008 in brackets)

• Gross premiums written 265.8 (265.4)
• Net premiums earned 195.5 (215.7)
• Claims incurred, net of reinsurance 96.3 (163.9)
• Net underwriting charges 62.7 (54.8)
• Underwriting profit/loss 36.5 (-3.0)

Richard Tolliday, chief executive officer said: "Omega delivered a strong performance in 2009, with a notable underwriting contribution and healthy margins on a historic basis, whilst maintaining our prudent approach to reinsurance buying and investment.

“We have continued to drive outstanding performances from our US and Bermuda platforms, while in the UK we have more than doubled our underwriting capacity in Lloyd's Syndicate 958 for the 2010 account.

“All of these developments put us in a very favourable position to move positively into 2010 and beyond."

Benign losses

“Given our focus on catastrophe and direct property lines, our claims experience has benefited from 2009 being a relatively benign loss year, free of significant catastrophe events. This is reflected in our loss ratio which improved by 26.7 points to 49.3% (2008: 76.0%).

“However, we have strengthened attritional claim reserves on prior underwriting years in the Syndicate. This has been restricted to certain classes, including longer tail classes.

“Given the position of the cycle and experience to date we have taken a more prudent view of likely claims and premiums development and have therefore increased our reserving margin over the actuarial best estimate, produced by our independent actuaries, for prior years to take account of this.

Increase reserves

“This reserve increase has been offset largely by the reinsurance protection afforded to us by our aggregate whole account reinsurance protection although this has resulted in reduced profit commission on those contracts.

“The recent 1 January 2010 renewals season indicated that rates have softened. US catastrophe business has seen reductions of between 5% and 10%, whereas larger nationwide business has remained flat.

“Non-US business has seen smaller reductions albeit from a smaller base. Premium rates across Omega's portfolio decreased marginally during 2009. Overall, however, Omega's account is still affording attractive margins. There are some signs that the remainder of the year may see a further weakening of market conditions.

Underwriting discipline

“The chief underwriting officer and the underwriting team will be applying the disciplined approach to underwriting for gross profit that has underpinned Omega's profitable performance through past market cycles. They will not hesitate to decline business should margins become unacceptable.

Omega also ran though the dispute it is having with shareholder Invesco Perpeptual.