Amlin Corporate Insurance N.V.

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Amlin Corporate Insurance N.V.

Publié le : jeudi 21 juillet 2011
Lecture(s) : 130
Nombre de pages : 12
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Corporate Insurance N.V.
Capitalization: Strong Quality Of Capital, Conservative Claims Reserving, And Prudent Reinsurance Purchase Are Supportive
Liquidity: Strong, Though Weakening, On Positive Net Cash Flows Over The Cycle
February 7, 2011
Financial Flexibility: Strong With Support Of The Amlin Group
Operating Performance: Softening Cycle, Material Reinsurance Purchasing And Costs Of The Restructuring Put Profitability Under Pressure
Accounting: IFRS, Neutral To The Ratings
Amlin
Investments: Conservative Thanks To Limited Exposure To Credit And Market Risks
Outlook
Corporate Profile: Midsize Insurer Specializing In Corporate Risks Competitive Position: Good In Corporate Risk Insurance In Benelux
Enterprise Risk Management: Adequate, With Gradual Adoption Of Amlin Group's Risk Management Standards
Management And Corporate Strategy: Focused On Internal Restructuring And Portfolio Review, But Challenges Weigh On Execution
Table Of Contents
Primary Credit Analyst: Marie-Aude Salinas, Paris (33) 1-4420-6792; marie-aude_salinas@standardandpoors.com Secondary Contact: Dennis Sugrue, London (44) 20-7176-7056; dennis_sugrue@standardandpoors.com
Rationale
Major Rating Factors
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Amlin Corporate Insurance N.V.
Major Rating Factors Strengths:Operating Company Covered By ·Strategic importance of ACI to the Amlin groupThis Report ·Strong capitalizationFinancial Strength Rating ·Competitive position in corporate risks remains good, albeit weakeningLocal Currency A-/Stable/--
Weaknesses: ·Underperformance of the Belgian marine book continues to weigh on earnings ·Weakened competitive position in the short term resulting from significant cuts in the core marine book ·Still some execution risks linked to the company's operational management changes following ownership shift
Rationale
The ratings on Dutch non-life insurer Amlin Corporate Insurance N.V. (ACI; formerly Fortis Corporate Insurance N.V.) reflect the company's strategic importance to the Amlin group (core operating entities rated A/Stable/--). ACI's stand-alone creditworthiness is underpinned by its strong capitalization and its still-good, albeit weakening, competitive position in corporate risks in its main line of business. Offsetting these factors are: the underperformance of the Belgian marine book, which continues to weigh on earnings; the weakened short-term competitive position due to significant cuts in the core marine book; and some execution risks related to the restructuring of ACI following the change in ownership.
Since the Amlin group acquired Fortis Corporate Insurance and renamed it in July 2009, ACI has been viewed as strategically important to its parent under our group ratings methodology (see "Criteria | Financial Institutions | General: Group Methodology" published April 22, 2009). The current ratings on ACI factor in one notch of support above its stand-alone rating from the parent, Amlin. We estimate ACI contributed approximately one quarter of the group gross premiums written (GPW) at year-end 2010. It complements Amlin's diversification strategy and provides a good future platform for accessing business in continental Europe. However, as the acquisition is still recent, integration and synergies are progressing but execution risks remain.
Standard & Poor's Ratings Services views ACI's capitalization as strong. The company's capital adequacy, as measured by our risk based capital model, was viewed as good at Sept. 30, 2010, but we see overall capitalization as strong given the strong quality of capital, conservative claims reserving, and the prudent reinsurance purchase.
ACI's competitive position is good thanks to its long-standing presence in the Benelux market and good risk diversification relative to its size. However, management has undertaken a portfolio pruning process that has had an adverse impact on the company's market position in the short term. This portfolio cleaning, especially in the marine books, together with the intensely competitive landscape in which ACI operates, will shrink the company's market share in our view. However, we view this as a rating strength over the longer term as it should lead to an improved operating performance.
