Slide 1: Results for the six months ended 30 June 2014
Cover Results for the six months ended 30 June 2014 Tuesday, 22 July 2014 1
Slide 2: Disclaimer notice
Disclaimer notice Certain statements in the presentation, are or may constitute “forward looking statements”. Such forward looking statements involve risks, uncertainties and other factors which may cause the actual results, performance or achievements of the company, or industry results, to be mate
Slide 3: Contents
Contents Pages Overview 4-5 Business update 6 Financials Performance 7-8 Investments 9-10 Reserves 11-12 Financial Commentary 13 In Focus: Specialty Lines and the US 14-20 The Outlook 21-23 Appendix 25-34 3
Slide 4: Overview
Generic title white Overview
Slide 5: Overview – strong results in a competitive market
Overview – strong results in a competitive market • Profit before income tax of $132.9m (2013 profit: $82.3m) • Gross written premiums increased 1% to $1,077.7m (2013: $1,066.7m) • Combined ratio 90% (2013: 89%) • Rate change on renewal business -1% (2013: 1%) • Prior year reserve releases of $72.9m
Slide 6: Business update
Business update • Continue to achieve rate increases in specialty lines • Rates on short tail lines of business under pressure • More profitable opportunities in small business lines • Continued expansion in the US • Continue to attract good people o Property o Terrorism o Surety reinsurance o Senio
Slide 7: Financials
Generic title white Financials
Slide 8: Six months financial performance
Six months financial performance 6 months ended 6 months ended % increase 30 June 2014 30 June 2013 Gross written premiums ($m) 1,077.7 1,066.7 1% Net written premiums ($m)* 889.2 758.0 17% Net earned premiums ($m) 804.5 758.8 6% Profit before tax ($m) 132.9 82.3 61% Earnings per share (pence) 13.5
Slide 9: On track to deliver a 2% return in 2014
On track to deliver a 2% return in 2014 100.0 4.0% 90.0 80.0 Annualised Investment Return 3.0% 70.0 46.9 Investment Return 60.0 46.5 $m 50.0 2.0% 40.0 30.0 16.8 1.0% 29.0 46.8 43.5 43.0 20.0 36.1 22.5 10.0 8.5 0.3 0.0 0.0% 2009 2010 2011 2012 2013 2014 2nd half 1st half Return 9
Slide 10: No material changes to the portfolio
No material changes to the portfolio June-14 Dec-13 Other Credit, Capital Growth Other Credit, Cash and Cash Capital Growth Cash and Cash 1.7% Assets, 12.0% 2.1% Equivalents, Assets, 11.7% Equivalents, 8.5% 8.7% Investment Fixed Income: Grade Credit, Sovereign and Fixed Income: 33.6% Supranational,
Slide 11: Prior year reserve releases remain stable
Prior year reserve releases remain stable 220 22.0% 200 20.0% 180 18.0% 160 16.0% 140 14.0% 120 12.0% $m % of NEP 100 10.0% 80 8.0% 60 6.0% 40 4.0% 20 2.0% 0 0.0% 2009 2010 2011 2012 2013 2013 HY 2014 HY -20 -2.0% Specialty lines Political risks and contingency Life accident and health Marine Proper
Slide 12: Whole account reserve strength within our target range
Whole account reserve strength within our target range Preferred upper end 8.2% 8.2% 7.9% % above actuarial estimate 7.5% 7.4% 7.4% 6.9% 6.7% 6.7% 6.4% 6.1% 6.0% 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 (HY) Financial year 12
Slide 13: Financial commentary
Financial commentary • Robust surplus capital position – revised disclosure at year end • Restructuring of investment management on track – completion 30 September 2014 • SII on track for 1 January 2016 go live 13
Slide 14: In Focus – Specialty Lines and the US
Generic title white In Focus – Specialty Lines and the US
Slide 15: Specialty Lines portfolio since 2008
Specialty Lines portfolio since 2008 Premium mix 100% 950 90% 900 80% 850 70% % of SL premium 60% Total SL premium $m 800 50% 750 40% 30% 700 20% 650 10% 0% 600 2008 2009 2010 2011 2012 2013 2014 Forecast Healthcare Management Liability Professions Small business Technology & Cyber Treaty Total SL p
Slide 16: 2008 to 2014 rate change by product
2008 to 2014 rate change by product 115% 110% 105% Rate change 100% 95% 90% 85% 80% 2008 2009 2010 2011 2012 2013 2014 (B) Professions Healthcare Management Liability Technology and cyber Treaty Small Business Total 16
Slide 17: Specialty Lines – business update
Specialty Lines – business update • Continue to achieve positive rate increase • Positive about US economy • Growth in US • Focus on growth areas and new business o Cyber o Environmental o Miscellaneous medical o Crime • Opening loss ratio for 2014 reverting to pre-recession levels • Leveraging the
Slide 18: Priorities for the US in 2014 - 15
