Reinsurance News

Lloyd’s to report improved underwriting result but investments drive full year loss

8th March 2023 - Author: Luke Gallin

Lloyd’s, the specialist insurance and reinsurance marketplace, is poised to report a better than expected combined ratio of 91.9% for full year 2022, although an investment loss of £3 billion is expected to result in a full year loss before tax.

The world’s oldest re/insurance marketplace is scheduled to release its 2022 results on March 23rd, but has today released some preliminary figures.

This includes an improvement in the combined ratio of 1.6 percentage points, year-on-year, to 91.9%, and is in spite of major claims of 12.7%, including losses related to Russia’s ongoing invasion of Ukraine, and from Hurricane Ian.

At the same time, the attritional loss ratio improved from 48.9% in 2021 to 48.4% in 2022, with prior year reserve releases of 3.6%, compared with 2.1% last year, while the expense ratio fell from 35.5% to 34.4%.

In terms of growth, gross written premiums (GWP) increased more than 19% to over £46 billion, which Lloyd’s says reflects both growth from the strong USD (8%), direct price rises (8%), and organic growth (3%).

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However, the investment result has more than offset the improved underwriting performance reported by Lloyd’s for 2022.

The marketplace states that the mark-to-market accounting treatment of rising interest rates on fixed income portfolios forced a write down of asset values and is projected to result in higher yields and investment returns in the future.

But for 2022, the reported investment loss is roughly £3 billion, compared with income of £900 million in 2021. Lloyd’s states that the investment loss has no cash impact, and is expected to be reversed in the coming years as the assets reach maturity.

Owing to the investment loss, Lloyd’s expects to report a full year loss before tax of approximately £800 million in 2022, versus profit of £2.1 billion in 2021.

Chief Executive Officer (CEO) of Lloyd’s, John Neal, commented: “Today we are presenting an underwriting performance and capital position as good as Lloyd’s has reported in recent memory. 2022 showed both strong premium growth and a continued fall in expenses, which, alongside a high-quality balance sheet demonstrate that our market is in the best shape to offer both an attractive return to capital and investors as well as providing businesses the insurance protection they need in these uncertain times.”

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