We regard ACI's operating performance as good thanks to its diversified risk portfolio and
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profitable-but-competitive underlying pricing. However, the underperformances of the Belgian marine and, to a lesser extent, the Belgian fleet books are weighing on earnings. The company's underwriting performance contrasts with historically strong results; the net combined ratio was 101% at end-June 2010 and we expect it to remain above 100% for full-year 2010, reflecting a continuing soft phase of the cycle and weaker-than-expected risk selection. The company's bottom line is also being affected by higher expenses associated with restructuring costs and a significant contribution from reinsurance purchasing. ACI is conducting portfolio reviews, which aim to recover underwriting profitability in the next two years. We expect the re-underwriting process to be largely complete at the end of first-half 2011.
ACI's growth-oriented strategy has enabled it to build a strong presence in its home markets, but also has seen it write some unprofitable business in the past three years, mostly in the marine line. We view positively management actions to restore profitability, although this is taking longer than we originally anticipated, amid very competitive trading conditions. In parallel, management appears to be successfully managing its separation from the Fortis group with little business disruption, although this process is not yet complete. Integration within the Amlin group is progressing but is at an early stage, so execution risk remains.
Outlook
The stable outlook on the ratings reflects that on ACI's parent, Amlin PLC (BBB+/Stable/--). Since ACI is a strategically important subsidiary of Amlin PLC, the ratings and outlook on ACI will move in tandem with those on the group as a whole, albeit capped at one notch lower than the rating on Amlin's core subsidiary, Amlin Bermuda Ltd. We therefore do not anticipate raising or lowering the ratings during the next two years.
We expect ACI's re-underwriting process, which started in second-quarter 2008, to continue to shrink ACI's marine and fleet portfolios. However, the delay in portfolio restructuring is taking longer than we anticipated and should now start coming into effect in second-half 2011 and more so in 2012. Consequently, we expect GPW to decline further by about 5%-8% in 2010 and 2011, and the net combined ratio is expected to be at or below 100% in 2011. Net earnings are set to suffer from continuing costs due to restructuring.
Corporate Profile: Midsize Insurer Specializing In Corporate Risks
ACI is a midsize commercial lines insurer mostly serving Benelux-based companies, with offices in the Netherlands and Belgium. The company operated as the commercial lines insurance arm of Fortis group until the group was dismantled in October 2008. Following the nationalization of all Fortis group's Dutch banking and insurance companies, ACI acted as a stand-alone insurance company, 100% owned by the Dutch government. Since July 2009, the company has been fully owned by the U.K.-based property/casualty insurer and reinsurer Amlin PLC and has been rebranded Amlin Corporate Insurance N.V.
With GPW of €397 million on June 30, 2010, ACI's portfolio is made up of marine (48%), property (22%), liability (17%), and fleet insurance (9%), with the remainder from fronting arrangements with Luxembourg-based reinsurance companies. The company distributes its products mainly through brokers and target clients who generate up to €550 million in sales.
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Competitive Position: Good In Corporate Risk Insurance In Benelux
ACI's competitive position is good thanks to its long-standing presence in the Benelux market and good risk diversification relative to its size. However, we believe the portfolio cleaning together with the intensely competitive landscape in which ACI operates, will shrink the company's market share in the short term. More positively, we view this as a rating strength as it should lead to an improved operating performance over the longer term.
Historical ACI enjoys a fairly diversified business mix relative to its size. Its long-standing market position and well-established broker relationships have helped the company achieve strong positions in its target markets, namely in marine and liability in Netherlands and Belgium, and fire and engineering businesses in Belgium.
Between 2004 and 2008, ACI boasted strong GPW growth that averaged 9.5% every year. In particular, the company expanded its international marine business, which grew by 35% in terms of GPW in 2008 (12% growth in 2007). ACI's rapid expansion in businesses outside its traditional expertise--such as yachts, naval construction, and protection and indemnity (P&I)--led the company to underwrite some unprofitable accounts. This translated into major underwriting losses in the ensuing years, which are still weighing on ACI's current results.
