As efforts to improve Lloyd’s of London’s operating performance start to take hold, it’s imperative that the specialist insurance and reinsurance marketplace delivers sustainable, long-term profitability, according to its Chief Executive Officer (CEO), John Neal.
Addressing the media earlier today, Neal discussed the three-year journey the market’s been on to improve its performance, following a period of “genuinely poor” normalised combined operating ratios, which culminated in an “acutely disappointing” result in 2017.
The good news is, that excluding the unprecedented impacts of the ongoing COVID-19 pandemic, which saw Lloyd’s report an overall loss for H1 2020 with a combined ratio of 110.4%, the underwriting performance has improved as a result of the market’s efforts.
In fact, and as noted by Neal, ex-COVID-19, the H1 2020 underlying combined ratio amounted to 91.7%, which represents a seven percentage point improvement from where the market was 12 months prior.
So, it appears as though the performance actions implemented by Lloyd’s are starting to come to fruition, and this can also be seen in the year-on-year improvement in the attritional loss ratio at the half-year.
But while the future is starting to look brighter, Neal stressed that it’s vital for Lloyd’s not to rest on its laurels and continue recent efforts.
“We have to future-proof the Lloyd’s marketplace, not to produce a satisfactory return in 2021, but to produce a sustainable, long-term profitable path for the benefit of all market constituents,” said Neal. “If we do that well, then we know that rating agencies will be satisfied, our regulators will be satisfied, and frankly, so will our customers who want to be part of a marketplace that’s successful and profitable.”
Later adding: “And, so, the performance actions must continue. In fact, they must continue, forever. It’s an every-year process, as far as we’re concerned.
“We will maintain a focus on profit over growth, and surely that is just the normal rhythm of running a good business.”
Of course, re/insurance markets are hardening ahead of the January 1st, 2021 renewals, and it’s expected by many that conditions will remain favourable for some time.
Neal explained how the marketplace is benefiting from supportive rate momentum and current market conditions, stating that this provides the tailwind to ensure that Lloyd’s can and should execute against plan.
“So, whilst the rating environment is supportive and market conditions are favourable, it doesn’t give rise to exponential growth. We’ll support the right growth, for the right risk, at the right price. So, yes, we’ve made progress, but yes, there’s more work to do.
“Our ultimate goal is to achieve sustainable, long-term profitability at Lloyds, and that’s why we continue with our performance agenda, and that’s why we’ve required every syndicate to present plans that are logical, realistic, and achievable,” said Neal.