Last checked at 19 May 2010 16:05
19 May 2010
Omega Insurance Holdings Limited
Interim Management Statement
Omega Insurance Holdings Limited ("Omega" or "the Company"), the international insurance and reinsurance group, today announces its Interim Management Statement (IMS) for the period from 1 January 2010 to date.
Financial data reflects the quarter to 31 March 2010.
Highlights
·; 18% growth in the Group's gross written premium in the first 3 months of 2010 to $124.5 million (2009: $105.5 million)
·; Gross written premium of Omega Bermuda up 13% to $26.5 million (2009: $23.4 million)
·; Gross written premium of Omega US up 56% to $10.6 million (2009: $6.8 million)
·; Net loss estimate from the Chilean earthquake unchanged at $23.0 million
·; Net loss estimate from the Gulf of Mexico Deepwater Horizon incident of approximately $5.6 million
·; Healthy margins in our core lines of business continue, giving a positive outlook for the full year 2010 and beyond
·; Appointment of John Coldman as Chairman and Richard Pexton as Chief Executive Officer
Commenting on the Group's performance, Richard Pexton, Chief Executive of Omega, said:
"The results for the period reflect the high level of natural catastrophes, the large Deepwater Horizon rig loss; costs associated with the SGM and continued prudent underwriting. It is pleasing to see premium growth, as a result of growing our newer platforms and our increased participation on the Syndicate. John Coldman and I look forward to concluding our review and reporting to shareholders in due course".
Group gross written premium
Segmental and class of business gross written premium for the three months to 31 March 2010 and the corresponding period in 2009 was as follows:
|
| Three months to 31 March 2010 $'m |
| Three months to 31 March 2009 $'m |
| % growth |
| Gross written premium by segment |
|
|
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|
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| Participation in and reinsurance of Syndicate 958 | 87.4 |
| 75.3 |
| 16% |
| Omega Bermuda | 26.5 |
| 23.4 |
| 13% |
| Omega US | 10.6 |
| 6.8 |
| 56% |
| Total | 124.5 |
| 105.5 |
| 18% |
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| Gross written premium by class of business |
|
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| Non marine property (inc onshore energy) insurance | 18.6 |
| 16.3 |
| 14% |
| Property catastrophe reinsurance | 55.7 |
| 51.0 |
| 9% |
| Property per risk treaty reinsurance | 5.3 |
| 5.4 |
| (2%) |
| Professional indemnity insurance | 2.7 |
| 2.8 |
| (4%) |
| Motor insurance and reinsurance | 14.9 |
| 7.5 |
| 99% |
| Offshore energy and marine insurance | 7.2 |
| 6.0 |
| 20% |
| Liability insurance and reinsurance | 14.7 |
| 10.2 |
| 44% |
| Other | 5.4 |
| 6.3 |
| (14%) |
| Total | 124.5 |
| 105.5 |
| 18% |
Market Environment
A benign US catastrophe loss experience during 2009 has resulted in overcapacity in the US reinsurance market and rate reductions of 5% to 10% were given during the key 1 January renewal season. Overall margins still remain attractive.
International catastrophe business has been under pressure for some time, with further rate reductions of 3% experienced during the recent 1 April renewals. This softening has led us to incrementally reduce our participation in this class. So far the recent loss activity has not had any material impact on international rates.
Pricing and renewals on the non-marine property insurance book remains steady. Our selective approach to underwriting principally through the use of well established binding authorities concentrating on small, commercial business which remains sheltered from aggressive competition has allowed us to protect our margins.
The recent losses arising from the sinking of the Deepwater Horizon rig mean that the expected pressure on rates for the mid year will not now materialise as we expect rates to improve in offshore energy.
Syndicate 958
The Group's share of gross premiums written by Syndicate 958 for the first three months of the year is up by 16% to $87.4 million (March 2009: $75.3 million). Business derived from Syndicate 958 is a combination of the Group's share of Syndicate 958 underwriting, through ownership of Syndicate capacity, and a 20% quota share reinsurance of the Syndicate.