In response, the company started a portfolio pruning exercise in the second quarter of 2008, which translated to a 7% decrease of GPW at year-end 2009, and a further 11% drop at June 30, 2010. In addition to the business cancelled by the company, these reductions--to a lesser extent--resulted from the heads of the marine departments departing, but were mitigated by regaining the Raets contract (estimated to contribute about €33 million for 2010). We believe the new underwriting teams in both Antwerp and Rotterdam will fully prune these portfolios, as already reflected in the Dutch book, and will maintain ACI's share of profitable contracts.
ACI operates in very competitive landscapes (its liability and property business in the Netherlands and Belgium, for example) where there is also excess capacity, especially in the marine market. This constrains ACI's ability to raise prices; these were flat overall in 2010.
In addition, dismantling the Fortis group has somewhat pressured ACI's competitive position in Belgium. In particular, ACI and AG Insurance (A-/Stable/--) (formerly Fortis Insurance Belgium) now compete for motor-fleet business they previously shared. ACI's underwriting team for the Belgian fleet business has also been fully replaced, delaying ACI's re-underwriting exercise. That said, we do not view AG Insurance as representing a bigger threat than any other competitors in the industry. ACI lost a relatively small amount of business to AG Insurance in 2009 and 2010. So far, the company has not experienced material cancellations of profitable contracts due to the dismantling and some underwriters departing.
The concentration of business within a small number of large brokers somewhat weakens ACI's competitive position. While 250 intermediaries distribute ACI products in the Netherlands and Belgium, four large brokers write 48% of the business. In addition, ACI's exposure is still significantly concentrated in Belgium and the Netherlands and its ability to expand in other markets is limited. However, these negative factors are counterbalanced by ACI's diversified client portfolio. ACI's 10 largest clients represent only 22% of GPW in Belgium and just 4% in the Netherlands, where the company underwrites business through the Netherlands bourse market.
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Prospective We expect ACI to continue to focus on internal restructuring and portfolio cleaning, particularly in the Belgian marine and fleet sectors where the pruning is taking longer than we anticipated. This process, which aims to correct the company's substantial but ultimately unprofitable growth in recent years, is expected to be largely completed by the end of first-half 2011, with the renewal season. We expect GPW to fall by between 5% and 8% in 2010 and 2011. We anticipate that ACI's competitive position will remain fundamentally good thanks to its expertise in its chosen risks and markets. In the longer term, ACI should also benefit from Amlin's strong franchise and expertise particularly in marine business, in our view. Therefore, we expect healthy and prudent growth to return in 2012.
Table 1
Amlin Corporate Insurance N.V./Competitive Position
(Mil. €) Total revenue Non-life gross premiums written Annual change (%) Non-life net premiums written Annual change (%)
--Year ended Dec. 31--
2009 2008 2007 2006 662.3 623.7 514.5 472.5 708.4 762.5 656.3 597.3 (7.10) 16.17 9.88 2.68 590.5 590.5 496.8 445.5 0.00 18.85 11.51 10.34
2005 446.1 581.7 4.02 403.8 11.63
Management And Corporate Strategy: Focused On Internal Restructuring And Portfolio Review, But Challenges Weigh On Execution
ACI's growth-oriented strategy has enabled it to build a strong presence in its home markets, but has also led it to write some unprofitable business in the past three years, mostly in the marine line. We view positively management's actions to restore profitability, although we believe management did not fully anticipate the amount of deterioration in the book. The portfolio pruning process has not, as yet, met our expectations for improving the company's operating metrics, namely achieving a combined ratio at or below 100% for 2010. In parallel, management appears to be successfully navigating its separation from the Fortis group with little business disruption, although this process is not yet complete. Integration within the Amlin group is progressing but execution risk remains.
Strategy To increase its established competitive position in its main corporate segments, ACI has focused on new business initiatives in the marine business (such as yachts, naval construction, and P&I) in the past three years. While this strategy led to strong top-line growth during 2004-2008, this foray outside its traditional area of expertise has also resulted in significant underwriting losses and has materially impaired the company's core marine book of business from 2008.
