Amlin, the Lloyd's of London insurer, played down fears of a collapse in premiums yesterday, as it revealed a 17 per cent increase in first-half pre-tax profits, and said prospects continued to look strong for the second half.
The company also announced an increase in its interim dividend of 3.5 times, making good on its promise from earlier this year to allocate 30 per cent of all future profits to the dividend.
Shares in the company rose 8.5p to 151p on the results, which exceeded analysts' expectations, giving the company a market value of £594m.
Analysts and investors have been fearing a sharp fall in general insurance premiums over the past nine months, as the sector passes the peak of its cycle. While these predictions have been borne out by falls in the aviation, commercial property, and catastrophe insurance sectors, premiums have held up in other sectors such as marine insurance.
In response to suggestions that the worst may be yet to come, Charles Philipps, the chief executive of Amlin, said: "We absolutely do not think it's going to fall off the edge of a cliff. But we do think there is going to be mounting pressure on rates.
"The average renewal rate decline has been a modest 2.5 per cent, which is a reflection of our underlying posture to focus on management rather than underlying growth."
Aside from selective underwriting, the main driver behind Amlin's strong results was a sharp reduction in both its expenses and claims, lowering its combined ratio - the primary measure of an insurer's efficiency - by 10 percentage points to 73 per cent.
Commenting on the latest storm to hit the east coast of America - Hurricane Frances - Mr Philipps said it looked as though total insurable losses to the group would be smaller than last month's Hurricane Charley, which cost the company between £30m and £40m, well within its budget for a natural disaster of this sort.
Joanna Parsons, an analyst at ABN Amro, said that while Hurricane Frances may cause billions of dollars worth of damage, the majority looked likely to be as a result of flooding - a risk covered by the US state.Reuse content