Priorities for the US in 2014 - 15 • Distribution • Underwriting process o Coordination o Standardisation and simplification o Concentration o Leverage the system o Definition o Invest in automation • Product development • Footprint o Differentiation o 6 key hubs o Prioritisation o Core products in
Slide 19: US originated business for HY 2014
US originated business for HY 2014 $238.2 (2013: $208.1) GWP by Product 170 500.00 160 450.00 150 140 400.00 130 120 350.00 110 100 300.00 Total US $m Product $m 90 250.00 80 70 200.00 60 50 150.00 40 100.00 30 20 50.00 10 0 - 2008 2009 2010 2011 2012 2013 2013 HY 2014 HY Architects and Engineers pr
Slide 20: US footprint – 2010 - 2015
US footprint – 2010 - 2015 Minneapolis (MN) 2010 2015 Underwriters 0 2 Boston (MA) 2010 2015 San Francisco (CA) 2010 2015 Products 0 1 Underwriters 9 4 Underwriters 11 16 Products 2 3 Products 3 8 Chicago (IL) 2010 2015 Underwriters 19 21 Products 7 8 Farmington (CT) 2010 2015 Underwriters 7 4 Produ
Slide 21: The Outlook
The Outlook
Slide 22: Cumulative rate change since 2001
Cumulative rate change since 2001 250% 200% Rate Change 150% 100% 50% 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 HY 2014 Underwriting Year Life, accident & health Marine Political risks & contingency Property Reinsurance Specialty lines All divisions 22
Slide 23: Outlook
Outlook • Competition remains intense • Growth in premium and profit will be challenging in the current environment • Rate pressure, particularly on short tail catastrophe exposed lines • We see more attractive opportunities in small business lines • Continued focus on growth from US operations whic
Slide 24: Any questions?
Questions? Any questions?
Slide 25: Appendix
Generic title white Appendix
Slide 26: US interest rates
US interest rates US Government Bond Yields 3.50% 3.00% 2.50% 2.00% 1.50% 1.00% 0.50% 0.00% US 10 Year Index US 5 Year Index US 2 Year Index 26
Slide 27: Specialty lines incurred claims remain in line with expectations
Specialty lines incurred claims remain in line with expectations Development Net Incurred loss ratio at each development year 140% 6 5 4 120% 114% 3 2 ULR 100% 85% Net incurred loss ratio 80% 75% 62% 65% 57% 60% 56% 56% 45% 47% 41% 42% 41% 40% 23% 20% 9% 0% 1993- 1997- 2001 2002 2003 2004 2005 2006
Slide 28: Diversified portfolio achieves consistent combined ratio through market cycles
Diversified portfolio achieves consistent combined ratio through market cycles 160 140 120 100 80 60 40 2009 2010 2011 2012 2013 2014 HY Year 28
Slide 29: Life, accident & health
Life, accident & health 6 months ended 30 June 2014 2013 Gross premiums written ($m) 81.5 56.4 • Significant rate increase Net premiums written ($m) 62.9 39.0 Net earned premiums ($m) 42.9 45.4 • Improved claims and combined ratios Claims ratio 62% 76% Rate change on renewals 12% (1%) Percentage of
Slide 30: Marine
Marine 6 months ended 30 June 2014 2013 Gross premiums written ($m) 196.7 197.1 • Combined ratio of 76% Net premiums written ($m) 163.1 165.2 (2013: 79%) Net earned premiums ($m) 143.9 131.5 • Prior year reserve releases of $21.3m (2013: $17.0m) Claims ratio 36% 43% Rate change on renewals (5%) (2%)
Slide 31: Political risks and contingency
Political risks and contingency 6 months ended 30 June 2014 2013 Gross premiums written ($m) 60.4 63.3 • Reduction in gross premium Net premiums written ($m) 47.7 46.0 driven by increased rate pressure Net earned premiums ($m) 42.8 46.3 • Combined ratio of 85% (2013: 76%) Claims ratio 35% 33% Rate c
Slide 32: Property
Property 6 months ended 30 June 2014 2013 Gross premiums written ($m) 190.7 199.0 Net premiums written ($m) 151.8 130.1 • Prior year releases of $14.8m (2013: $5.5m) Net earned premiums ($m) 145.9 150.2 • Combined ratio of 88% (2013: 91%) Claims ratio 47% 52% Rate change on renewals - 3% Percentage
Slide 33: Reinsurance
Reinsurance 6 months ended 30 June 2014 2013 Gross premiums written ($m) 163.1 170.3 Net premiums written ($m) 124.8 121.1 • Significant downward pressure on rates Net earned premiums ($m) 80.1 70.8 • Prior year reserve releases of $10.1m (2013: $14.9m) Claims ratio 45% 24% Rate change on renewals (
Slide 34: Specialty lines
Specialty lines 6 months ended 30 June 2014 2013 Gross premiums written ($m) 385.3 380.6 Net premiums written ($m) 338.9 256.6 • 1% growth in gross premiums written Net earned premiums ($m) 348.9 314.6 • 1% rate increase on renewal business Claims ratio 61% 62% Rate change on renewals 1% 4% • Prior