An increased loss burden ate into Atrium’s profits in the first three months of the year as Enstar’s Lloyd’s arm’s combined ratio spiked 12.1 points to 94.9 percent.
The unit’s incurred losses in the period jumped over $5mn to $17mn in the quarter as the loss ratio rose by more than 10 points to 48.8 percent, with the company’s other Lloyd’s presence Starstone posting an even more dramatic drop with a slim $504,000 profit.
That marked a significant deterioration on the performance this time last year, when the Lime Street and company market player reported underwriting income of just over $2.6mn and a combined ratio of 97.7 percent compared to the 99.6 percent for Q1 2018.
Enstar’s surging run off operation - which has struck a series of significant deals including an RITC for Novae’s at the beginning of 2018 - massively increased its top line, with gross written premiums soaring to $7.4mn from just $983,000 year-on-year.
In addition to the unit’s assumption of some £860.1mn ($1.16bn) of gross reserves from Novae’s prior year accounts in a deal struck in January, the firm also acquired gross loss reserve of £403.9mn from Neon and a further AUD$359.4mn ($280.8mn) of compulsory third party liability business from Zurich’s New South Wales vehicle in February.
At a group level Enstar fell to an operating earnings per share loss of $2.12, significantly worse than the $2.80 per share profit it posted in the same period in 2017.
That translates to an overall net loss for the firm of around $41.2mn compared to a profit of $54.7mn last year.
The headline loss was largely down to a hefty charge for net realised and unrealised gains of $143.03mn, mainly due to $100.3mn of net unrealised losses from its fixed income investment portfolio which was attributed to rising sovereign yields and widening credit spreads.
The loss is similar to the massive $6.2bn unrealised loss experienced by Warren Buffett’s Berkshire Hathaway in its Q1 results, in that it largely stems from changes to reporting standards which forced the company to account for unrealised investment losses on a mark-to-market basis.