60% less income compared to Q1 2009; $50m Chile losses
Flagstone Re's Q1 operating income has fallen more than 60% despite the Chile earthquake being its only major catastrophe claim. The figure fell to $12.1m in Q1 2010 from $31.3m in Q1 2009.
CEO David Brown said: “The only individually material loss to us was from Chile and we still believe that our initial estimate of $50m is reasonable.
“However, we also believe that the overall industry loss from this event will develop towards the higher end of the range of industry estimates and out of caution have recorded a net reserve of $55m against this event.
“Despite these events, Flagstone's emphasis on technical underwriting and risk management allowed us to produce a loss ratio of 58.8% and underwriting profits of $16.3m.
“Again, thanks to the significant amounts of premiums generated by our diversified global platform, we were able to offset losses and produce a superior loss ratio. We believe that our accident year loss ratios over the last three years are amongst the best in our industry.
“We are pleased with the renewal book of business written for the first quarter as we generally saw disciplined underwriting, with rates only marginally pressured downward, while the international book saw rates flat to down 5%.
“Overall, our gross premiums written increased 10.7% with our Lloyd's platform, Marlborough, continuing to generate business in the short tail specialty lines it targets and materially adding to our diversification. We are re-branding Marlborough Underwriting Agency Limited effective today, and it will now be called Flagstone Syndicate Management Limited, more fully reflecting the completed integration of Marlborough into the Flagstone Group.
“Our solid results in the quarter are a testament to our growing breadth, level of service and our reputation; we remain confident that we will continue to execute and deliver strong returns in the year to come.
“In the first quarter, Japanese renewal rates were flat to down 5% year over year for both wind and earthquake, although the Company's exposure was lowered as well, resulting in a net 2% reduction in rates.
“Flagstone carefully grew its North American portfolio in the quarter at renewal by approximately 20%, and its exposure grew by a similar amount, in part due to re-positioning on different layers as the North American portfolio saw decreases of approximately 8% in average rate.
“Modelled expected losses declined in-line with this due to reductions in underlying exposures at the Company's clients and changes in commercial vendor models. Consequently, on a risk-adjusted basis, both internationally and in North America, effective rates are closer to flat."