Chief Financial Officer's statement

After several years working with our market to significantly improve underwriting discipline and profitability, we are now seeing these efforts bear fruit in a buoyant and growing Lloyd’s market.

In many ways, the results speak for themselves. Profit before tax in 2023 was £10.7bn (2022: loss £(0.8)bn), consisting of an underwriting result of £5.9bn (2022: £2.6bn) and an investment return of £5.3bn (2022: loss £(3.1)bn).

Gross written premium increased 11.6% to £52.1bn (2022: £46.7bn). Broken down, this was comprised of 4.3% organic volume growth; 7.2% price movements (a combination of rate and inflation); and 0.1% foreign exchange movements. Combined, we have now seen 24 consecutive quarters of price improvements. The Property and Casualty lines of business were particularly strong in 2023, partially offset by some less attractive conditions in parts of the Casualty class.

This growth was supported by exceptional underwriting conditions in 2023. The market’s combined ratio – a key measure of operating profit – improved nearly eight points across the year to 84.0% (2022: 91.9%). The underlying combined ratio, which excludes major losses, showed stability at 80.5% (2022: 79.2%).

The market’s attritional loss ratio of 48.3% (2022: 48.4%) was stable, while major claims were relatively low at 3.5% (2022: 12.7%). In total, exposure to major losses throughout the year – including the Middle East earthquake in Turkey, Hawaii wildfires, Cyclone Gabrielle and Hurricane Idalia – stood at £1.3bn (2022: £4.1bn). This compares to 2022 which saw larger market exposure to events such as Hurricane Ian and conflict in Ukraine.

Prior year releases were 2.2% (2022: 3.6%) accounting for reinsurance to close legacy transactions in the market, offset by some strengthening in exposures to conflict in Ukraine. 

The expense ratio, comprised of acquisition and administrative expenses, remained flat at 34.4% (2022: 34.4%) – a positive result given the market’s profitability and the inflationary pressures of recent years.

The market produced an outstanding investment result of £5.3bn (2022: loss £(3.1)bn), reflecting the higher risk-free interest rates around the world alongside the unwind of paper losses from the mark-to-market accounting system booked in previous years.

Our central solvency ratio for 2023 increased to 503% (2022: 412%) following positive movements on our investments and a reduction in the central solvency capital requirement. The market-wide solvency ratio also increased to 207% (2022: 181%) reflecting strong profitability and investment returns, discounting benefits and a reduction in the market-wide solvency capital requirement. The reduction in capital requirements was driven by changes in inflation risk, the strengthening of the pound against the US dollar and a regulatory change to the risk margin – while being partially offset by market growth.

The total capital of the market balance sheet stands at £45.3bn (2022: £40.2bn) – an increase that reflects the continued growth and profitability of the market. Our balance sheet includes an overall reserve margin of £4.6bn (2022: £3.8bn) in line with our prudent approach to reserving, booking losses early and conservatively. Specifically, the market has been strengthening its Casualty reserves for the past four years, avoiding the need to materially increase Casualty reserves in 2023.

In 2023 we were pleased to see our sustainable profitability and resilient capital reflected in S&P Global’s upgrading of the Lloyd’s market from A+ to AA-, and A.M. Best’s decision to boost the market’s outlook to ‘positive’ (from ‘stable’).

2023 was therefore an outstanding year for Lloyd’s, with strong profitable growth underpinned by a strong balance sheet. This resilience continues to give us and our stakeholders confidence.

As in previous years, our focus will remain on supporting the market’s profitability and balance sheet strength through our oversight and strategic execution, while continuing to focus on providing attractive opportunities to invest in the Lloyd’s market.

These efforts are helping futureproof our market in an uncertain environment. We will continue to work with all our stakeholders to support confidence, resilience and profitability so our market remains attractive for our customers and capital providers in the years ahead.

Burkhard Keese

Chief Financial Officer