Kin Group Regulatory News (KIN)

1 Dec 2005 07:02

Kiln PLC01 December 2005 Kiln plc Kiln plc ('Kiln') - Trading Update Kiln announces an update on the effect of the US hurricane season, details ofincreased capacity at Lloyd's in 2006 and updated forecasts for its managedsyndicates. Effect of the US hurricane season Following the recent receipt of further information which has affected Kiln'sview of the likely losses from the US hurricane season, Kiln has undertaken afurther review of the impact of Hurricanes Katrina and Rita and an initialreview of the impact of Hurricane Wilma on Kiln shareholders. Kiln estimatesthat the pre-tax cost of these three hurricanes for its shareholders will amountto £60 - £80 million. These figures include Kiln's initial estimate of the losses arising fromHurricane Wilma (of £7.5 - £12.5 million) and also recognise a deterioration ofapproximately £10 million relating to losses which are expected to arise fromHurricane Katrina, for which the total insured market loss is now estimated tobe in the region of US$50 billion. The Katrina deterioration results largelyfrom changes in Kiln's view of the likely ultimate losses from its Property andPer Risk Reinsurance accounts. Reinsurance protection remains available should gross losses from any of thehurricanes increase further. In the case of Hurricane Katrina, being the largestof the three events, the main sections of the Property and Reinsurance accountscontinue to benefit from Syndicate 510's proportional reinsurance protection andthe Energy account has further non-proportional reinsurance protection availableto it. All three losses have particular issues of complexity, and the landfallof three major hurricanes in less than two months has meant that reporting ofactual losses has been slower to develop than would normally be expected. Thecomplexity of the losses and the relative lack of specific data mean that theseestimated figures should still be considered for guidance purposes only. Kiln plc's results for the full year, including whether or not the Board is ableto report a profit for 2005, are dependent on Kiln's performance during the lastquarter, as well as other variables including the £:US$ exchange rate (currentlyestimated to be approximately £1:US$1.75), the development of previousunderwriting years and the impact of certain IFRS accounting conventions. Itremains Kiln's intention that in the absence of exceptional unforeseencircumstances, the full year dividend will be at or above 3p per share payableon the increased capital following the recently announced Rights Issue, and thatthis level will be maintained throughout the insurance business cycle. The severity of the losses from the 2005 hurricane season, in which HurricaneKatrina alone was more than twice the size of the insurance loss of the 9/11attacks, make it a market turning event. Following the Rights Issue, Kiln iswell positioned to respond to the opportunity which the resulting attractiveunderwriting conditions have created. The company has achieved its pre-emptiontarget of an increase in capacity of 14.5% for flagship Syndicate 510, taking itto £625 million for 2006 (2005: £546 million). The group's overall capacityacross all four syndicates now stands at a record £803 million allowing Kilnfull potential to benefit from the enhanced underwriting environment followingthe 2005 hurricane season. Supplementary listing particulars in respect of this update will be issued indue course. Capacity ownership for 2006 Kiln plc has taken the opportunity to increase its shareholders' participationin its 2006 underwriting portfolio from £280 million to £353 million, anincrease of 26%; this was primarily achieved through an increase in ownership ofSyndicate 510's stamp from £226 million to £295 million, an increase of 30% madepossible by pre-emption and the successful acquisition of capacity in theLloyd's auctions. Kiln's participation in Syndicate 510 for 2006 will represent47% ownership (2005: 41%). Full details on capacity follow: Kiln plc's capacity ownership - 2006 compared with 2005 2005 Year of Account 2006 Year of Account Kiln capacity increase Capacity Kiln owned Capacity Kiln owned Syndicate £m £m % £m £m % % 510 546.07 225.97 41.4% 625.24 294.56 47.1% 30% 557 47.84 2.5 5.2% 54.78 0 0.0% -100% 807 100.01 45.69 45.7% 110.01 51.71 47.0% 13% 308 9.65 5.51 57.1% 13.00 7.19 55.3% 30% Total 703.57 279.67 39.8% 803.03 353.46 44.0% 26% Updated syndicate forecasts The 2003 year of account shows improvements in the three largest syndicates anda slight deterioration in the small Life Syndicate 308. The 2004 year of accountis showing some deterioration across each of the syndicates mainly as a resultof the impact of Hurricanes Katrina and Rita. Current forecasts for managed syndicates are as follows: 2003 year of account Capacity Forecast (% of capacity as Previous forecast as at at September 2005) June 2005 £mSyndicate 510 483 20.2 to 25.2 19.4 to 24.4Syndicate 557 55 35.8 to 40.8 35.4 to 40.4Syndicate 807 87 12.0 to 17.0 11.6 to 16.6Syndicate 308 4 8.7 to 11.7 10.3 to 13.3 2004 year of account Capacity Forecast (% of capacity as Previous forecast as at at September 2005) June 2005 £mSyndicate 510 507 3.8 to 8.8 6.2 to 11.2Syndicate 557 55 4.5 to 9.5 5.7 to 10.7Syndicate 807 113 4.3 to 9.3 4.8 to 9.8Syndicate 308 5 (3.4) to1.6 (1.9) to 3.1 Please note that forecasts are based on exchange rates of US$1.77 and C$2.05. Edward Creasy, Chief Executive Officer of Kiln plc said: 'The severe hurricane activity, which began in 2004 has continued and increasedin 2005, has undoubtedly changed the nature of the market. Rates, which had beenstable, are now increasing sharply, and Kiln shareholders are well positioned tobenefit from this improved rating environment.' 30 November 2005 Enquiries: Kiln plc 020 7886 9000Edward Creasy, Chief Executive Officer RobertChase, Director of UnderwritingPeter Haynes, Chief Financial OfficerKate Rogers, Head of Communications College Hill 020 7457 2020Tony FriendRoddy Watt Notes to Editors: Kiln, established in 1962, is an international insurance andreinsurance underwriting group that specialises in complex, unusual risk. Kilnplc is listed on the London Stock Exchange. Its operating subsidiary, R J Kiln &Co Limited has £803 million of capacity under management for the 2006 year ofaccount, making it one of the largest agencies trading in the Lloyd's of Londoninsurance market. A recognised leader in each of the five main business areas in which itoperates: reinsurance, accident and health, aviation, marine and special risks,and property, Kiln enjoys a security rating of 'A' (Strong) assigned to Lloyd'sby Standard and Poor's. This information is provided by RNS The company news service from the London Stock Exchange