ACI has since undertaken a portfolio review, started in second-quarter 2008, which aims to recover profitability. Because market competition restrains ACI's ability to raise prices somewhat, more in-depth pruning is expected in the coming months with the upcoming renewal.
ACI's management team is in charge of setting the strategy to improve profitability. However, the introduction of Amlin group controls provides further momentum to ACI's re-underwriting efforts. We view this as a longer-term positive given Amlin's proven strong underwriting capabilities.
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Operational management ACI used to have strong operational links with its former owner, Fortis, now AG Insurance in Belgium (formerly Fortis Insurance Belgium) and Ageas (A-/Stable/--) in the Netherlands (formerly Fortis Insurance Netherlands).Particularly in Belgium, ACI previously derived considerable benefits from FIB's support functions such as human resources (HR), information technology (IT), claims handling, and administration of outward reinsurance.
During 2009, the transformational year, ACI's management successfully disentangled itself from the Fortis group, with little business disruption. The continuity in IT functions is now guaranteed in the short term through a service provider contract with AG Insurance. The contract lasts until June 2011, enabling ACI to smoothly achieve independence before complete integration within the Amlin group.
In parallel, the Belgian workforce's transition from Fortis to ACI has been successful, with 86% of staff transferred to ACI and new recruitment achieved in various teams (marine and the Belgian fleet). However, ACI needs new underwriting and operating systems. This is a major project and consumes significant time and some costs, but this process is being managed by Amlin.
Integration within Amlin is progressing but being in its early stages execution risk remains. The successful integration of ACI's French office into AFU (now Amlin France) already indicates ACI's ability to smoothly transition to a new group. Investments are already managed at the group level. Amlin has also worked to restructure ACI's operations and management team. Many of the Amlin group's underwriting practices have been implemented at ACI. ACI's management has also changed significantly: the group has installed a chief risk officer (CRO) and chief operating officer (COO); has replaced the lead underwriters on the troublesome marine book; and is currently looking for a new chief financial officer.
Financial management ACI's main medium-term target is to recover technical profitability within segments of its business that were loss-making from 2008 to now, while maintaining prudent reserving practices. The Amlin group has set a long-term net-combined-ratio aim of 95%. In terms of capitalization, the group's strategy is to preserve its subsidiary's capital base to retain capital adequacy consistent with a 'A' rating level under Standard & Poor's risk-based capital model.
ACI has also adopted a new compensation scheme for managers and underwriters that's based on achieving profitability targets across the cycle. This is in line with the group compensation structure, but adapted to fit local nuances.
Enterprise Risk Management: Adequate, With Gradual Adoption Of Amlin Group's Risk Management Standards
ACI demonstrates adequate enterprise risk management (ERM) capabilities for its insurance operations. Consequently, we do not expect ACI to experience losses outside normal ranges from traditional risk areas. Our assessment is based on ACI's stand-alone adequate risk-management culture and adequate risk controls for the majority of its key risks: underwriting, reserving, and property catastrophe risks. We expect ACI to gradually adopt Amlin group's risk governance by the end of 2011. ACI will therefore benefit from its parent's stronger skills. We consider the group's risk-management controls to be adequate, with a positive trend overall.
We consider ERM to be moderately important to the rating, due to the level of volatility, complexity, and diversity
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of the businesses written by ACI. The company's business profile requires a high degree of risk awareness. ACI's underwriting and reserving practices are sufficient for its risk profile, but are expected to be substantially enhanced to conform with Amlin group practices. We also expect the arrival of the new CRO and COO will boost implementation of group's practices.
Although ACI's risk-management culture and governance continue to reflect the practices of its former owner, we believe them to be adequate. Indeed, ACI's management developed its own risk-management policies--evidenced by the company's internal committees--and created a corporate risk department in 2008. The company also created a risk-self-assessment process, with risk mapping and yearly monitoring.
