Best Rates Lloyd’s Syndicates 382 (Hardy) and 1225 (AEGIS)

Syndicate 382 – Hardy Underwriting
A.M. Best Co. has affirmed the Best’s Syndicate Rating of ‘A ‘(Excellent) and the issuer credit rating (ICR) of “a+” of Lloyd’s Syndicate 382, which is managed by Hardy (Underwriting Agencies) Ltd (HUA). Best also affirmed the ICRs of “bbb” of Hardy Underwriting Bermuda Limited, the ultimate holding company of the Hardy group of companies, and of the UK-based Hardy Underwriting Group plc, the immediate holding company of the syndicate’s managing agency (HUA). Best has also affirmed the debt rating of “bbb-” on the $30 million floating rate subordinated bonds issued by Hardy Group in 2006. The outlook on all ratings remains stable.

Best said it “believes syndicate 382’s financial flexibility continues to benefit from its position as a wholly aligned syndicate within Hardy Bermuda. The rating also reflects the financial strength of the Lloyd’s market, which underpins the security of all Lloyd’s syndicates.

“For the 2009 year of account, syndicate 382’s stamp capacity increased to £ 250 million [$377 million], up from £110 million [$166 million] the previous year. This significant increase in stamp capacity follows its merger on 1 January 2009 with HUA’s syndicate 3820 (2008 capacity: £75 million [$113 million]) and also reflects the weakening in 2008 of sterling against the major currencies in which the syndicate trades. Hardy Bermuda’s funds at Lloyd’s requirements for the 2009 year of account are met in part by full utilisation of its existing £35 million [$52.76 million] letter of credit facility.”

Best also indicated that it “expects the syndicate to benefit from improved rating conditions in the latter part of 2009, particularly for its catastrophe-exposed business. Modest rate strengthening is also anticipated for the syndicate’s aviation business, leading to some improvement in its combined ratio from the 93 percent achieved in 2008 (annually accounted basis).

“The syndicate benefits from a conservative asset allocation strategy with no equity holdings. As a result of this approach, a solid net investment yield is expected in 2009 at a comparable level to the 4 percent achieved in 2008 (including realised/unrealised gains and losses on investments). On an underwriting year basis, the 2006 year of account closed with a strong return on capacity of 21 percent, which reflected favourable rating conditions and a benign year for catastrophes.

“Syndicate 382 occupies a good position within the Lloyd’s market as a specialist underwriter of aviation, marine and property business. A.M. Best expects syndicate 382’s profile for catastrophe excess of loss business to benefit from its merger with syndicate 3820.”

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

“The ratings of syndicate 1225 primarily reflect the financial strength of Lloyd’s of London, which underpins the security of all syndicates,” Best explained. “The syndicate benefits from the association with its parent company, Associated Electric and Gas Insurance Services Limited (AEGIS) (Bermuda), which provides the assets that back the syndicate’s funds at Lloyd’s.

“The syndicate’s prospective earnings remain subject to volatility due to its exposure to catastrophe losses in its energy and utility accounts.

“The syndicate continues to mitigate this potential volatility by diversifying its business. In 2009, utility and energy lines are expected to account for less than 40 percent of the portfolio (2008: 50 percent), with the syndicate reducing its exposure to Gulf of Mexico energy business significantly. Growth is expected in other lines, including non-marine property and certain niche lines to which the syndicate has recently added contingency and leisure accounts.”

Best also said it “expects the syndicate to achieve a combined ratio of just under 100 percent in 2009, assuming normal catastrophe activity. In 2008, the syndicate achieved a combined ratio of 92 percent, supported by a substantial reserve release, which counteracted hurricane losses.

“Syndicate 1225 has a good business profile in its core energy and utility business, assisted by its association with parent AEGIS (Bermuda). The syndicate wrote 72 percent of its utility property business and 66 percent of its energy casualty business from a leadership position in 2008, and led on 39 percent of overall premiums written.

Source: A.M. Best – www.ambest.com