As results for the last fiscal year roll in RBC Capital Markets equity analysts project a further year of dragging results for Lloyd’s underwriting, after 2016 reports have continued to show declines in what’s been a year on year deterioration.
“The Lloyd’s market posted a 98% combined ratio at 1H16, and our expectation is that this will not have improved much in 2H16,” said RBC analysts.
According to the report, insurance businesses with operations at Lloyd’s have shown weak combined ratio results.
Two out of a cross-section of five of Lloyd’s major divisions studied in the report made underwriting losses in 4Q16, and one of the re/insurers, Argo, failed to turn a profit, showing a combined ratio of 100% for the last fiscal year.
Lloyd’s is not the only major industry player to have suffered from tough market conditions, as excess capital, new technologies, new emerging competitors, and alternative capital have left traditional players competing over a tighter and smaller market share.
Munich Re results showed the firm achieved its full-year 2016 profit target, but for the fourth-quarter major catastrophe losses hit the firm, and the P&C reinsurance combined ratio was 101.9%.
Despite the centuries-old insurer suffering from tough market conditions, RBC believes the insurance giant is not far away from a silver lining as a bottoming out of prices appears to be ahead for the industry.
“We expect that the company senses that a turn in the market might not be too far away. With Lloyd’s prices weak, we continue to see good value in holding names with more diversified business mixes such as Beazley.
“Lancashire reported that it was holding on to a slightly larger capital buffer than usual at its FY16 results on 16th Feb 2017. We expect that the company senses that a turn in the market might not be too far away,” said RBC.