Underwriting risk management is adequate in our opinion. ACI has developed risk management tools for policy scoring and cycle management. It uses detailed underwriting guidelines in line with group's practices and has adopted some group tools as well, including increased levels of controls, increased accountability, and the implementation of peer reviews. An offsetting factor is the recent sharp increase in loss ratios in property and marine, which reflects weaker-than-expected cycle management. That said, we view positively the actions taken to restore technical profitability and the focus on the existing portfolio; these indicate still-adequate risk management practices.
Reserving risk controls are viewed as adequate. The reserving policy is conservative and tested externally every year. It shows consistent surpluses every year against the 80th percentile based on a value-at-risk (VaR) approach that's consistent with the parent's methodology. The testing is performed separately for each line of business on an undiscounted basis. Partially offsetting these favorable aspects is the change in reserving methodology in 2009, which led to liability reserves strengthening.
ACI has not yet developed internal capital modeling tools adapted to its business. Consequently, the company does not yet have a unified tool enabling it to optimize decision-making relating to capacity adjustments, reserving policies, or reinsurance purchasing. We expect ACI to be integrated into the Amlin group's capital model by 2011, which should improve risk taking in the business.
Accounting: IFRS, Neutral To The Ratings ACI's annual report and financial statements are prepared in accordance with International Financial Reporting Standards (IFRS). Under IFRS, the company marks its bond investments to market and this is reflected in its revaluation reserve. Property investments at year-end 2009 are held at cost and as such we gave credit in our capital model to the unrealized capital gains not recognized in the balance sheet. Other adjustments to the capital model are the loss reserve surplus adjustment and loss reserve discount.
Operating Performance: Softening Cycle, Material Reinsurance Purchasing And Costs Of The Restructuring Put Profitability Under Pressure We regard ACI's operating performance as good thanks to its diversified risk portfolio and profitable-but-competitive underlying pricing. However, the underperformance of the Belgian marine and, to a lesser extend, the fleet book is weighing on earnings. The bottom line is also affected by higher expenses due to the restructuring and reinsurance purchasing that represents a significant portion of the company's total expenses. ACI is, however, conducting portfolio reviews, which aim to recover underwriting profitability in the next two years.
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Historical ACI posted good underwriting earnings during 2005-2009, with an average net combined ratio of 95% supported by a competitive, though profitable, pricing of the underlying portfolio, and low expenses ratios (averaging 25% over the same period). ACI also reported good return on equity (16%) and return on revenue (12%) over the same period, on the back of good average underwriting results and investment income.
Through 2006, ACI benefited from hardening market conditions. Underwriting earnings started to worsen in 2007 and have turned negative since 2008, reaching a high of 102% net combined ratio at year-end 2008. This mainly reflects softening market cycles, weaker-than-expected risk selection, and growth outside ACI's area of core expertise, which led to the underwriting of unprofitable business.
As a result, the company started a portfolio cleaning process in second-quarter 2008. This exercise has successfully helped reduce the combined ratio of the Dutch marine portfolio to 92% on June 30, 2010, from 111% for 2009; the portfolio also benefited from some reserve releases (of €20 million, representing a 3% impact only on the overall combined ratio in the first half of 2010). However, the performance of the Belgian marine book continues to disappoint, with a 180% net combined ratio at the end of June 2010, which significantly weighs on earnings. The fleet portfolio in Belgium is also disappointing, although less so, with a combined ratio of 122% at end-June 2010 (from 104% at year-end 2009). The delay in the return to profitability of these Belgian books reflects tough market conditions, the distractions associated with the sale process, and staffing issues related to the replacement of the underwriting team.
Higher reinsurance costs also weighed down ACI's underwriting earnings after Fortis Re, which had accounted for 39% of the reinsurance program, exited ACI's reinsurance program when the Fortis group was dismantled. Restructuring charges continued to increase in 2010, and are viewed on a one-off basis in our analysis. These costs related to the disentanglement from the former Fortis group, the transition incentive allowed to ACI's staff, and other IT costs. The underwriting deficit and the one-off costs were offset by a resilient contribution from investments. Overall, net earnings were slightly up to €28 million at year end 2009 and €21 million at the end of June 2010 (from €24 million at year-end 2008).
