Re/insurance group MS Amlin plc has reported a considerable increase in the premiums it underwrites on behalf of specialist insurance and reinsurance linked investment manager Leadenhall Capital Partners LLP, with £34.9 million underwritten for Leadenhall ILS funds in 2015.
The figure in 2014 was just £21.7 million, reflecting a 61% increase in the amount of premium written on behalf of investment funds managed by Leadenhall Capital Partners.
MS Amlin, which was recently acquired by MSI (Mitsui Sumitomo), puts the increased premiums written on behalf of the insurance-linked investment funds run by Leadenhall down to the “growing synergies” between the ILS fund manager and the MS Amlin reinsurance business.
MS Amlin increased its stake in Leadenhall to 75% in 2014, as it recognised an opportunity to embed efficient, capital markets money and the third-party capital fund manager model within its business.
Thanks to the increased stake, the growing synergies between the two and also Leadenhall Capital Partners increased third-party assets under management, the investment fee income earned by MS Amlin from its stake in Leadenhall has grown significantly year-on-year.
MS Amlin reports £16.5 million of investment fee income recognised thanks to the consolidation of Leadenhall Capital Partners into its accounts for the full year. That’s up by a huge 589% from the £2.4 million recognised in 2014 and is a meaningful addition to MS Amlin’s operating income.
The MS Amlin results also reflect the challenging reinsurance market conditions, with the firm confirming that reinsurance competition remains high. As a result the firm has continued to be selective and has pulled back on catastrophe business further, with non-catastrophe business as a proportion of reinsurance gross premiums growing to 68%, up from 56% in 2014.
At the reinsurance renewals MS Amlin reports rates falling by 6.7% on average but retention of business being strong at 89%, this compares to rate declines of 7.0% and retention of 86% in 2014. U.S. and international catastrophe reinsurance rates fell by 8.3% and 9.4% respectively, the company reported.
This decline in reinsurance pricing is reflected in investment income earned from MS Amlin’s stake in Leadenhall funds, with the company reporting a return on £67.8 million of capital in ILS funds of £2.2 million or 3.2%, for 2015, compared to £63.1 million of funds generating £3.9 million and 6.2% in 2014.
The increased premiums underwritten on behalf of Leadenhall ILS funds benefits the managers investors by providing access to the MS Amlin balance sheet and renewal business. That will help Leadenhall to acquire more high quality risks for its investment portfolios, so no surprise to see the figure increasing as the synergies continue to grow between the pair.