QBE Syndicate 2999 Annual Report and Accounts 2009

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Report of the directors of the managing agent continued The Managing Director comments for each sub-syndicate are as follows: Jonathan Parry – QBE Reinsurance Syndicate 566 Gross written premium £million Net earned premium £million Net underwriting profit £million Combined operating ratio % 09 08 We are pleased to report a profit of £65.2 million for the 2009 financial year, which represents a combined operating ratio of 80% (78.1% in 2008). This result was assisted by there being a relatively benign year for natural catastrophes with the largest loss to the syndicate being US$8.1 million gross and net from the Australian bush fires. There was a degree of loss activity within the Aviation account with the largest loss being the Air France crash off Brazil and the syndicate was also affected by the Coogee/West Atlas oil rig loss near Australia which impacted the Marine account. Thankfully the syndicate’s philosophy of avoiding attritional losses has paid dividends and this has been the main driver behind a very pleasing result. The reinsurance market as a whole had a good year in 2009 and this has led to increased competition for business in 2010. We have seen some price reductions at the important 1 January renewal season which has led to the syndicate declining an element of the renewal portfolio, but on the whole, terms and conditions have remained at an acceptable level. With the spread of different classes of business within the reinsurance portfolio, we believe the syndicate is well set to steer through a difficult period of the market cycle and well positioned to take advantage of the next hard market. Colin O’Farrell – QBE Marine and Energy Syndicate 1036 It is pleasing to be able to report that the syndicate has again delivered another excellent result, with a combined operating ratio of 79.9% and a profit for the year of £46.2 million (84.5% and £34.9 million in 2008). This has been achieved in a year that, whilst proving to be free from significant natural catastrophes, has been characterised by an abundance of risk losses across the insurance market, far in excess of normal activity. In addition, competition has increased in most lines of business throughout 2009 leading to significant downward pressure on rating levels. Given these facts, the result is all the more impressive. Of course, premium and rates are just one side of the equation. As we have noted already, there were a great many risk losses over the course of the year. The vast majority affected the energy account but given the rating changes they are still performing ahead of plan. In fact the market absorbed the impact of the total loss of a North Sea platform (Ekofisk 2/4W in the joint UK/Norwegian sector) without jeopardising the syndicate’s underwriting plans. Once again we must pay testament to the diversity of our product offering. We are not beholden to the performance of any one portfolio and the resultant stability provides an excellent platform for profitable and controlled growth. Last year we noted the performance of the political accounts which have once again delivered an exceptional performance in what is a very challenging environment. This year we note the performance of the Burnett MGA, which was absorbed into the portfolio for the 2009 underwriting year. While the London insurance market has proved to be challenging in the latter part of the year, Burnett has been operating within a difficult market all year, with the added pressure of defending our business from previous underwriters. That they have performed better than plan is a sign of the quality of their staff and affirmation of the decision to buy the business. In 2010 we intend to further develop this platform. Many other accounts have delivered very good results. In a catastrophe-free year the Offshore Energy account would be expected to perform well and so their contribution is not surprising. However, more impressive is the result from the Hull and Liability accounts. Between them they have generated in excess of £20 million of profit in sectors where, disappointingly, competition is keen. 14 QBE Syndicate 2999 Annual report 2009 293 373 09 08 207 300 Gross written premium £million Net earned premium £million Net underwriting profit £million Combined operating ratio % 09 08 282 353 09 08 158 191 09 08 09 08 41 31 95 51 09 08 09 08 80.0 78.1 79.9 84.5
During 2009 we installed a new Head of Business Unit in Singapore, to oversee our Asian platform. In a fiercely competitive market the benefits of having an experienced underwriter with authority in situ are beginning to pay dividends and we will use 2010 to further consolidate our influence in the region. As usual, another important contributor to the result has been the development of our prior years. After a torrid 2008, the 2007 underwriting year has had significantly reduced activity and the 2008 underwriting year has also performed well after a difficult first year. The robust reserving policy the syndicate has always adopted has once again stood us in good stead. As usual, thank you to the claims team for an exceptional performance. At the risk of dampening expectation for 2010, although some of the challenges we anticipated for 2009 above have stabilised, the difficulty of our current trading environment cannot be understated. It would truly be an impressive performance to even match 2009 next year! Finally, a personal note of thanks to all the syndicate staff for their continued application, tenacity and endurance in delivering the result. John Neal – QBE Syndicate 1886 Gross written premium £million Net earned premium £million Net underwriting profit £million Combined operating ratio % 09 08 92 135 Syndicate 1886 remains a cornerstone in enabling QBE European Operations’ underwriters to deliver its products to brokers and clients around the globe. During 2009, the growth in income to Syndicate 1886 continued, with gross written income increasing by 47% from £92 million in 2008 to £135 million for 2009. This was principally from the International Liability and the Financial and Professional Lines accounts. Overall the 2009 financial year produced an underwriting profit of £17 million (2008 £29 million) and a combined operating ratio of 89.8% (70.9%), the largest contribution arising from the International Liability account. The 2008 and prior underwriting year contribution to the 2009 financial year result was a profit of £7 million, £8.8 million of which was from Syndicate 980 prior year releases following the continuation of a case estimate review. The small prior year deterioration on the pure 1886 account was largely in respect of International Liability and Overseas Motor accounts where claims experience over the year resulted in a strengthening of reserves. The syndicate continues to add to both its product range and its geographical reach, by further increasing its presence in Canada and expanding existing portfolios. Bernard Mageean – QBE Property Syndicate 2000 09 08 Property The absence of a major natural catastrophe and a reduction in the number of major losses in the market place were key factors for 2009, albeit offset by reduced net earned premium. The opening quarter saw good rate increases in the USA, especially the natural catastrophe sector. Unfortunately owing to depressed mineral pricing and reduced business interruption values from individual clients, premium volumes did not increase as much as may have been expected. The rest of the year still saw increases but not as dramatic as seen in the first quarter. The rates outside of the US, bar the mineral and mining industries, were disappointing and struggled to achieve good increases. The outlook for 2010 is potentially more stable, with certain carriers looking to offload catastrophe aggregate in the USA but there seems to be a reasonable appetite within the market place to take up this shortfall. Accident and Health The Accident and Health portfolio experienced a good year in 2009 which was benign to large loss frequency and to price reductions. Pricing has been static on the professional sports business with the general business being more susceptible to competition in the US domiciled market. 2010 should follow 2009 in relation to pricing as a large proportion of the book has already been renewed at expiring rates. 70 92 Gross written premium £million Net earned premium £million Net underwriting profit £million Combined operating ratio % 09 08 86 94 09 08 72 82 09 08 09 08 17 23 29 36 09 08 09 08 45.5 70.9 89.8 87.1 15 QBE Syndicate 2999 Annual report 2009
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Page 5 and 6: Major events in 2009 • Growth ach
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Page 27 and 28: Balance sheet As at 31 December 200
Page 29 and 30: Statement of cash flows For the yea
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Page 45 and 46: Net investment income Gross investm
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