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Lloyd’s performance improves & premiums grow, but investments dent results

21st September 2018 - Author: Charlie Wood

Lloyd’s of London’s interim report has revealed an uptick in gross written premiums, pre-tax profits of £0.6 billion and improved performance, while investment returns have declined considerably to £0.2 billion against £1.0 billion in June 2017.

Lloyd's of London insurance and reinsurance marketGross written premiums increased 2.4% to £19.3 billion H1 2018, compared to £18.9 billion in June 2017, driven predominantly by property insurance; proportional treaty reinsurance lines, casualty; and specialty.

“While the underlying numbers show some signs of improvement, the result also highlights ongoing challenges that are actively being addressed,” said Inga Beale, Lloyd’s Chief Executive Officer.

The combined ratio improved to 95.5%, compared to 96.9% in June 2017, supported by a benign loss period and prior year releases.

Pre-tax profit for the first six months along with an improved combined ratio represents an annualised return on capital of 4.3%, against 8.9% in June 2017.

Lloyd’s strong capital position means more pricing pressure on the market with net resources totalling £29.0 billion, compared to £28 billion in June 2017.

“We continue to focus on improving the Lloyd’s market’s long-term performance by taking positive action to address areas of the market that are under-performing. While much of the Lloyd’s market is profitable, some syndicates and certain lines of business have a disproportionate negative impact on the market’s profitability,” stated Beale.

“Syndicates are being asked to conduct in-depth reviews of the worst performing 10% of their portfolios, along with all loss-making lines, and submit their relevant remediation plans for approval as part of the 2019 business planning process.”

Elsewhere, underwriting challenges remain and Lloyd’s market’s accident year ratio for H1 2018 was 99.3%, compared to 98.5% in June 2017.

This slight uptick is primarily due to an increase in attritional losses offset by a reduction in major claims. Major claims added 0.6% to the combined ratio for the first half of 2018 compared with 1.9% in the equivalent period last year.

Lloyd’s will be hoping that the efforts to close down underperforming business, portfolios or entire syndicates, and improve profitability across the market take effect and help to improve this key accident year ratio metric.

“Lloyd’s continues to lead the world in delivering innovative products and services to customers by providing essential, complex and critical coverage that is so needed to enable human progress,” added Beale.

Addressing her decision to step down earlier this year, Beale said, “It is my honour and privilege to lead one of the most respected and trusted insurance brands in the world and I’m proud of the part I have played in securing Lloyd’s future.”

“The progress we have made together with true collaboration across the entire London Market towards modernisation and digital transformation is profound. I’m also proud of the expanded access to new markets that Lloyd’s now has, and the progress that has been made towards building a more diverse and inclusive market.”

“I’d like to take this opportunity to thank everyone for the support they have given me during my five years as CEO,” concluded Beale.

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