Lloyd's managing agency SVB Holdings reported weighted average rate increases of almost 3% in the first seven months of 2004.
It said the 2003 year of account continued to show “further encouraging development”, with the forecast for both Syndicate 1007 and Syndicate 2147 increased to 12.5%–17.5%.
SVB said the 2002 year of account had shown further satisfactory performance, but that the progress had been “countered by adverse experience from SVB's discontinued units.”
The 2002 year of account forecasts for Syndicates 1007 and 1241 were both downgraded.
The forecast for non-marine Syndicate 1007 was reduced from 12%–17% down to 7.5%–12.5%, while the forecast for Syndicate 1241 was reduced from a loss of between 2% and 3% to a loss of between 20% and 15%.
The 2002 forecast for non-marine Syndicate 2147 was unchanged at 9%–14%, said SVB.
“The first half of 2004 has seen adverse development from the discontinued units,” said SVB. “As previously reported the first quarter was affected by loss reviews on two of the 19 large liability reinsurance contracts. The second quarter was affected both by large contract loss reviews (on a further four contracts) and by the balance of account.
“The poor gross experience was coupled with comparatively little reinsurance recovery and our projections have been amended to allow for a higher net impact from projected future development.”
SVB said Syndicate 1241 was the principle repository for the discontinued unit.
The managing agency said it was taking radical action to improve the run-off of its discontinued units.
The company said it was establishing a provision at group level £103m in excess of June 2004 syndicate reserves to meet possible future adverse claims developments, and had appointed Omni Whittington to provide strategic advice in relation to the management of the run-off.
“The consequence of these revisions to forecasts, when combined with the earning patterns for premium income, is expected to be a small operating loss (based on long-term rates of investment return) for the period ended 30 June 2004,” said SVB.
SVB chief executive Matthew Fosh said: “Much of SVB's underwriting between 1997 and 2000 has turned out to be even poorer than we had estimated.
“However, we have consistently said that the good underwriting of recent years will prevail over the losses from our discontinued units.
“The initiatives announced today, and in particular the provision we are making at group level, do not imply any change in this view but it will reduce the period in which the discontinued business obscures the good results from our current trading.”
