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A.M. Best expects syndicate 1084 to produce good financial results in 2009, subject to catastrophe experience. On an annually accounted basis, the syndicate produced a pre-tax loss of GBP 33.7 million in 2008, primarily as a result of substantial investment losses. A.M. Best believes that the likelihood of further large investment losses in 2009 has been reduced following steps taken by the syndicate to de-risk its investment portfolio by disposing of its equity and absolute return bond funds and investing the proceeds in cash and high quality bonds. However, the syndicate remains exposed to hedge funds, which produced substantial losses in 2008. Although the syndicate has served notice to close all its hedge fund investments, reducing them to 8.3% of invested funds as at 30 June 2009 from 20.1% as at year-end 2008, full redemption is not likely to be complete until the end of 2010.
A.M. Best anticipates an improvement in the syndicate?s combined ratio in 2009 from the 97% achieved in 2008, supported by rate increases for most classes of business written and a reduction in attritional losses. In addition, the syndicate carries prudent reserves, and A.M. Best believes there is a sufficient, although reduced, margin to support future releases. At a group level, there has been a pattern of increasing prior year redundancies since 2004, culminating in a net release of GBP 49.3 million during 2008. This amount includes a one-off release of GBP 11.8 million, due to changes in the syndicate?s reserving methodology.
A.M. Best believes the syndicate?s business profile within Lloyd's is supported by the franchise of the Chaucer group. CSL offers a diverse range of services within the Lloyd?s market. In addition to the management of in-house syndicates 1084 and 1176, which are supported by Chaucer capital, CSL manages syndicates supported by third party capital, offers a turnkey operation to new market entrants and provides run-off management.
An offsetting factor is the uncertainty surrounding the future management of CHP following the announced retirement of its chief executive officer, and the future structure of the group?s ownership in view of Pamplona Capital Management, LLP?s intention to purchase a 29.9% stake.
For Best?s Credit Ratings, an overview of the rating process and rating methodologies, please visit http://www.ambest.com/ratings.
The principal methodologies used in determining these ratings, including any additional methodologies and factors that may have been considered, can be found at http://www.ambest.com/ratings/methodology.
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The Connors Group, Inc. ("Company") is not an investment advisory service, nor a registered investment advisor or broker-dealer and does not purport to tell or suggest which securities or currencies customers should buy or sell for themselves. The analysts and employees or affiliates of Company may hold positions in the stocks, currencies or industries discussed here. You understand and acknowledge that there is a very high degree of risk involved in trading securities and/or currencies. The Company, the authors, the publisher, and all affiliates of Company assume no responsibility or liability for your trading and investment results. Factual statements on the Company's website, or in its publications, are made as of the date stated and are subject to change without notice.
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