Lloyd’s, the specialist insurance and reinsurance marketplace, has today announced an improved underwriting profit of £2.6 billion in its 2022 full year results, although a net investment loss of £3.1 billion resulted in an overall loss before tax of £800 million.
After numerous years of performance improvement, the Lloyd’s market’s underwriting result improved by 53% year-on-year, helping the combined ratio strengthen by 1.6 percentage points to 91.9%, the strongest since 2015.
During the year, major losses of £4.1 billion contributed 12.7% to the combined ratio, resulting in a nat cat ratio of 8.4% compared with 11.2% in 2021.
Hurricane Ian was the costliest event of the year for Lloyd’s at £2 billion, followed by the war in Ukraine at £1.4 billion, the eastern Australia floods at a cost of £300 million, and the winter storm Elliot at a cost of £200 million.
While major claims as a percentage of net earned premiums increased, year-on-year, the attritional loss ratio improved from 48.9% to 48.4%. The expense ratio also improved, from 35.5% to 34.4%, which the corporation says is a reflection of its efforts to deliver strong performance and reduce the cost of doing business at the marketplace.
During 2022, Lloyd’s saw price increases of 8%, meaning the market has now seen 20 consecutive quarters of positive price movement.
Gross written premiums rose by almost 20% year-on-year to £46.7 billion in 2022, and includes 4% volume growth. Net earned premium jumped from £26.7 billion in 2021 to £32.5 billion in 2022.
“This is an outstanding underwriting result that follows several years of performance improvement, a comprehensive plan to digitalise our market, steady and sustained progress on our culture and purposeful action to help our industry and society manage the biggest challenges of our time,” said John Neal, Chief Executive Officer (CEO) of Lloyd’s.
“Looking to 2023, Lloyd’s expects strong premium growth to around £56bn, a combined ratio below 95% and a total investment yield on our assets of more than 3% – enabling us to support customers through the uncertain times ahead,” he added.
Offsetting the improved underwriting performance, Lloyd’s has announced net investment losses of slightly more than £3.1 billion for the year, compared with income of £948 million in 2021.
As a result of mark-to-market accounting rules on fixed income investments, Lloyd’s has fallen to a loss of £800 million in 2022, compared with profit of £2.3 billion in 2021.
The marketplace does expect this loss to be reversed in the coming years as assets reach maturity and benefit from favourable interest rates.
Additionally, the market’s capital and solvency position continued to improve last year, with a central solvency and market-wide solvency ratio of 412% and 181%, respectively. Net resources amounted to £40.2 billion in spite of the large investment loss, which highlights the strength and resilience of the Lloyd’s balance sheet.
For the current year, Lloyd’s expects gross written premium to increase further to £56 billion, and expects a combined ratio of less than 95%.
