LONDON (Alliance News) - Amlin PLC Monday reported an 8.0% fall in first half pretax profit, hit by a GBP24.6 million foreign exchange swing, largely on the weakening of the dollar, as well as a 52% increase in large catastrophe losses.
In a statement, the insurer and reinsurer reported a GBP148.5 million pretax profit in the six months ended June 30, compared with GBP161.4 million in the corresponding period last year. According to Amlin, analysts had forecast a range of GBP111.0 million to GBP159.0 million for its pretax profit, with the mean average at GBP143.0 million.
Amlin increased its interim dividend 3.8% to 8.1 pence from 7.8p.
Amlin shares down 0.7% at 444.50 pence Monday morning.
"Amlin continues to generate good returns despite a more competitive trading environment, demonstrating the strength of our franchise and the benefit of a well-diversified portfolio. While remaining focused on underwriting discipline, we continue to identify opportunities for profitable growth. With the benefit of previous premium growth and significant savings on outwards reinsurance, Amlin remains well positioned in current market conditions," Chief Executive Charles Philipps said in a statement.
Underwriting contribution fell to GBP141.6 million from GBP158.2 million. The group's combined ratio, a measure of underwriting profitability, was slightly worse than that reported for the corresponding period last year, increasing to 87% from 85%. Reserve releases fell to GBP40.1 million from GBP61.4 million. An increase in large catastrophe losses to GBP48.9 million from GBP32.2 million was due to European hailstorms and a Nebraska tornado in June, Amlin said.
Gross written premium was up 2.8% at GBP1.89 billion, including gross written premium attributable to multi-year reinsurance contracts, typically two years, added GBP41.3 million to the total. Overall, the average rates achieved on renewed contracts decreased by 3.3%, with reinsurance rates coming under further downward pressure.
Turning to investments, Amlin said the contribution fell to GBP54.9 million from GBP67.4 million, blaming a "challenging" investment environment due to the low interest-rate environment adopted by leading central banks looking to stimulate economic growth.
Amlin, which has decided to organise its client facing operations into the three business units of reinsurance, marine & aviation, and property & casualty, also said it intends to establish its first office in the Middle East in the second half.
"Our current expectation is to support Lloyd's plans to open an office in Dubai within the Dubai International Financial Centre (DIFC) co-locating with other managing agents," Amlin said.
Describing the DIFC as an "emerging hub" for business from across the Middle East North Africa region, the insurer and reinsurer said it expects the main business opportunities to be in marine, as well as some property and casualty classes.
Amlin said it is also currently establishing an office in Miami to access treaty reinsurance opportunities from Latin America that do not typically come into the London market. It expects the office to be operational by the fourth quarter, ready to begin underwriting in January 2015. It is also continuing to develop its reinsurance presence in Asia through its Singapore office.
The developments follow the opening of Amlin's office in Hamburg, Germany, in January.