Prospective We expect ACI's current portfolio review to lead to improving underlying profitability starting from 2011 and showing further improvement in 2012. Amlin's track record and expertise should help ACI's management in restoring the past strong earnings levels. Consequently, we expect the gross combined ratio to decrease to below 100% in 2011, effectively showing the benefit of the pruning exercise, while maintaining prudent reserving practices. The bottom-line result will continue to suffer from costs due to the untangling of ACI from the Fortis group. However, for 2010, we expect the company to report a combined ratio of above 100%.
Table 2
Amlin Corporate Insurance N.V./Operating Statistics
(Mil. €)
Net income Return on equity (%) Return on revenue (%) PC: Net loss ratio (%)
--Year ended Dec. 31--
2009 2008 2007 2006 28.4 24.1 64.7 56.5 10.0 9.1 20.9 18.0 4.7 6.9 13.6 17.5 76.9 79.3 70.4 64.0
2005 60.0 23.3 18.5 62.4
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Table 2 Amlin Corporate Insurance N.V./Operating Statistics (cont.) PC: Total net expense ratio (%) 25.0 22.8 23.9 25.3 PC: Net combined ratio (%) 101.9 102.1 94.3 89.2 PC: Gross combined ratio (%) 84.8 101.1 85.4 94.3
27.3 89.7 75.7
Amlin Corporate Insurance N.V.
Investments: Conservative Thanks To Limited Exposure To Credit And Market Risks
Investments are conservative, thanks to limited exposure to credit and market risks. Regular investment income contributes positively and steadily to ACI's net results, with an average yield of 4% over the past five years. Starting September 2009, the investments are managed at the Amlin group level.
Credit risk Credit risk is limited, with all of ACI's fixed-income portfolio being allocated to securities rated 'A-' and above.
Market risk ACI began to reinvest in equities recently (after having eliminated all equity holdings at the beginning of 2009). We believe the company's current equity allocation to be between 5%-10% of the overall investment portfolio. Market volatility risk arises primarily from this equity portfolio and from corporate bonds because property investments have been sold in 2010. The risk arising from volatility of corporate bonds is mitigated because ACI generally holds most of these assets to maturity. Finally, the duration of ACI's bond portfolio has been significantly reduced since September 2009 to be more in line with the group's duration, which has decreased market risks.
Table 3 Amlin Corporate Insurance N.V./Investment Statistics
(Mil. €)
Portfolio performance Net investment yield (%) Net investment yield including all capital gains/ (losses) (%) Portfolio composition (book value) Total bonds (%) Common stock (%) Real estate (%) Cash & cash equivalents (%) Total mortgages and loans (%) Total portfolio composition (%)
2009
4.3 5.0
--Year ended Dec. 31--
2008
4.7 3.3
90.4 89.6 0.0 0.0 4.7 5.5 4.3 4.1 0.6 0.8 100.0 100.0
2007
4.1 5.0
85.8 6.9 6.0 0.4 0.9 100.0
2006
3.7 3.4
87.0 9.6 0.5 1.9 1.0 100.0
2005
4.0 4.5
86.3 8.7 0.5 2.3 1.1 100.0
Liquidity: Strong, Though Weakening, On Positive Net Cash Flows Over The Cycle ACI's liquidity is strong thanks to recurring positive net cash flows over the cycle. If ACI needs to sell assets to pay claims, its investments carry enough strong liquidity features. The ratio of liquid assets to technical reserves
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exceeded 118% on average in the past five years. We do note however, that the operating cash flow ratio are strong, though weakening due to the underperformance of the underwriting activities.
Capitalization: Strong Quality Of Capital, Conservative Claims Reserving, And Prudent Reinsurance Purchase Are Supportive
Standard & Poor's views ACI's capitalization as strong. The company's capital adequacy, as measured by our risk based capital model, was viewed as good at end-June 2010, but we view overall capitalization as strong given the strong quality of capital, the conservative claims reserving and the prudent reinsurance purchase.
