Key Performance Indicators

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Key Performance Indicators (KPIs) are used by the management team to evaluate both the Lloyd’s market and the Society’s performance. Lloyd’s has a range of metrics used internally for tracking and managing performance. The KPIs shown here illustrate Lloyd’s financial performance and progress against delivery of the strategy in 2014.

Security and ratings

Definition

Lloyd’s financial strength as evaluated by the world’s leading insurance rating agencies, taking into account operating performance, capitalisation, global competitiveness and financial flexibility.

Rationale

Indicates the financial robustness of Lloyd’s.

Progress

Lloyd’s financial strength rating was upgraded by Fitch Ratings to AA- in 2014, representing Lloyd’s strongest rating to date. A.M. Best and Standard & Poor’s ratings were both reaffirmed.

Lloyd’s is on positive outlook with A.M. Best and on stable outlook with Standard & Poor’s and Fitch Ratings.

A+
Standard & Poor's: A+
AA-
Fitch Ratings: AA-
A
A.M. Best: A

Brand strength

Definition

Non-financial indicator – Independent brand tracking survey of brokers, coverholders and policyholders run biennially. The brand health score is a combination of scores for brand affinity, usage, and awareness. The measure is an index that tracks relative changes in perception over time.

Rationale

A leading global brand and reputation helps managing agents win and retain preferred business.

Progress

Lloyd’s has maintained solid brand health in the insurance sector overall, with consistently high scores across brand measures (favourability scored a mean of 7.6 out of ten and renewal likelihood 8.9 out of ten), however a dip in unprompted insurance awareness has been noted which has contributed to the overall insurance score dip. The reinsurance results remain strong with an overall two point increase. The next survey will take place in 2015 and will be reported in the 2015 Annual Report.

The 2013 survey included responses from three new countries, as a consequence, there are two sets of results for brand health in 2013. 2013 (a) illustrates the results of all 16 countries surveyed. 2013 (b) represents the overall scores of the 13 countries included in both the 2013 and 2011 surveys.

Index scores

2013bReinsurance66
Insurance60
2013aReinsurance68
Insurance61
2011Reinsurance66
Insurance70

Exc. India, Mexico and Turkey

Lloyd’s Chain of Security

Several assets

Mutual assets

Analysis of mutual net assets for solvency

Strategic performance

Solvency deficit

  • Definition: The aggregate shortfalls for all members where the member’s assets are insufficient to cover its underwriting liabilities and member capital requirement.
  • Rationale: Indication of success at mitigating Central Fund exposure. Lower is better.
  • Progress: Solvency deficits decreased further in the year with no new exposures to the Central Fund.
£m
2010123
2011115
201294
201334
201419

Cost of mutuality

  • Definition: Central Fund contribution rate charged to members.
  • Rationale: Medium-term cost indicator for the operational efficiency of mutually available assets. Lower is better.
  • Progress: The 2014 contribution rate of 0.5% of GWP continues to represent a cost-effective benefit of mutuality: the rate for 2015 remains at 0.5%.
%
20100.5
20110.5
20120.5
20130.5
20140.5

Market performance

Combined ratio

  • Definition: The combined ratio is an expression of net incurred claims and expenses against net earned premium. Any figure that is less than 100% signifies a technical underwriting profit.
  • Rationale: Headline financial indicator for measuring underwriting performance. Lower is better.
  • Progress: 2014 saw another benign natural catastrophe year and sustained robust reserve releases.
%
201093.3
2011106.8
201291.1
201386.8
201488.1

Investment return

  • Definition: Net investment income plus realised and unrealised return on investments as a percentage of average total investments.
  • Rationale: Investment return can have a significant impact on overall profitability for (re)insurers.
  • Progress: The return of 2.0% reflects the continued low interest rate environment but assisted by capital gains arising from a further drop in yields.
%
20102.6
20111.9
20122.6
20131.6
20142.0

Pre-tax return on capital

  • Definition: Profits on ordinary activities before tax as a proportion of average capital and reserves held.
  • Rationale: Indicates the capital efficiency of Lloyd’s. The goal of the Franchise Board and Council is to support the market in monitoring cross-cycle returns to all capital providers.
  • Progress: Another excellent return, though higher capital requirements reflect the increasingly challenging market conditions.
%
201012.1
2011(2.8)
201214.8
201316.2
201414.7
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