Mon Nov 12, 2012 5:41am EST
Nov 12 -
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Summary analysis -- Canopius Managing Agents Ltd. - Syndicate 4444 12-Nov-2012
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CREDIT RATING: No public ratings. Country: United Kingdom
Primary SIC: Insurance
carriers, nec
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Rationale
The Lloyd's Syndicate Assessment (LSA) on Canopius Managing Agents - Syndicate 4444 (Canopius, or Syndicate 4444, or the syndicate) reflects its marginal capitalization and its high catastrophe exposure, which adds volatility to its earnings and capitalization. Partly offsetting these weaknesses are its good and improving competitive position, and good prospective earnings. While we note that there are challenges associated with the integration of Omega Insurance Holdings Limited (Omega) we believe its impact on the syndicate's assessment is neutral.
We view the syndicate's competitive position as good and improving, based on its increasing scale, well-diversified business portfolio, and strong business retention. The rapid growth in premium since 2005 has placed the syndicate in the top quartile within the Lloyd's Market (rated A+/Positive/--). For financial year-end 2012, we anticipate that the syndicate's gross premium is likely to increase by about 5%-10% (2011: GBP614 million) partly reflecting the single digit premium-rate increases in property business. In our view, the syndicate's overall business position is not likely to change materially in 2013 bearing in mind the potential integration of Omega Underwriting Agents - Syndicate 0958 (Syndicate 0958, not assessed) and Syndicate 4444. In our view, the potential execution risk associated with this is mitigated by the fact that majority of Syndicate 0958's business overlaps with that of Syndicate 4444's business.
We view the syndicate's operating performance as good. While we note that the syndicate's five-year average combined ratio at 101% is above Lloyd's Market (92%), we believe that the corrective underwriting actions in recent years are likely to contribute positively to the syndicate's underwriting performance. In line with our expectations, the syndicate posted a high net combined ratio of 109% in 2011 reflecting the record industry losses, which added 18 percentage points (pps). This partly reflects the syndicate's relatively high exposure to catastrophes in common with some of its peers. Unlike some of its peers, the syndicate did not benefit from material reserve releases. For the first half of 2012, the syndicate posted a very strong net combined ratio of 87% because of the benign losses and significant reserve releases (equating to a reduction of 9 percentage points) when compared with its track record. (Lower combined ratios indicate better profitability. A combined ratio of greater than 100% signifies an underwriting loss.)
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