Lloyd's - Lloyd's Interim Results for half year to 30 June, 2005 (£ version)

Lloyd’s announces first half profit of £1.38bn

• Strong profit in first half of 2005
• Good combined ratio versus international peer group
• Stable capital position, with further increase in solvency ratio

Lloyd’s, the world’s leading specialist insurance market, today announced an interim profit of £1.38 billion for the six month period ended 30 June, 2005. This represents a 21% increase on the corresponding period in 2004. The severe hurricane season will have a significant impact on the full year result. Despite that, and in the absence of any further major catastrophes or unforeseen events, the market is still expected to make a profit in 2005.

Highlights

• Profit of £1.377 billion, before tax, for the first half of 2005 on a pro-forma basis (June 2004: £1.142 billion)
• Combined Ratio of 87.3% (June 2004: 85.0%) compares favourably with an estimated average of 93.0% for US property and casualty insurers (i); 105.8% for US re-insurers (ii); and 92.9% for European insurers and re-insurers (iii)
• Reduction in gross written premium to £8.40 billion (June 2004: £9.84 billion) reflects underwriting discipline, responding to an increasingly competitive rating environment in the first half of 2005
• Resources of the Society and Members up 4.9% to £11.98 billion on corresponding period in 2004 (June 2004: £11.42 billion)

Chairman of Lloyd’s, Lord Levene, said:

“These are a pleasing set of results. The second half of 2005 will inevitably be shaped by the impact of Hurricanes Katrina and Rita which are vivid illustrations of the increasing severity of natural catastrophes and the complex world of risk in which Lloyd’s underwriters operate with distinction. Lloyd’s policyholders in the affected U.S. states can rest assured that Lloyd’s will play its full part in the recovery of that region.”

Lloyd’s Chief Executive Nick Prettejohn said:

“The Lloyd’s market delivered a strong performance in the first half of 2005. A combination of disciplined underwriting and a relatively benign claims environment put Lloyd’s on a strong footing, even as rates declined from their peak across many areas of business in the first six months.

“Hurricanes Katrina and Rita serve as a reminder that insurers’ full year results are influenced significantly by the extent of catastrophic loss, and most notably this year by the severity of the windstorm season. Katrina, in particular, will have a significant bearing on full year profits. With three months left of the year, the North American hurricane season not yet over and the full impact of Katrina and Rita not certain, it is not possible to draw any firm conclusions about the full year result. However, in the absence of any other major catastrophic loss or unforeseen event, the market is still expected to achieve a profit.

“The hurricanes are also likely to have the effect of stemming the softening of rates in a number of classes of business, and indeed in some classes rates are now increasing.

“Lloyd’s capital position is strong and stable. The solvency ratio has continued to improve, from 300% at the end of 2004, to 375% at the end of June.”

Interim results for six months ended 30 June, 2005:

Lloyd’s balance sheet:

Notes to editors

1. A copy of Lloyd’s Interim Report and presentation to analysts can be accessed at: Lloyd's Interim Results 2005

2. A combined ratio is a measure of an insurer’s underwriting profitability based on the ratio of net incurred claims plus net operating expenses to net earned premiums. A combined ratio of 100% is break even. A ratio of over 100% is a loss; less than 100% is a profit.

3. Sources of combined ratio figures - (i) Insurance Information Institute (estimate - September 2005), (ii) Reinsurance Association of America (August 2005), (iii) Company Returns / Lloyd's analysis (September 2005).

4. Central assets include the assets of the Central Fund and the other assets of the Corporation. In aggregate, the value of Lloyd's central assets, excluding the callable layer and the liability in respect of the subordinated debt, amounted to £1,182m ($2,116m) at June 2005.

5. Balance due to/(from) Members and Funds at Lloyd’s represent the aggregate of each member’s resources. These resources operate on a several basis and are only available to meet each member’s share of claims. Central Assets are available at Council’s discretion to meet the liabilities of any member on a mutual basis.

6. This press release includes forward-looking statements. These statements are based on currently available information and consistent accounting policies as applied at 30 June 2005. They reflect Lloyd’s current expectations, projections and forecasts about future events and financial performance. All forward-looking statements address matters that involve risks, uncertainties and assumptions. Based on a number of factors, actual results could vary materially from those anticipated by the forward-looking statements. These factors include, but are not limited to, the following:

• Rates and terms and conditions of policies may vary from those anticipated.
• Actual claims paid and the timing of such payments may vary from estimated claims and estimated timings of payments, taking into account the preliminary nature of such estimates.
• Claims and loss activity may be greater or more severe than anticipated, including as a result of natural or man-made catastrophic events.
• Competition on the basis of pricing, capacity, coverage terms or other factors may be greater than anticipated.
• Reinsurance placed with third parties may not be fully recoverable, or may not be paid on a timely basis, or such reinsurance from creditworthy reinsurers may not be available or may not be available on commercially attractive terms.
• Developments in the financial and capital markets may adversely affect investments of capital and premiums, or the availability of equity capital or debt.
• Changes in legal, regulatory, tax or accounting environments in relevant countries may adversely affect (i) Lloyd’s ability to offer its products or attract capital, (ii) claims experience, (iii) financial return, or (iv) competitiveness.
• Economic contraction or other changes in general economic conditions could adversely affect (i) the market for insurance generally or for certain products offered by Lloyd’s, or (ii) other factors relevant to Lloyd’s performance.

The foregoing list of factors is not comprehensive, and should be read in conjunction with other cautionary statements that are included herein or elsewhere. Lloyd’s undertakes no obligation to update or revise any forward-looking statement, whether as a result of new information, future developments or otherwise.

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Lloyd's is the world's leading specialist insurance market with a capacity to accept insurance premiums of more than £13.7 billion in 2005. It occupies sixth place in terms of global reinsurance premium income, and is the second largest surplus lines insurer in the US. In 2005, 62 syndicates are underwriting insurance at Lloyd's, covering all classes of business from more than 200 countries and territories worldwide.