Syndicate capacity for the 2010 year of account increased in sterling terms from the 2009 level but this is due to the effects of the strengthening US dollar. In US dollar terms capacity reduced from $496m to $420m. In 2009 the Syndicate increased its catastrophe exposed writings in the context of a strong rating environment. As catastrophe rates have eased we have allocated more capital to other lines, for example the motor account has seen solid growth.
The successful capacity offer in July 2009 and further purchases of capacity in the November capacity auctions brought the Group's share of the Syndicate up to 38.8% (2009: 16.4%) for 2010. The full effect of the increased business derived from the Syndicate will be felt in 2011 and 2012.
Omega Specialty, Bermuda
Gross written premiums for the first three months of the year were up by 13% to $26.5 million (March 2009: $23.4 million). This is predominantly US catastrophe exposed treaty excess of loss business written in the Bermudian reinsurance market.
Omega Specialty continues to build its profile and relationships within the market and is well positioned and established for growth as conditions improve.
Omega US
Gross written premium was $10.6 million for the three month period (March 2009: $6.8 million), representing a 56% increase. This formative business continues to expand its footprint through new agencies. With the infrastructure and team now in place, the business is focused on developing a profitable underwriting business.
The rating environment in the US excess & surplus market remains challenging but positive margins are still available. In these conditions we will continue with our selective and profit-focused approach to underwriting, concentrating on steady growth whilst we wait for the market upturn.
Claims
There have been a number of catastrophe and large risk losses in the period. These include the Chile, Mexico and Haiti earthquakes, European windstorm Xynthia, Gulf of Mexico Deepwater Horizon incident, Australian storms and the US winter storms.
As was communicated on 31 March, our initial estimate of losses arising from the Chilean earthquake is currently $23 million. This estimate has not changed and is based on market loss estimates of between $5.5 billion and $8.5 billion and a ground-up assessment of individual contracts across our portfolio. Our exposure to Chile is predominately through our international treaty reinsurance account.
We have some exposure to the Gulf of Mexico Deepwater Horizon loss through our offshore energy account; with a current estimated net loss of $5.6 million.
Investments
The investment return for the first 3 months of 2010 was 0.7% or 2.7% on an annualized basis, as we continued our conservative stance towards asset allocation through the period. Our total cash and investments increased by 0.7% in the quarter to $614.6 million (2009: $610.2 million). We have no material exposure via our fixed income or money market portfolios to Greece, Portugal, Ireland or Spain. Group investments including the Group's share of Syndicate investments can be analysed as follows:
| Asset Type | Total funds | |
|
| At 31 March 2010 $m | At 31 Dec 2009 $m |
| Government Bonds | 376.2 | 337.6 |
| Government Agencies | 8.4 | 10.4 |
| Other Government Guaranteed | 55.3 | 59.9 |
| Municipal | 0.9 | 0.8 |
| Corporate Bonds | 96.6 | 108.7 |
| Money market | 40.5 | 54.9 |
| Cash and cash equivalents | 36.7 | 37.9 |
| Total | 614.6 | 610.2 |
Corporate expenses
The Group incurred professional fees of $2.9 million during the period, in relation to the Special General Meeting held on the 12 March 2010 and related matters.
Dividend
A final dividend of US 6.5 cents per share was paid on 30 April 2010 to shareholders on the register at 9 April 2010.
Board developments
As a result of the Special General Meeting on 12 March, Walter Fiederowicz, Christopher Clarke, Clifford Palmer, Coleman Ross and Nicholas Warren stepped down as non-executive Directors of the Company. In their place John Coldman was elected as Chairman of the Board and James Bryce, Robin Spencer-Arscott, Jonathan Betts, David Cooper and Ernest Morrison were appointed as non-executive Directors of the Company. Richard Pexton was subsequently appointed by the Board as the new Chief Executive Officer, replacing Richard Tolliday who ceased to be a director of the Company. As was previously communicated, Richard Pexton and John Coldman are currently undertaking a review of the business. They intend to report back to shareholders on their findings in due course.
On 19 May 2010 the Company granted an option over 2,500,000 common shares to Richard Pexton under the Omega Insurance Holdings Limited 2006 Long-Term Incentive Plan (the "LTIP"). In accordance with the rules of the LTIP, an award was granted by way of option over 2,500,000 common shares on 19 May 2010 at a price of £1.02 per common share (the closing share price on the preceding dealing day). The option may be exercised in three years' time, subject to Mr. Pexton's continued employment with the Company.
