March 4, 2013 11:44 pm

Amlin posts profit at European arm

Amlin’s chief executive has said the insurer is regaining investors’ trust, after its European business turned an annual underwriting profit for the first time since a problematic acquisition almost four years ago.

On Monday, Charles Philipps reported that the company’s European operation – which covers risks as diverse as art galleries, pleasure craft and corporate motor fleets – paid out 98p in claims and expenses last year for every pound it took in premiums.

This compared with a lossmaking £1.13 a year earlier, when problems with a business bought from bailed-out financial services group Fortis contributed to a profit warning that wiped out almost a fifth of Amlin’s market capitalisation.

Amlin said its results for the year to end December reflected action it had taken to revive the fortunes of the former Fortis business, through repricing policies, withdrawing from certain areas and replacing management.

This recovery helped the group overall to produce pre-tax profits of £264m compared with losses of £194m a year earlier, when Amlin was among the hardest hit of all Lloyd’s of London insurers from a string of costly catastrophes.

Amlin’s board proposed a final dividend of 16.5p a share, giving a total for the year of 24p, up 4.3 per cent on a year earlier. This is payable from diluted earnings per share of 49.4p compared with losses of 30.3p last time.

Unlike fellow specialist insurers Beazley and Lancashire, Amlin avoided paying a special dividend.

“It’s a balance between paying a higher dividend and rebuilding the balance sheet,” said Mr Philipps, who foresaw rising prices in some areas such as catastrophe reinsurance and US property & casualty insurance.

After paying for reinsurance, Amlin earned £1.99bn worth of premiums in 2012, up from £1.93bn a year ago.

Shares in Amlin fell 6.8p to 424.4p on Monday.

FT Comment

Prospective investors in London’s listed specialist insurers are presented with companies pursuing very different strategies. Amlin, which is moving away from a Lloyd’s-focused business, offers them the prospect of greater global diversification. It already has a platform in Singapore but is casting its net wider, considering setting up hubs in such locations as Brazil. Alongside its results, Amlin also unveiled the latest of several bolt-on acquisitions, including a $50m deal for a Rotterdam-based marine insurer. Admittedly, its Fortis acquisition was hardly a good advert for overseas expansion drive. But the shares have bounced back from lows of 270p in October 2011, outperforming FTSE 350 non-life insurance peers by more than a fifth. They now change hands at a 40 per cent premium to book value and offer a yield of 6 per cent. Amlin’s discount to the sector, which trades on a 50 per cent premium, may look unjustified to those confident in its expansion story.

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