Best Affirms Ratings of Lloyd’s Syndicate 2003, Managed by Catlin

August 23, 2010

A.M. Best Co. has affirmed Best’s Syndicate Rating of ‘A’ (Excellent) and issuer credit rating of “a+” of Lloyd’s Syndicate 2003, which is managed by Catlin Underwriting Agencies Limited (CUAL), a member of the Bermuda-based Catlin Group Limited (CGL). The outlook for both ratings is stable.

In a separate bulletin Best also affirmed the ratings of all of the companies belonging to the Catlin Group, as well as the debt ratings [See IJ web site –].

The ratings of syndicate 2003 reflect the “financial strength of the Lloyd’s market, which underpins the security of all Lloyd’s syndicates,” said Best. The report also noted that in Best’s opinion syndicate 2003 benefits from “financial flexibility provided by CGL, which is expected to maintain excellent consolidated risk-adjusted capitalization in 2010.”

On an annually accounted basis, syndicate 2003 is expected to produce a “pre-tax profit substantially lower than the £333 million [$518 million] achieved in 2009,” Best continued. The decrease reflects the “exposure to various large loss events during the first half of 2010, including the Chilean earthquake and Deepwater Horizon oil rig explosion.

“Rates are expected to continue to deteriorate across CGL’s portfolio due to competitive market conditions. However, favorable pricing for business written in the specialty, war and political risks and reinsurance accounts is expected to support performance in 2010.”

Best also pointed out that the group is “reducing the amount of long-tail casualty business written, in response to concerns relating to the potential for adverse claims activity arising from weak market and economic conditions. On a Lloyd’s underwriting year basis, a positive return on capacity is anticipated for the 2008 and 2009 years.

“Performance for the 2009 year of account is expected to benefit from the absence of significant catastrophe losses during the year and good rating conditions for reinsurance and specialty lines business.

“The result for the 2008 year of account will be affected by losses stemming from Hurricane Ike and the financial crisis. The 2007 year of account closed with a return on capacity of 22.7 percent (a return of 19.6 percent on gross written premiums), owing to favorable market conditions, particularly for US catastrophe-exposed business, and good investment earnings, supported by the rebound in the financial markets during 2009.”

Best’s report described Syndicate 2003 as benefiting from “a robust business profile in the Lloyd’s market, writing a well diversified portfolio of property/casualty risks. The syndicate maintains a good competitive position, leading approximately 65 percent of business written.

“Business is derived from a large network of worldwide brokers and CGL’s US subsidiaries (on a coverholder basis), which enable it to access business that would otherwise not be available to the Lloyd’s market. Growth in 2010 is expected to emanate from the reinsurance and property accounts, reflecting good pricing for this business, and from the casualty account. Concern relating to growth in the competitive US casualty market is partly alleviated by the syndicate’s focus on shorter-tail casualty risks and the contraction of its long-tail portfolio.”

Source: A.M. Best

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