Insurer Advent Capital has increased pre-tax profits ten per cent to £25.2 million and taken steps to reduce volatility.

The AIM-quoted company, which owns the £135 million-capacity underwriting syndicate 780 of Lloyd’s, increased net premiums 17.5 per cent to £96 million in 2007, though its underwriting profit was marginally lower at £20.9 million. Advent’s new Bermuda-based reinsurance arm Advent Re wrote £6 million premiums and contributed £4.9 million to profits.

Matching the company’s currency exposures virtually eliminated 2006’s exchange loss of £2.9 million and investment income was three per cent ahead at £13.1 million. Earnings rose 9.3 per cent to 4.87p a share and the board, chaired by Lloyd’s veteran Brian Caudle, is recommending a maiden dividend of 1.25p a share.

Pointing out that Advent slightly exceeded its targeted 20 per cent return on equity, chief operating officer Keith Thompson says the company, which lost £74 million in 2005 largely as a result of reinsurance claims on US hurricanes Katrina, Wilma and Rita, has ‘redesigned its portfolio’ of risks. He explains that ‘we are increasing the proportion of direct property insurance and our energy business’, so that the two classes of business together accounted for 45 per cent of last year’s income, against only 14 per cent at the beginning of the decade.

‘We have given up some upside,’ Thompson concedes. ‘Our 2007 profit would have been greater with the old mix’, but the change has reduced the risk of catastrophic losses.

He says last month’s policy renewals showed a continuing slide in premiums of an average six per cent and comments ‘there is a lot of competition and a lot of pressure on rates in all classes of business’. Syndicate 780 will not be immune, but Thompson says it will try to avoid offering weak-market features such as lower deductibles or multi-year cover.

The company is tight-lipped about whether it expects to participate in the corporate consolidation under way in the market. Floated at 35p in 2005, the year of the hurricanes, Advent’s shares slid to 20p by the middle of last year.

They have crept back up to 25p, 0.5p higher this morning, valuing the company at £102 million. They should perform better than several others in the sector.

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