Embattled Omega warns on premiums

Chris Wheal

Mar 11th 2010

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Omega - the Lloyd's insurer under attack by major shareholder Invesco Perpeptual - announced pre-tax profits up 67% to $47.1m (2008: $28.2m), based on gross written premiums of $265.8m ($265.4m) this morning.

The pre-tax result included a profit of $36.5m (loss of $3.0m) from underwriting activities, $15.9m ($23.5m) from managing agency activities and $16.3m ($21.8m) from investment income. Profit for the year was $43.6m ($22.2m). Its combined ratio was 81.4% (101.4%). It won't be enough to stop Invesco.

Financial highlights (2008 in brackets)

Gross written premium$ 265.8m ($265.4m)
Group combined ratio 81.4% (101.4%)
Profit for the year $43.6m ($22.2m)

Group Underwriting Result $m (2008 in brackets)

Gross premiums written 265.8 (265.4)
Net premiums earned 195.5 (215.7)
Claims incurred, net of reinsurance 96.3 (163.9)
Net underwriting charges 62.7 (54.8)
Underwriting profit/loss 36.5 (-3.0)

Richard Tolliday, chief executive officer said: "Omega delivered a strong performance in 2009, with a notable underwriting contribution and healthy margins on a historic basis, whilst maintaining our prudent approach to reinsurance buying and investment.

"We have continued to drive outstanding performances from our US and Bermuda platforms, while in the UK we have more than doubled our underwriting capacity in Lloyd's Syndicate 958 for the 2010 account.

"All of these developments put us in a very favourable position to move positively into 2010 and beyond."

Premiums starting to fall

But the key was the fact that a benign catastrophe season was behind the profit boost, not necessarily great underwriting. And things don't necessarily look that great for the future.

"The recent 1 January 2010 renewals season indicated that rates have softened. US catastrophe business has seen reductions of between 5% and 10%, whereas larger nationwide business has remained flat," Omega said.

"Non-US business has seen smaller reductions albeit from a smaller base. Premium rates across Omega's portfolio decreased marginally during 2009.

Further weakening

"Overall, however, Omega's account is still affording attractive margins. There are some signs that the remainder of the year may see a further weakening of market conditions.

When Omega announced its chairman was to stand down its shares leapt 5%. Now Invesco wants a bigger boardroom shake-up. Omega has offered a compromise that has been ignored. The shareholders will give their verdict this month in the City's most exciting soap opera.