Slide 1: Results for the year ended 31 December 2010
Cover Results for the year ended 31 December 2010 Tuesday, 8 February 2011
Slide 2: Disclaimer notice
Disclaimer notice Certain statements made in this presentation, both oral and written, are or may constitute “forward looking statements” with respect to the operation, performance and financial condition of the Company and/or the Group. These forward looking statements are not based on historical f
Slide 3: Contents
Contents Overview of 2010 5-7 Financials Performance 9 Investments 10-11 Reserves 12-13 Capital 14 Solvency II 15 Underwriting review 16-20 Outlook 21 Appendix 23-31 3
Slide 4: Overview of 2010
Generic title white Overview of 2010
Slide 5: Strong profits and underwriting performance
Strong profits and underwriting performance • Profit before income tax of $250.8m (2009: $158.1m) • Return on equity of 21% (2009: 16%) • Profit excluding exceptional FX items of $217.1m and return on equity of 19% • Gross written premiums reduced by 1% to $1,741.6m (2009: $1,751.3m) • Combined rati
Slide 6: Sustained high performance – Total ROE over 5 years of 100%
Cover Sustained high performance – Total ROE over 5 years of 100%! Gross premiums written ($m) Combined ratio (%) 2000 100% 90% 90% 90% 90% 90% 88% 1800 90% 1600 80% 70% 36% 39% 34% 35% 36% 1400 1200 60% 1000 50% 800 1,561.0 1,620.0 1,751.3 1,741.6 40% 1,371.0 30% 600 54% 51% 56% 55% 52% 400 20% 200
Slide 7: Focus on capital discipline and new opportunities
Focus on capital discipline and new opportunities • Returned capital through share buy-backs and special dividends; • We have hired new non-executive directors, Ken Sroka and Rolf Tolle, and appointed Dan Jones to head up broker relations; • Progress made in new areas:- • Reps and warranties; • US a
Slide 8: Financials
Generic title white Financials
Slide 9: Strong profits
Strong profits Year ended Year ended % increase/ 31 Dec 2010 31 Dec 2009 (decrease) Gross premiums written ($m) 1,741.6 1,751.3 (1%) Net premiums written ($m) 1,402.1 1,331.3 5% Net earned premiums ($m) 1,405.2 1,313.6 7% Profit before income tax ($m) 250.8 158.1 59% Earnings per share 27.4p 18.4p D
Slide 10: Annualised 1.0% investment return delivered in 2010
Annualised 1.0% investment return delivered in 2010 120.0 7.0% 100.0 50.7 6.0% Investment Return 80.0 5.0% Annualised Investment Return 45.7 4.0% 60.0 45.8 ($m) 3.0% 40.0 30.3 2.0% 51.2 29.0 20.0 42.4 30.0 1.0% 11.5 19.3 20.7 4.7 8.5 4.2 6.3 - 0.0% 2003 2004 2005 2006 2007 2008 2009 2010 -1.0% -20.0
Slide 11: Capital growth assets and duration increased
Capital growth assets and duration increased December 2010 December 2009 Alternative assets 11.3% Alternative assets, 7.3% ABS, MBS, CMBS, Corp ABS, MBS, CMBS, Bonds Other Corp Bonds Other, 5.0% 8.4% Corp Bond Financial Non-Gtd Cash and cash 2.4% Corp Bond Financial equivalents, 22.2% Cash and cash
Slide 12: Consistent prior year reserve releases
Consistent prior year reserve releases 150 12.0% 130 10.0% 110 8.0% 90 $m 70 6.0% 50 4.0% 30 2.0% 10 2006 2007 2008 2009 2010 -10 0.0% Specialty lines Marine Political Risks & Contingency Property Reinsurance % of NEP 12
Slide 13: Whole account reserve strength remains high
Whole account reserve strength remains high Margin in net held reserves % above actuarial best estimate 10.0% 8.2% 7.9% 7.5% 7.4% 6.7% 6.7% 6.4% 6.1% 5.0% 0.0% 2003 2004 2005 2006 2007 2008 2009 2010 Financial year Our objective is to hold booked reserves within a range above actuarial best estimate
Slide 14: Strong capital position and distribution
Strong capital position and distribution Sources of funds Year Ended 31 Dec 2010 Year Ended 31 Dec 2009 Shareholders funds ($m) 1,082.9 995.9 Debt ($m) 248.8 259.5 1,331.7 1,255.4 Uses of funds Lloyd’s underwriting ($m) 776.9 792.4 US Insurance Company ($m) 107.7 110.9 884.6 903.3 Surplus ($m) 447.1
Slide 15: Solvency II – significant investments continue
Solvency II – significant investments continue Substantial SII programme remains on track Budget £4.6m of external spend over three years; and 4,000 man days of key technical and management personnel We remain alert for any growth opportunities SII might create We are already getting benef
Slide 16: Underwriting review
Generic title white Underwriting review
