Lloyd's - Lloyd's announces $3.387 billion profit for 2003

• Industry-leading results, outperform international peer group
• Further strengthening of balance sheet
• Continuing focus on underwriting profit

LONDON, April 7- Lloyd's, the world's leading specialist insurance market, today announced a pro forma annually accounted profit of $3.387 billion in 2003, an increase of 152% from $1.343 billion 1 in 2002. Other highlights include:

• Initial projection of profit of $3.186 billion on a three-year accounted basis for the 2003 underwriting year
• Further reduction in combined ratio to 90.7% (2002: 98.6%)
• 66% increase in Central Fund to $1.273 billion (total Central Assets up 54% to $1.398 billion)
• Net resources of Lloyd's are up 50% to $18.2 billion

"Lloyd's is in good shape after a year of strong progress. However, there is no room for complacency," said Lord Levene, Chairman of Lloyd's. "We get daily reminders of just how risky our world is, and that is where Lloyd's comes in. This market is founded on providing a shelter against worldwide risks."

"These results represent an encouraging underwriting performance and a further strengthening of the market's balance sheet following last year's return to profit," said Lloyd's Chief Executive Nick Prettejohn. "The 2003 result benefited from favorable external conditions, with strong premium rates and a low financial impact on the market of catastrophic loss.

"These results are good news for our U.S. customers and capital providers," said Mr. Prettejohn. "We are proud to serve the U.S. market, which is critically important for Lloyd's, and accounts for more than one third of our business.

"Lloyd's has outperformed our international peer group, as businesses in the market have concentrated on delivering underwriting profit," continued Mr. Prettejohn. "Lloyd's Franchise Board took decisive steps in 2003 to strengthen the market, and we will continue that critical work. In particular, we will continue to take strong action where businesses are under-performing."

"Lloyd's made good progress in 2003, in absolute and competitive terms," explained Mr. Prettejohn. "The task now is to build on that progress. Consistently good performance, balance sheet strength and attractive returns for capital providers can only be achieved if businesses continue to write for profit and price risk adequately. The continuing increases to reserves across the industry, and conditions in the capital markets, mean that the need for an underwriting profit is as strong as ever," he concluded.

The combined ratio 2 for 2003 of 90.7% compares with an estimated average of 100.7% for US property and casualty insurers (i), 101.2% for US re-insurers (ii) and 101.4% for European insurers and re-insurers (iii) 3 .

Lloyd's Capital and Reserves (billions)

During 2003, the net resources of Lloyd's increased by 50% to $18.2 billion from $12.1 billion in 2002.

Lloyd's also announced today the most recent figures for its global assets available to meet policyholders' claims. As at 31 December 2003 these were:

Central Assets

Lloyd's central assets increased by 54% to $1.398 billion from $906 million in 2002.

Central Fund

As of December 31, 2003, the assets of the Central Fund amounted to $1.273 billion, an increase of $507 million since reported last year.

In normal circumstances, the Central Fund is available, at the discretion of the Council of Lloyd's, to meet a liability if a member has insufficient resources in its Premium Trust Fund (PTF) and is unable to provide other additional funds.

Annual vs. three-year accounting

Lloyd's traditional method of accounting was conducted on a three-year basis. Under this system, the year's accounts remain open for 36 months. Premium income and claims are usually accounted for in the underwriting year of account in which the policy is issued.

Under annual accounting, the result for the year accounts for the movement of premiums, claims, expenses and reserves during that calendar year period. Beginning on January 1, 2005, Lloyd's will adopt the UK GAAP annual accounting standard as the statutory reporting regime.

There can be considerable differences between the three-year figure and annual figure for the same year. For example, under annual accounting, the entire September 11th loss was accounted for in 2001 when the claims occurred. But under three-year accounting, the September 11th losses were split between 1999, 2000 and 2001 because these were the years in which the relevant insurance policies were issued.

Result for 2001, projections for 2002 and 2003 - three-year accounts

Whereas results for 2003 are being reported on a pro forma annually accounted basis, the result for 2001 year-of-account and the latest projections for 2002 and 2003 are calculated using the Lloyd's traditional three-year accounting method.

Lloyd's announced today that the result for the 2001 year-of-account is a loss of $4.257 billion.

The latest projection from the businesses in the market for 2002 year-of-account is a profit of $2.991 billion, which is in line with previous projections.

Footnotes:

1. Sterling figures for 2003 are converted at a 1.79 exchange rate as at 31.12.03. Figures for 2002 are converted at a 1.61 exchange rate as at 31.12.02. These exchange rates are used throughout the press release.

2. A combined ratio is a measure of an insurer's underwriting profitability based on the ratio of net incurred claims plus expenses to net 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 Jan 2004, (ii) Reinsurance Association of America, March 2004 (iii) Company returns/Lloyd's FPMA analysis, March 2004.

Cautionary note on forward-looking statements

This document includes forward-looking statements. These statements are based on currently available information and consistent accounting policies as applied at December 31, 2003. 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:

1. Rates and terms and conditions of policies may vary from those anticipated.
2. 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.
3. Claims and loss activity may be greater or more severe than anticipated, including as a result of natural or man-made catastrophic events.
4. Competition on the basis of pricing, capacity, coverage terms or other factors may be greater than anticipated.
5. 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.
6. Developments in the financial and capital markets may adversely affect investments of capital and premiums, or the availability of equity capital or debt.
7. 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.
8. 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.
9. Foreign exchange rates may materially fluctuate from the rates prevailing at December 31, 2003 (£1 = US$ 1.79, CA $2.31, ?1.42)
10. 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 insurance market with a capacity to accept insurance premiums of more than $26.7 billion in 2004. It is the world's second largest commercial insurer and sixth largest reinsurance group. In 2004, 66 syndicates are underwriting insurance at Lloyd's, covering all classes of business from more than 190 countries and territories worldwide.

A presentation on Lloyd's 2003 financial results can be viewed at www.lloyds.com/results2003 .

A high-resolution photograph of Lord Levene and Nick Prettejohn is available for download from www.newscast.co.uk .
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