Many of the Lloyd's quoted operators have cut previous losses and are waiting to cash in on the hard market. Jason Woolfe reports
EVEN an increase in WTC losses couldn't hold Amlin back from a storming performance among quoted Lloyd's operators in the first half of this year.
Along with most of its peers, Amlin turned a profit, after losing money in the first six months of 2001, but it's the size of its profit and its earnings per share figure that sets it apart.
It felt bullish enough about its prospects to pay a dividend, albeit at only 75p a share.
Now that the others have reported their first-half results, Amlin's £18.2m pre-tax profit looks particularly good, and it leads the field in our table here with its 6.3p earnings per share result.
Only little Hardy can come close on that measure of performance, although the smaller outfit also beats Amlin on its combined ratio.
A closer look reveals that Amlin benefited from better than expected investments, while many of the others in the class suffered losses as they try to sit out the stockmarket downturn waiting for their equities to regain value.
But the main driver across the market is, of course, the chance to make an underwriting profit after the lean years of low prices.
Amlin and BRIT have both now entered the FTSE 250, raising the prospect of a higher profile and perhaps livelier trading in their shares.
Greater exposure could help both groups to persuade investors that non-life insurance is not bedevilled by the same problems dragging the life sector down - principally the fear of forced selling of investments to meet tight solvency rules.
Non-life favoured
The focus of analysts and investment professionals is mainly on the large composite insurers, but they are making a clear distinction between life and non-life.
Morgan Stanley analyst Rob Procter wrote earlier this month that his organisation favoured non-life and reinsurance over the life and banking sectors.
And it's the non-life insurers with the least exposure to equities that can best argue that they are relatively insulated from any further falls on the stock markets.
Many of the quoted Lloyd's vehicles are responding to the volatile markets by holding more cash than they would do normally, or otherwise reducing or diluting their holdings in shares.
One of the best turnarounds in investment performance comes from SVB - a welcome piece of good news for the group whose 2001 losses ruled out a capital raising trip to the market earlier this year.
SVB managed to turn an investment loss of £9.8m for the first six months of last year into a handsome £8.6m profit in the same period this year. This was the result of having largely escaped the equity markets downturn following 11 September when it decided that, faced with yet more losses, it simply could not afford any more volatility.
Hardy, in other respects far more successful, took a different view and is sitting tight on a portfolio of equities worth £8.2m at the beginning of the year. Its holdings outperformed the sector, but it still lost £434,000 of value.
Chief executive Barbara Merry said: "The conclusion we've come to is that this just isn't the right time to sell."
Hardy's US fund has been doing particularly well, producing a return last year of 11.2% against a benchmark of about -13%.
If it can repeat that sort of performance across all its investments then Hardy's grin and bear it strategy will pay off well.
Bullish market
Goshawk's equity portfolio managed a flat result, but the group distinguished itself with a combined ratio of 90%, equal to BRIT's and just behind Cox's leading 89%.
Many of the Lloyd's operators were keen to point out that the fruits of the current hard market had only just started to make an impact on the books as these results were being drawn up.
The mood across the market is bullish and should stay that way as long as loss ratios remain relatively benign.
The race is now on to see which groups can fight their way to the top of the table by writing as much profitable business as possible while keeping efficiency high.
The ones with the best combined ratio figures - Cox, Goshawk, BRIT and Hardy - could be set to accelerate into one of the most profitable markets for many years.