Slide 17: Underwriting review
Underwriting review Year Ended 31 December 2010 2009 Gross premiums written ($m) 1,741.6 1,751.3 Net premiums written ($m) 1,402.1 1,331.3 Net earned premiums ($m) 1,405.2 1,313.6 Combined ratio 88% 90% Rate change on renewals (2%) 3% 17
Slide 18: Cumulative rate changes since 2001
Cumulative rate changes since 2001 220% 200% 180% Rate Change 160% 140% 120% 100% 80% 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Underwriting Year Life, Accident & Health Marine Political Risk & Contingency Property Reinsurance Specialty Lines All Depts. 18
Slide 19: Specialty Lines incurred claims remain encouraging
Specialty Lines incurred claims remain encouraging Net incurred loss ratio * at each development year Development Year 6 140% 5 4 3 120% 114% 2 ULR Net incurred loss ratio 100% 85% 80% 73% 57% 60% 45% 41% 42% 42% 42% 40% 31% 20% 12% 0% 1993-1996 1997-2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Slide 20: Portfolio management achieves consistent combined ratio through market cycles
Portfolio management achieves consistent combined ratio through market cycles Combined Ratio % 120 110 100 90 80 70 60 50 40 2006 2007 2008 2009 2010 Year 20
Slide 21: Outlook
Outlook • The industry is operating in challenging conditions • Weak global economy is keeping demand low • The market is competitive and rates are continuing to decline but from good levels • Forecast for rates to decrease by 2% across 2011 • The threat of inflation remains whilst interest rates ar
Slide 22: Any questions?
Questions? Any questions?
Slide 23: Appendix
Generic title white Appendix
Slide 24: US originated business delivers $393.6m
US originated business delivers $393.6m GWP by Product Commentary 150 140 130 • Commercial property 120 includes $110.0m written 110 by First State 100 • Significant contributions in 90 2010 from: 80 – Architects & Engineers - $m 70 $66.7m 60 – Technology & Media - 50 $77.1m 40 – Management Liabilit
Slide 25: Recession planning: Frequency has reverted to normal levels
Recession planning: Frequency has reverted to normal levels Claims Frequency - Rolling 12 month average 160% 150% 140% 130% 120% 110% 100% 90% 80% 70% 60% 50% * US Lawyers US Architects & Engineers US D&O* US Employment Practices Liability UK Prof. Indemnity *US D&O statistics are market-wide 25
Slide 26: Life accident & health
Life accident & health Year Ended 31 December 2010 2009 • Strong premium growth achieved in Gross premiums written ($m) 78.1 67.9 2010 in our life portfolio and in personal accident business via our Net premiums written ($m) 71.4 63.4 Brisbane office Net earned premiums ($m) 65.9 35.4 • Developing o
Slide 27: Marine
Marine Year Ended 31 December 2010 2009 Gross premiums written ($m) 261.7 265.0 • Gross premiums down 1% in a generally softening market Net premiums written ($m) 235.6 228.9 • War premiums up on the back of increasing threats Net earned premiums ($m) 234.7 239.9 • Energy account seeing rating rebou
Slide 28: Political risks and contingency
Political risks and contingency Year ended 31 December 2010 2009 Gross premiums written ($m) 100.9 127.6 • Terrorism: significant market losses in Thailand avoided Net premiums written ($m) 79.9 98.6 • Contingency: team continues to build with additional underwriting resources Net earned premiums ($
Slide 29: Property
Property Year ended 31 December 2010 2009 Gross premiums written ($m) 382.5 394.4 • Rate change down driven by large risk property Net premiums written ($m) 283.8 283.1 • Claims ratio improved, good results from First State Net earned premiums ($m) 286.9 272.4 • Market continues to be competitive in
Slide 30: Reinsurance
Reinsurance Year ended 31 December 2010 2009 Gross premiums written ($m) 174.4 142.2 • Strong growth in premiums achieved due mainly to special Net premiums written ($m) 134.4 117.3 purpose syndicate 6017 Net earned premiums ($m) 132.1 117.0 • Munich office continues to develop well writing $10.5m •
Slide 31: Specialty Lines
Specialty Lines Year Ended 31 December 2010 2009 • Strong performance in technology, Gross premiums written ($m) 744.0 754.2 offset by reduction in architects and engineers and directors and officers Net premiums written ($m) 597.1 540.1 • Prior year releases of $56.9m (2009; $57.8m) Net earned prem