Author Topic: Net Premiums Written  (Read 2701 times)

FairFacts

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Net Premiums Written
« on: February 18, 2018, 12:54:21 PM »
Greetings, this is my first post here,

Does anyone know why Net Premiums Written have fallen from 87% (Q4'16) or 85% (2016) to 81% in 2017 of Gross Premiums Written?




Spekulatius

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Re: Net Premiums Written
« Reply #1 on: February 18, 2018, 03:04:43 PM »
Greetings, this is my first post here,

Does anyone know why Net Premiums Written have fallen from 87% (Q4'16) or 85% (2016) to 81% in 2017 of Gross Premiums Written?

I am guess that they passed on some premiums to a partners or reinsurances companies. This is mostly part of risk management to reduce exposure to certain (tail?) risks.
To be a realist, one has to believe in miracles.

Cigarbutt

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Re: Net Premiums Written
« Reply #2 on: February 18, 2018, 05:41:02 PM »
Welcome FairFacts,
I assume you refer to FFH numbers released recently.
Many reasons drive the retention ratio.
An interesting exercise would be to look at the insurance and reinsurance subs segmented data that will be reported in the annual report and try to identify with sub/line contributed to the change and try to define the reason(s) why it was felt that more premiums had to be ceded in exchange for reinsurance protection.
Looking forward to that discussion.




FairFacts

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Re: Net Premiums Written
« Reply #3 on: February 19, 2018, 06:04:34 AM »
I took a look at the last three years ('15,'16 and '17) through Q3.

Brit went from 86.3% (2015), 77% (2016), 73% 2017
AWH was 71.4% in 2017.

Dunno what conclusion to draw from this, worth keeping an eye on going forward.....

FairFacts

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Re: Net Premiums Written
« Reply #4 on: February 19, 2018, 06:29:45 AM »
With regard to Brit I guess this answers my question

"We increased the level of reinsurance purchased in 2017, with spend increasing from 22.6% to 25.6% of premiums written.  Our relationship with the Bermuda domiciled special purpose reinsurer Versutus Limited has continued to grow, with the amount of capital deployed to support Brit increasing to US$187.0m for 2018.  We have also expanded the use of quota shares to manage our net exposure and have purchased a two year catastrophe protection, which largely explains the increase in ceded premium in the period.  The events of 2017 have illustrated the benefits of these protections."
Taken from Brit Limited press release 2/16/18 page 2.

Cigarbutt

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Re: Net Premiums Written
« Reply #5 on: February 19, 2018, 06:40:17 AM »
Reading your last post as I was finishing this.
Brit has been into the fold for some time now.
Their own disclosure describes a recognition that, generally, markets have been very soft. This would point to a lower risk appetite and to lower retention of premiums even if it remains relatively well capitalized.
One does not know if this was a directive coming from the sub itself or "guided" by the parent, but Brit has disclosed for instance that it has been increasing cessions on quota shares. It's a question of degree and context but I think counter-cyclical adjustments are welcome even if it means less income in the short term.
Expect more of the same at Allied World?

Txvestor

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Re: Net Premiums Written
« Reply #6 on: February 19, 2018, 08:42:20 AM »
Reading your last post as I was finishing this.
Brit has been into the fold for some time now.
Their own disclosure describes a recognition that, generally, markets have been very soft. This would point to a lower risk appetite and to lower retention of premiums even if it remains relatively well capitalized.
One does not know if this was a directive coming from the sub itself or "guided" by the parent, but Brit has disclosed for instance that it has been increasing cessions on quota shares. It's a question of degree and context but I think counter-cyclical adjustments are welcome even if it means less income in the short term.
Expect more of the same at Allied World?

Interesting observations, and as it happens to coincide with better underwriting results in recent years, one cannot really complain. AWH ceding that much, yet performing so poorly this last Cat season is shocking however. I guess at the very least, it is not as much a gem as it was touted, and Andy Barnard has a lot of work to do whipping their systems and processes into shape.

Cigarbutt

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Re: Net Premiums Written
« Reply #7 on: February 19, 2018, 10:10:08 AM »
Fair enough and every acquisition can have a Cinderella at midnight feel to it after the fact.
But, the previous operating history of Allied suggests a positive outcome over time.

In 2010, FFH bought Zenith National (with a 34,5% premium to book value) in the context of declining net premiums ++ and poor reported combined ratios (post-acquisition 2010: 137,8%   2011: 127,5%   2012: 115,6%). OK, different company and different environment. But, how did one feel about that acquisition then? How does one feel about that acquisition now?

With Zenith, the net premimums were low at a time when they should have been low. The negative was the relatively high expense ratio and the need to bring reserve levels to the same standards. Results since 2013 have been excellent and there is a lot more potential in the WC lines. For Allied, the scenario is different and adjustments won't be at the same levels but expectation for a similar conclusion is reasonable IMO.

A certain amount of patience and confidence are required and it may take a while before the realization of value. It may take a full cycle.

racemize

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Re: Net Premiums Written
« Reply #8 on: February 19, 2018, 03:58:09 PM »
Reading your last post as I was finishing this.
Brit has been into the fold for some time now.
Their own disclosure describes a recognition that, generally, markets have been very soft. This would point to a lower risk appetite and to lower retention of premiums even if it remains relatively well capitalized.
One does not know if this was a directive coming from the sub itself or "guided" by the parent, but Brit has disclosed for instance that it has been increasing cessions on quota shares. It's a question of degree and context but I think counter-cyclical adjustments are welcome even if it means less income in the short term.
Expect more of the same at Allied World?

Interesting observations, and as it happens to coincide with better underwriting results in recent years, one cannot really complain. AWH ceding that much, yet performing so poorly this last Cat season is shocking however. I guess at the very least, it is not as much a gem as it was touted, and Andy Barnard has a lot of work to do whipping their systems and processes into shape.

Again, they said that it was one casualty item, so if what they said is true, it isn't based on cats.