Despite the turbulent financial markets and challenging insurance conditions Lloyd’s first-half profits jumped nearly 40%, due to robust underwriting results and a modest rebound in investment returns.
Click on the flash player below to watch an interview with Lloyd's CEO Richard Ward to find out more about Lloyd's results.
Components of the result
The market posted a pre tax profit of £1.32 bn for the first six months of this year, up from £949 million for the same period last year.
The market’s underwriting profit of £678 million up to June 30 was nearly the same as the previous year, despite the difficult market conditions. It was helped by the lack of any major catastrophes in the first half.
The investment result was £708 million, a modest return of 1.6% on invested assets reflecting the very tough conditions in the financial markets, where interest rates and risk-free yields were very low.
But it was more than double the investment return made in the six months to June 30, 2008.
Lloyd’s gross written premiums for the period stood at £13.5 billion, up by over a third on first-half 2008, helped by the weaker dollar, but also due to an increasing demand from international clients for policies from Lloyd’s businesses.
Good results in a challenging environment
“The first six months’ result has been achieved in what remain challenging circumstances. The market is in solid financial shape and business volumes have increased as a result of brokers and policyholders seeking to use the security of the Lloyd’s platform,” said Lloyd’s Chairman, Lord Levene.
But he also struck a note of caution. “External conditions, however, remain difficult with the US windstorm season and recessionary trends continuing to pose a threat to the insurance industry.”
Lloyd’s made a combined ratio (which measures claims as a percentage of premiums) of 91.6%, down two percentage points on the first half of 2008 but which compares favourably with Lloyd’s peers.
US property and casualty insurers posted a combined ratio of 100%, U.S. reinsurers had a ratio of 94% while European insurers and reinsurers had one of 99%. The catastrophe-focused Bermuda market’s combined ratio of 84% reflected the benign conditions for natural disasters, with the US Hurricane season in the second half of the year, not the first.
Central assets – the pool of funds that underpins the market’s ‘A’-grade ratings and from which any unpaid claims will be reimbursed – stood at just over £2 billion.
Earlier in the year Lloyd’s took advantage of the turbulent conditions in the corporate bond market to buy back some of its debt, which resulted in a £36 million gain for the Central Fund.
A milestone was reached during the period when the second part of the Equitas deal was concluded, which saw the market’s pre-1993 liabilities reinsured by Equitas transferred to Berkshire Hathaway. The High Court approval of the transaction gives finality to those Lloyd’s Names that were covered by Equitas.
Lloyd’s Chief Executive, Richard Ward, said: “Lloyd’s prudent and conservative approach has ensured that our capital position and ratings remain strong. While we are well placed to take advantage of opportunities through the market’s wide product range and distribution channels, our focus must remain on underwriting profitability.”
