A.M. Best Affirms Ratings of Lloyd’s Syndicate 1225

A.M. Best Europe – Rating Services Limited has affirmed the financial strength rating of A (Excellent) and issuer credit rating of “a+” of Lloyd’s Syndicate 1225 (United Kingdom), which is managed by AEGIS Managing Agency Limited. The outlook for both ratings remains stable.

The ratings of syndicate 1225 reflect the financial strength of the Lloyd’s market, which underpins the security of all Lloyd’s syndicates. In addition, the syndicate benefits from its association with Associated Electric & Gas Insurance Services Limited (AEGIS), which is the ultimate parent company of its sole capital provider, AEGIS Electric & Gas International Services Limited.

The syndicate’s prospective earnings are expected to remain volatile due to the exposure of its energy and utility accounts to catastrophe losses. However, this business as a proportion of total premium income has been reduced in recent years as the syndicate has diversified into other classes. In addition, other measures have been taken to moderate results volatility, including reducing the syndicate’s maximum line size on energy accounts and in 2011 significantly reducing the energy onshore casualty portfolio. In 2011, the total energy portfolio is expected to account for less than 20% of the syndicate’s gross written premiums, down from 28% in 2010.

The combined ratio is expected to deteriorate in 2011 from the 90% achieved in 2010, reflecting exposure to catastrophe losses in the first quarter of the year and the absence of the substantial reserve release that supported the 2010 result. Despite a number of large single risk losses and the impact of the Chilean, Haitian and New Zealand earthquakes, there was a small improvement in the syndicate’s underwriting result in 2010 to GBP 27.9 million from GBP 25.7 million in 2009. Pre-tax profit fell to GBP 47.2 million from GBP 52.1 million, due to lower investment returns.

The syndicate maintains a good business profile in its energy and utility lines, supported by its association with AEGIS. In addition, the syndicate continues to improve the diversification of its portfolio. In 2011, livestock business was added to its non-energy portfolio, which principally comprises non-marine property, marine and international casualty, war and terrorism and property treaty reinsurance.

The principal methodology used in determining these ratings is Best’s Credit Rating Methodology -- Global Life and Non-Life Insurance Edition, which provides a comprehensive explanation of A.M. Best’s rating process and highlights the different rating criteria employed. Additional key criteria utilised include: “Risk Management and the Rating Process for Insurance Companies” and “Rating Lloyd’s Syndicates”. Methodologies can be found at http://www.ambest.com/ratings/methodology.

In accordance with Regulation (EC) No. 1060/2009, the following is a link to required disclosures: http://www3.ambest.com/emea/ambersdisclosure.pdf

A.M. Best Europe – Rating Services Limited is a subsidiary of A.M. Best Company. Founded in 1899, A.M. Best Company is the world's oldest and most authoritative insurance rating and information source.