Amlin expects its first-half 2011 profit after tax to be £53m below previous expectations thanks to rising loss estimates and reserve strengthening. The shortfall is £65m on a pre-tax basis.
Amlin said that during July it received a “material increase” in notified claims from the 11 February New Zealand earthquake, bringing total catastrophe claims to £314m.
While this was partly offset by reduced loss estimates from the Japanese earthquake and from Amlin London, Amlin Bermuda has had to strengthen net major catastrophe reserves, contributing £27m to the shortfall in profit expectations.
In addition Amlin Corporate Insurance (ACI) has performed below the company’s expectations because of a higher-than-normal frequency of large claims advices on its property and marine accounts, particularly in June 2011. Therefore ACI’s first half result is £28m below previous expectations.
On top of this, Syndicate 2001’s reserve releases, at £6m in the first half, are £10m below Amlin’s normal expectations. This was mainly caused by a £3m deterioration in Amlin UK’s 2009 motor and property reserves.
However, the company added that if development patterns move back towards the trend in the second half of the year, and the 2009 development is unusual, the deterioration could be partially or fully reversed by the end of 2011.
Amlin also expects some of the overall shortfall in profit expectations to be offset in the second half of the year by increased income from catastrophe reinsurance, which has been written in the second quarter in an improved rating environment.
"The first half of 2011 has seen an unprecedented level of catastrophes that have affected the non-life insurance sector as a whole. Despite this, we are disappointed by these further developments and their impact on our 2011 performance,” said Amlin chief executive Charles Phillips. “We have continued with our cautious approach to reserving and if loss activity returns to more normal levels we would expect a strong performance in the second half of the year.”
He added: “We also remain confident that our actions to strengthen ACI's underwriting practices, risk management and reserving will show through in future results. The balance sheet remains robust and with conditions improving on key lines of business we are well placed in our markets."
Amlin will release its first-half results on 22 August.
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