Given today’s fairly benign claims backdrop, most insurers are making solid underwriting profits - Lloyd's insurer Amlin (AML) included. But low claims also leave insurers well capitalised and tempted to compete for business by cutting premium rates. The competitive pressure from an influx of new capital, notably insurance-linked securities, is also putting rates under pressures. That softening outlook could prove bad news for the more expensively rated shares in the sector and Amlin’s shares are amongst the priciest.
- Makes solid underwriting profits
- Owns all of its underwriting capacity
- Premium rates under pressure
- Modest investment return
- Better dividend yields available elsewhere
- Shares expensively rated for the sector
Claims have certainly been low of late. Last year, for example, some of the highest claims in the sector arose from European hailstorms and German flooding which, combined, generated around €7.5bn (£6bn) of losses for insures. But that’s tiny compared with the $70bn (£41bn) or so hit from Hurricane Katrina in 2005, or the $100bn or more of losses in 2011 from such events as a Japanese earthquake, Australian floods, or tornadoes in the US.