Insurance companies have endured an exceptionally costly year so far thanks to a bitter winter in Europe and devastating earthquakes in New Zealand and Japan. Insured losses in the first quarter alone are at a record level, testing the discipline of firms' risk management. As the largest insurance hub in Europe, the City's insurers play a vital role in the UK's financial success.
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Beazley has had a strong year since its takeover target Hardy fought off its attentions last December. Despite devastating earthquakes in Chile and New Zealand in 2010, the £1bn gross premium per year insurer posted about the best results in the non-life sector, with profits up 60 per cent to £150m on a combined ratio of 88 per cent. Despite taking an $154m (£95m) loss from catastrophes so far this year, Dublin-based Beazley says it will still make an underwriting profit. And in addition to paying a dividend, it is keen to use its cash pile to tackle more M&A opportunities in the Lloyd’s market.
UK online car insurer Admiral is still motoring ahead, defying market gloom to achieve a seventh straight year of profit growth in 2010 on the back of a ten per cent market share in the UK. Profits rose 25 per cent while turnover rose 47 per cent in the year – and it continues into 2011, with a 50 per cent revenue increase in the first quarter. Its internet-savvy business model and price comparison website confused.com is keeping it ahead of its competition while it invests in overseas operations it believes will grow the group long-term. Analysts expect it to have 13 per cent market share by 2016.
Catastrophe specialist Catlin has taken a number of smart strategic decisions over the past year. The operator of Lloyd’s’ biggest syndicate, it expanded into the US with a bolt-on acquisition, Blue Ridge Insurance, in January. It then launched a Zurich operation that was A-rated by agency AM Best and grew 107 per cent in the first quarter. Though $218m (£133m) in catastrophe losses pushed its full year 2010 profits down 33 per cent to $406m, it beat forecasts thanks to its strong underwriting profit. Most recently, it has unveiled new products designed to win more UK business from brokers.
The life insurance consolidator looks set to be one of the FTSE 100’s most popular stocks this year since unveiling plans to return £500m to its investors via share buybacks over 12 months. Resolution, which has combined assets from Friends Provident, Axa and Bupa, is determined to recoup the maximum cash from its assets and aims to distribute £400m generated from the closed life books each year. It added the extra £500m to that total after its decision to rule out further acquisitions either in the UK or abroad left it cash-rich. Resolution believes it can release at least £235m in capital synergies from restructuring its life assets next year – maybe more once it has resolved its Solvency II commitments.
One of the City’s premier voices on risk management and the state of insurance rates, Hiscox proved the strength of its underwriting by posting a £211m profit for 2010 with a combined ratio of 89 per cent despite incurring £165m in catastrophe losses. Strongly focused on profitable business lines such as reinsurance, it isn’t afraid to cut the level of premiums it writes if it believes a market is uncompetitive, so has cut its exposure to unprofitable or loss-affected areas. Hiscox has also ploughed resources very successfully into growing its UK retail brand, increasing its diversification, resilience – and profitability. It has featured among analysts’ top picks for this year and significant further growth is expected of it.