Lloyd's - Lloyd's announces £1 892m profit for 2003

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

Lloyd's, the world's leading specialist insurance market, today announced a pro forma annually accounted profit of £1,892 million in 2003, an increase of 127% on 2002.

Highlights:

• Profit of £1,892 million, before tax, for 2003 on a pro forma annually accounted basis (2002: £834m)
• Initial projection of profit of £1,780 million on a three-year accounted basis for the 2003 underwriting year
• Further reduction in combined ratio to 90.7% (2002: 98.6%)
• 49% increase in Central Fund to £711 million (total Central Assets up 39% to £781 million)
• Net resources of the Society and Members up 35% to £10.1 billion

The Chairman of Lloyd's, Lord Levene, said:

"Lloyd's is in good shape after a year of strong progress. However, there is no room for complacency. 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."

Lloyd's Chief Executive, Nick Prettejohn said:

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

"Lloyd's has outperformed our international peer group as businesses in the market have concentrated on delivering underwriting profit. Lloyd's Franchise Board took decisive steps in 2003 to strengthen the market, and there will be no let up in that 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. The task now is to maintain 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."

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

Notes to Editors

1. Sources of combined ratio figures - (i) Insurance Information Institute (estimate - Jan 2004), (ii) Reinsurance Association of America (Mar 2004), (iii) Company Returns / Lloyd's FPMA analysis (Mar 2004)
2. All other figures contained in the release will be disclosed in Lloyd's Report and Accounts published in May.
3. A presentation on Lloyd's 2003 financial results can be viewed at www.lloyds.com/results2003 .
4. A high-resolution photograph of Lord Levene and Nick Prettejohn is available to download from www.newscast.co.uk .
   Please note: Lloyd's accepts no responsibility for the content of external sites

Notes accompanying Lloyd's 2003 financial results

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

Difference between annual and three-year accounting

Lloyd's traditional method of accounting has been 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.

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 11 loss was accounted for in 2001 when the claims occurred. But under three-year accounting, the September 11 losses were split between 1999, 2000 and 2001 because these were the years in which the relevant insurance policies were issued.

Whereas 2003 is 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 £2,378 million. The latest projection from the businesses in the market for 2002 year-of-account is a profit of £1,671 million which is in line with previous projections.

2. 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 31 December, 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:

• 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.
• Foreign exchange rates may materially fluctuate from the rates prevailing at 31 December, 2003 (£1 = US$1.79, CA$ 2.31, ?1.42)

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.

3. Combined Ratio

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.

4. Lloyd's Capital and Reserves £m

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

Cash and investments include members' funds at Lloyd's. Funds at Lloyd's must be readily realisable and may include letters of credit and bank and other guarantees.

5. Central Assets £m

6. Central Fund

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.

At 31 December 2003, the assets of the Central Fund amounted to £711 million, an increase of £235 million since reported last year.

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Lloyd's website: http://www.lloyds.com

Lloyd's is the world's leading insurance market with a capacity to accept insurance premiums of more than £14.9 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.