Admiral Generates Improved Profits And New Reinsurance Agreements

Posted on Nov 04, 2010 by Sergio Ulloa (G+)

UK-based insurer Admiral has announced that it has entered into new agreements with Bermuda-based XL Re and Spain-based Mapfre Re, which will augment existing arrangements between Admiral and other reinsurers such as Munich Re, Swiss Re, New Re and Hannover Re. The new agreements will gradually replace its existing deal with Hannover Re, which will have a reducing share of Admiral's business over the next two years before the deal expires in 2013. Admiral is highly regarded for its ability to underwrite its risks and for the provision of competitive insurance products, which are primarily for motor vehicles including motor cycles, but also for the home, travel, life and health sectors. The addition of two new reinsurance firms to its portfolio of risk bearers will see a shift in the underwriting percentage between the four companies currently involved. The news of Admiral's new reinsurance deals comes on the back of healthy third-quarter earnings, which saw the car insurance specialist accumulate £ 446 million (US$ 716.5 million) in profits - an increase of 50 percent year on year. Admiral's profits were driven by strong growth in motor vehicle insurance premiums, which rose by 28 percent over results from 12 months ago; this means that six percent of cars on Britain's roads are insured by Admiral. Admiral's non-UK motor insurance business achieved an 87 percent increase in premium generation, reaching £19.3 million (US$ 30.8m) for the third-quarter of 2010. XL Re and Mapfre Re will be part of Admiral's underwriting network, which is praised for its quality. The newly agreed deal with XL Re and Mapfre Re will mean the share of motor risk Admiral retains falls from 27.5 percent to 25 percent as the new reinsurance companies integrate into Admiral's underwriting arrangements over the next three years. The agreement between Admiral and New Re has been extended, while the contract with reinsurance firms Swiss Re will be unchanged. Admiral newly released results showing profits of £ 446 million (US$716.5 million), including premiums passed on to its current reinsurers. The deal will see Mapfre Re take a 2.5 percent share of risks next year, increasing to 3 percent in 2012; XL Re will take a 2.5 percent share in 2011, continuing for 3 years until 2013. German based Hannover Re will maintain a 10 percent share of risks this year which will reduce to 8.75 percent in 2011 and 2012 and will subsequently expire in 2013. Admiral will increase New Re's share of reinsuring Admiral's business from 10 percent to 11.25 percent in 2011, which will climb to 13.25 percent in 2012-2013. Munich Re's share is being cut from 45 percent to 40 percent from the end of next year, with Swiss Re's share remaining unchanged at 7.5 percent. There will be an 8.75 percent share of risk which is flexible and could be allocated to one of the existing or new reinsurers. International reinsurer XL Group saw net income for the third quarter of 2010 increase by 61 percent to US $397.4 million mainly due to a 75 percent decline in net realized investment losses to $166.3 million. That improvement benefited XL's offsetting of a 46 percent decline in underwriting income which amounted to US$152.7 million and was achieved on earned premiums of US$3.75 billion - down 3.8 percent. The combined ratio rose to 95.9 percent from 92.8 percent. Also, XL's Group's life premiums fell 33 percent to US$287.9 million. Admiral's introduction of two new reinsurance firms - XL Re and Mapfre Re - to add to their existing reinsurer's Munch Re, Swiss Re, New Re and Hannover Re - is leading to a reshuffling of its risk exposure over the next three years. This will result in Admiral being able to lower its own motor insurance risk from 27.5 percent to 25 percent. Admiral's new reinsurance partners will be underwriting business for the British insurer's operations in the UK, Italy, Spain, USA and the planned expansion into France in the near future. Companies Mentioned: XL Group XL Group plc, through its subsidiaries, provides insurance and reinsurance coverage to industrial and commercial firms, insurance providers, and other institutions worldwide. The XL Group operates in three market segments - Insurance, Reinsurance and Life Operations. Mapfre Re Mapfre Re is based in Spain and is part of the Mapfre Group. Mapfre Re is one the largest reinsurers in the world, and is prominent in Spain and Latin America. Swiss Re Swiss Reinsurance Company Ltd was established in 1863 and is present in more than 20 countries. Swiss Re provides reinsurance products and financial service solutions. It offers various reinsurance products covering property, casualty, life, health and special lines - such as agricultural, aviation, space, engineering, HMO reinsurance, marine, nuclear energy, and special risks. Munich Re Munich Re stands for exceptional solution-based expertise, consistent risk management, financial stability and client proximity. This is how Munich Re creates value for clients, shareholders and staff. It operates in all lines of insurance, with around 47,000 employees throughout the world. Especially when clients require solutions for complex risks, Munich Re is a much sought-after risk carrier. The primary insurance operations are mainly concentrated in the ERGO Insurance Group. ERGO is one of the largest insurance groups in Europe and Germany and 40 million clients in over 30 countries place their trust in the services and security it provides. In international healthcare business, Munich Re pools its insurance and reinsurance operations, as well as related services, under the Munich Health brand.