Favourable underwriting conditions and a lack of large catastrophes usually add up to a very profitable year for insurers – and the story’s no different at Lloyd’s.
The market has reported a pre-tax profit of £3.8bn for 2007 and strengthened its capital resources, but warned that the favourable conditions were unlikely to be repeated so the focus must remain on underwriting discipline.
Lloyd’s Chief Executive, Richard Ward, believes the market is in “good shape” to meet its challenges, but warned of the perils of the future. He said: “The question on everyone's lips is, can this performance be repeated next year? The answer is we don’t know but we can’t expect to be as lucky. It is unlikely that there won't be any catastrophes this year.
“Investment returns could be impacted by the current instability in the financial markets. We are already seeing a softening of rates across all lines. Therefore, it is of paramount importance that we focus on underwriting for profit and maintaining underwriting discipline.
“As a marketplace we have a responsibility to our policyholders and to ourselves to ensure that we maintain our financial strength and security throughout the course of a cycle.”
Lloyd’s combined ratio stands at 84%, a slight deterioration on the 83.1% reported last year, but once again compares favourably with its peers.
There was also a 34% increase in central assets to £1.95bn from £1.45bn in 2006, while investment return was up 21% to just over £2bn and the release of surplus reserves of rose to £856m, up from £270m in the prior year.
Lloyd’s also closed its 2005 year of account at 36 months with a net profit of £340m. This includes a surplus on 2004 and prior years reinsured into 2005 of £622m and a pure year loss of £282m. Years of account in run-off during 2007 reported a profit of £75m.
Lloyd’s Chairman Lord Levene, said 2007 had been a year where Lloyd’s continued to “outperform” its major international peer groups. He continued:“ Lloyd’s benefited from a limited exposure to catastrophes but this has resulted in increased pressure on rates across all lines of business. The need to exercise underwriting discipline and maintain a focus on underwriting for profit rather than market share remains essential.”
Watch lloyds.com's interview with Richard Ward on Lloyd's results (16MB, wmv)
