Best downgrades outlook for MS Amlin’s reinsurance arm to negative on ‘weakening performance’

AM Best has revised the Long-Term Issuer Credit Rating (Long-Term ICR) of MS Amlin’s reinsurance arm MS Amlin AG (Switzerland) to negative from stable, on the back of “weakening underwriting performance” during recent years.

The ratings agency has also affirmed the reinsurer’s Financial Strength Rating (FSR) of A (excellent) and Long-Term ICR of a+ (excellent). The FSR outlook is stable.

On the same day, global specialty (re)insurer MS Amlin Underwriting, which operates through Lloyd’s, has announced an agreement with RiverStone International to undertake a $266m split reinsurance-to-close (RITC) transaction of the former’s UK property and casualty portfolio for the 2019 and prior years of account.

In addition, the companies have agreed a 100% quota share arrangement for the 2020 year of account on the same lines of business.

AM Best explained that the revision of MS Amlin AG’s Long-Term ICR outlook to negative reflects pressure on the company’s “adequate operating performance assessment, following weakening underwriting performance since 2017”.

The business is expected to report a significant loss after tax for 2021, reflecting a combined ratio well in excess of 100% that will only be partially offset by investment income, said AM Best.

AM Best said MS Amlin AG’s expected underwriting loss for last year will be mainly driven by elevated natural catastrophe losses and adverse development on Covid-19 and non-catastrophe reserves.

“MS Amlin AG’s operating performance has been volatile in recent years, with return-on-equity ratios (ROE) ranging from in excess of 10% in 2018 and 2019 to -12% in 2017. In 2021, the company is likely to report another negative double-digit ROE. The company has implemented a number of corrective actions in 2021 and 2022 to strengthen underwriting performance. Should these actions fail to translate into sustainable underwriting profitability, a downgrade of the Long-Term ICR is likely,” added the ratings agency.

MS Amlin Underwriting’s RITC deal with legacy reinsurer RiverStone International came into effect on 1 January.

Announcing the move, Andy Creed, chief financial officer at RiverStone International, said: “We will ensure that MS Amlin’s excellent reputation is maintained and its insureds continue to receive the highest possible level of service.”

Phil Green, chief financial officer at MS Amlin Underwriting, said: “This arrangement with RiverStone International helps us along our journey of transformation, by providing greater operational and financial simplicity for our business.”