Lloyd's of London insurer Neon Underwriting Ltd. is aiming to more than triple its annual gross written premium to £750 million by 2021, CEO Martin Reith said, as he aims to boost the company's relevance and help it attract more, better-quality business.
The expansion follows cutbacks in 2016 as Reith moved to fix the then-struggling American Financial Group Inc.-owned company, previously known as Marketform, after taking the helm in November 2015. Reith is well known in the Lloyd's market, having founded and run Lloyd's insurer Ascot Underwriting Holdings Ltd. between 2001 and 2009.
Reith said in an interview with S&P Global Market Intelligence: "At the moment we are like a little Jack Russell nipping at people's heels, and we want to grow into more of an Alsatian."
He added: "With growth comes scale and with scale comes relevance. ... My vision is to get this to a business, when it is fully formed, that will be doing around three quarters of a billion pounds worth of premium. I'm not pretending that is an easy achievement but what I do know is that there is good business out there. ... I would love to get there for 2021, that sort of timescale."
Shedding past troubles
Neon has already started growing since its 2016 cutbacks. Gross written premiums at Neon's Lloyd's Syndicate - 2468 (Neon Underwriting Ltd.) were £225.7 million in 2017, up 40.9% on the £160.2 million it wrote in 2016. Underwriting performance at the syndicate also improved: The combined ratio — which shows claims and expenses as a percentage of net earned premium — shrank by 112 percentage points to 105%.
Although that was still above the 100% break-even mark, denoting an underwriting loss, it is a marked improvement over the 217% reported in 2016, which meant its outgoings were more than double its income that year.
Reith said American Financial Group asked him to join Marketform, which it bought outright in 2012 after taking an initial 67% stake in 2007, and turn it around. He admitted: "The issues were greater than I thought they were, so the challenge was somewhat greater than I thought it was as well."
But he said Neon "is effectively a clean platform now" thanks to cutting back in 2016 and closing two years of account using a process called "reinsurance to close." This effectively meant that Neon transferred the old liabilities to a third party, allowing it to continue unencumbered. At Lloyd's, underwriting years remain open beyond their usual three years if there are liabilities that still cannot be quantified.
Neon closed its 2017 year of account in November 2016 and years 2008 to 2015 in February 2018, in both cases by reinsuring them with StarStone Underwriting's Syndicate 2008, which is ultimately part of Bermuda-based run-off buyer Enstar Group Ltd.
Acquisitions
With the old liabilities taken care of, Neon can concentrate on growth. The buzz around Neon being the first company to use the U.K.'s new insurance-linked securities regime has helped put the company on the map.
Further growth will come from a combination of acquisitions and hiring teams and individuals. Neon bought Guernsey-based underwriting agency Sapphire Underwriting, which specializes in insuring offshore financial institutions, in June 2017.
"First and foremost we are looking to continue to recruit good talent in London," Reith said.
"That's the hub of the business, and there is so much more yet for us to do in terms of tapping into the flow of business into London. ... Adding on businesses that either support or are additive to our current classes is something I am very interested in. If there is an element of niche around them, then so much the better."