In addition the Company has undertaken to grant further options under the LTIP over 2,500,000 common shares to Mr. Pexton on 19 May 2011 and 18 May 2012, subject to Mr. Pexton's being employed by the Company and not under notice on the relevant date of grant. The exercise price of the options will be the prevailing market value of a common share at such date. In the event of a takeover of the Company prior to 19 May 2011, the Company will grant an option to Mr. Pexton over the remaining 5,000,000 common shares, at the exercise price applied to the May 2010 grant. If a takeover occurs between 19 May 2011 and 18 May 2012, the Company will grant an option over the remaining 2,500,000 common shares at an exercise price equal to that applied to the May 2011 grant. These options will all be exercisable in the period from the third to the tenth anniversary of the date of grant.
Enquiries:
Analysts
David Coles, Head of Investor Relations, Omega 020 7767 3051
Media
David Haggie/Juliet Tilley, Haggie Financial 020 7417 8989
Notes to Editors
The Omega Group
Omega became the holding company of the Omega group of companies (the "Omega Group") on 9 November 2006 when the scheme of arrangement of Omega Underwriting Holdings PLC (the Omega Group's previous holding company and now wholly-owned by Omega) ("OUH") became effective. On the same date the Common Shares of Omega were admitted to trading on AIM, the admission of OUH's shares to trading on AIM was cancelled and OUH was re-registered as a private limited company.
On 7 July 2009, the common shares of Omega were admitted to the Official List of the London Stock Exchange and to trading on its main market for listed securities. On the same date, the admission of Omega's common shares to trading on AIM was cancelled.
The Omega Group, through its wholly owned subsidiary, Omega Underwriting Agents Limited, acts as a Lloyd's managing agent for Syndicate 958 and in February 2006 established a new insurance and reinsurance business, Omega Specialty Insurance Company Limited ("Omega Specialty"), based in Bermuda. In September 2006 Omega incorporated a new surplus lines insurer, Omega US Insurance, Inc. ("Omega US Insurance"), in Delaware which is held under a Delaware incorporated intermediate holding company Omega US Holdings, Inc.
Syndicate 958
Syndicate 958's capacity is $420 million for the 2010 year of account. The Syndicate has made an underwriting profit in every closed year of account since its inception in the 1980 year of account. The Syndicate has focused predominantly on short-tail, diversified property orientated insurance and reinsurance with a focus on small to medium sized insureds, with whom the Omega Group has built long-standing track records.
On 13 July 2009, the A.M. Best Company, Inc. reaffirmed the Syndicate's Financial Strength Rating of 'A' (Excellent) and an Issuer Credit Rating of 'A+' (Excellent).
Omega Specialty
Omega Specialty received its licence from the Bermuda Monetary Authority in February 2006 as a Class 3 insurer and has been reclassified as a Class 3B insurer. It was capitalised at US$172 million. Since then, Omega Specialty's premium income has been predominantly derived from its reinsurance of Syndicate 958 and the Omega Group's Lloyd's corporate member, Omega Dedicated, together with its increasing book of third party reinsurances where it seeks to underwrite business of a similar type and composition to be complementary to that underwritten by Syndicate 958.
On 13 July 2009, the A.M. Best Company, Inc. reaffirmed Omega Specialty's Financial Strength Rating of 'A-' (Excellent).
Omega US Insurance
Omega US Insurance is an insurance company licensed in the state of Delaware and underwrites on a surplus lines basis in other US States. Omega US Insurance is currently eligible to write business in 42 US jurisdictions (including on an admitted basis in Delaware) and applications are pending in further states. It was capitalised at US$50 million from the net proceeds of a share placing by OUH in October 2006.
On 3 December 2007, Omega US Insurance received a Financial Strength Rating from A.M. Best Company, Inc. of 'A-' (Excellent). The rating was reaffirmed on 3 February 2009.
A.M. Best
On 19 February 2010, A.M. Best placed the ratings of Omega, Omega Specialty Insurance Company Limited ("OSIL") and Omega US Insurance, Inc. ("Omega US") under review due to uncertainty regarding Omega's board composition, operational management and future strategy.