Capital adequacy Based on Standard & Poor's risk-based capital model, ACI's capital adequacy was good at end of June 2010, and redundant to a 'BBB' level. The better quality and shorter duration of the bond portfolio counter balanced the lower total adjusted capital because we have already taken into account the repayment of the €30 million loan with the former Fortis group that we believe will be retired before maturity. The quality of capital is strong, as 75% of total adjusted capital is made up of shareholders' equity.
Reserving policy Claims reserving is conservative, owing to the prior-year gains ACI realized on its claims reserves, while constantly keeping a buffer at the 80% confidence level on an undiscounted basis.
This prudent policy supports capital adequacy, because we include a portion of claims reserve surplus as adjusted capital in our risk-adjusted capital model. Amlin already began to evaluate reserving levels and practices in 2010. We expect some synergies with the group in the coming years.
Reinsurance ACI's reinsurance program is conservative on peak risks, but recently proved less efficient on frequency risks. ACI has gradually made significant adjustments in recent years, aiming to increase its retention while lowering its exposure to severity by purchasing more protection cover.
The recent frequency loss experience and the replacement of coverage formerly provided by Fortis Re (which previously assumed 39% of ACI's reinsurance cessions) led ACI to change its reinsurance program in 2009. The existing program continues to reflect higher reinsurance retention in general, except in property, where retention and severity were reduced.
In 2010, the group began to evaluate ACI's reinsurance purchases to allow it to take advantage of the group's scale. Amlin also envisages future synergies next year aiming at reducing ACI's reinsurance expenditure. As a result, the catastrophe cover has already been bought together with other group subsidiaries, enabling higher protection and better pricing conditions. This one-in-250 aggregate event coverage with €15 million retention significantly reduces ACI's net exposure to such risk.
Furthermore, ACI's exposure to reinsurers' default risk is limited, as all reinsurers are rated 'A-' or above.
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Financial Flexibility: Strong With Support Of The Amlin Group
We regard ACI's financial flexibility (defined as the ability to source capital relative to capital requirements) as strong because it is part of the Amlin group. ACI will therefore benefit from its parent's strong ability to provide capital to ACI should it be needed. However, we do not expect any substantial level of support to be required over the next two years. Indeed, ACI's needs for additional capital arise primarily from organic new business growth. As we expect net premium growth to be negative in 2011 and marginally positive for 2012, future capital requirements are limited. In addition, we believe ACI's own sources, mainly its ability to generate earnings, are sufficient to fund needs over the next two years.
Table 4
Amlin Corporate Insurance N.V./Financial Statistics
(Mil. €)
General account invested assets Change in general account invested assets (%) Invested assets / Total assets (%) Total shareholder equity
Total debt as reported P/C: Liquid assets to technical reserves PC: Reinsurance utilization (%) PC: Loss reserves / Net premium written (%)
Ratings Detail(As Of February 7, 2011)* Operating Company Covered By This Report Amlin Corporate Insurance N.V. Financial Strength Rating Local Currency Counterparty Credit Rating Local Currency
--Year ended Dec. 31--
2009 2008 2007 2006 1,410 1,196 1,099 1,043 17.9 8.8 5.4 3.3 87.4 82.4 82.8 80.0 319.0 249.2 280.3 338.7 30.0 30.0 30.0 30.0 120.2 109.8 117.7 135.6 16.6 22.6 24.3 25.4 169.1 151.2 153.8 152.1
2005 1,010 16.7 86.2 289.6 30.0 143.9 30.6 152.2
A-/Stable/--
A-/Stable/--
DomicileNetherlands *Unless otherwise noted, all ratings in this report are global scale ratings. Standard & Poor's credit ratings on the global scale are comparable across countries. Standard & Poor's credit ratings on a national scale are relative to obligors or obligations within that specific country.
Additional Contact: Insurance Ratings Europe; InsuranceInteractive_Europe@standardandpoors.com
Additional Contact: Insurance Ratings Europe; InsuranceInteractive_Europe@standardandpoors.com
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