Lloyd's publishes Interim Management Statement Q1 2010
Excess of central assets over solvency shortfalls of £2,785m (31 December 2009: £2,752m)
During the period there have been no events that have resulted in any material changes to our expectations for the full year
The Society of Lloyd’s is today publishing its Interim Management Statement for the three month period to 31 March 2010. This statement describes the unaudited consolidated financial position of the Society itself, its subsidiaries and the Central Fund and does not include results of the syndicates operating in the Lloyd’s Market.
As noted above, the IMS does not include results of the syndicates operating at Lloyd’s. The syndicate results will have been impacted by the catastrophe events during the first quarter, principally by the Chilean earthquake on 27 February. There is considerable uncertainty around the loss estimates for this event but, on the evidence to date, the size of the financial losses are expected to be within the ordinary course of business and have no impact on the results of the Society itself.
The Lloyd’s Strategy 2010 – 2012 sets out the strategy to deliver Lloyd’s vision to be the market of choice for insurance and reinsurance buyers and sellers to access and trade specialist property and casualty risks. The main priorities are Performance Management; Solvency II, the Exchange, Claims Transformation and Access to business.
Excess of central assets over solvency shortfalls
Management’s estimate of the excess of central assets over solvency shortfalls has increased by £33m since 31 December 2009 to £2,785m, comprising:
|31 Mar 10||31 Dec 09|
|Society net assets||1,154||1,126|
|Other solvency adjustments||48||44|
|Central assets for solvency purposes||2,844||2,811|
|Excess of central assets over solvency shortfalls||2,785||2,752|
The net assets of the Society have benefitted from the investment performance during the period, which is discussed in more detail below. It should also be noted that, in accordance with the accounting policies of the Society, Central Fund Contributions are not recognised until the beginning of the second quarter.
The increase of £1m in subordinated liabilities since the year end arises from an unrealised exchange loss on the conversion of euro denominated debt.
The investment background was relatively benign in the first quarter of 2010 as the global economy showed signs of further progress towards recovery. Equities were initially weaker, but recovered strongly and gained more than 5% in the quarter as a whole. Yields on UK Government debt moved moderately lower at many maturities during the period, generating capital gains on these securities. Also, yield spreads on many corporate debt securities continued to fall, resulting in additional gains from such investments.
Investment exposures of the Society arise principally within the Lloyd's Central Fund. Investments include more volatile assets, such as equities and hedge funds, but the majority of assets are invested in fixed interest securities of high credit quality.
Overall, the Society’s investments returned £50m in the period (31 March 2009: a loss of £22m) aided by gains on corporate debt holdings, which were increased during 2009, as well as globally diversified equity exposures. This return is higher than might have been predicted, given the low level of prevailing yields, and we remain cautious about the prospects for investment returns in the remainder of 2010.
Notes to Editors
- A copy of Lloyd’s 2009 Annual Report can be accessed at www.lloyds.com/about-lloyds/investor-relations/financial-performance/financial-results/archive
- 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 and securities, amounted to £2,113m at 31 March 2010. The Society financial statements are prepared in accordance with IFRS.
- Callable layer: Central Fund assets may be supplemented by a ‘callable layer’ of up to 3% of members ‘ overall premium limits in any one calendar year. These funds would be drawn from premium trust funds.
- This press release includes forward-looking statements. These statements are based on currently available information and consistent accounting policies as applied at 31 December 2009. 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 affecting 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.
- Foreign exchange rates may materially fluctuate from the rates prevailing at 31 March 2010 (£1 = US$ 1.52, £1 = €1.12)