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Possible downgrade for Argo’s Lloyd’s Syndicate 1200

7th October 2021 - Author: Charlie Wood

Syndicate Research Limited has downgraded the B- (Below Average), negative outlook, Continuity Opinion of Lloyd’s syndicate 1200 (Argo Managing Agency Limited) to C+ (Below Average) and placed the Continuity Opinion under review for possible downgrade.

These actions are a result of mounting concerns regarding the group’s long-term commitment to the business.

Syndicate 1200, backed by Argo Group and 9% of third party capital, writes a Non-Marine Property Casualty orientated book with 2021 capacity of £500 million.

The syndicate recorded a loss of 13% of Net Premium Earned (NPE) on an annually accounted basis for 2020 on a combined ratio of 116% (excluding fx), including losses from COVID-19 of 16% NPE.

SRL commented that, in terms of reported results, on a cross-cycle basis syndicate 1200 had recorded an average loss of 1% of NPE for 2012 to 2020 under annual accounting and more recent 5-year average annual losses of 11% NPE.

The syndicate had performed in line with the top of B- (Below Average) benchmarks in terms of indicative average annual returns on capital on a cross-cycle basis but more recent 5-year average returns were in line with the top of C (Below Average) benchmarks.

In terms of three-year accounting, the syndicate had recorded a loss of 3.5% capacity for 2018. The syndicate’s latest forecasts at Q2 2021 were for a mid-point loss of 7% capacity for the 2019 account and a breakeven result for 2020.

SRL state that the syndicate’s book had been realigned since 2017, with underperforming business placed into run-off and remedial action being taken on certain lines, and a new active underwriter had been appointed in 2019 together with new class underwriters for Property, Professional Lines, Specialty, General Liability and Marine/Energy.

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