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Lloyd's publishes Interim Management Statement Q1 2011

19 May 2011

Highlights:

  • Excess of central assets over solvency shortfalls of £2,996m (31 December 2010: £2,923m).
  • 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 2011. 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.

The syndicate results will have been impacted by the catastrophe events during the first quarter, principally the New Zealand earthquake, floods in Australia and the earthquake and subsequent tsunami which struck North East Japan. There is considerable uncertainty around the loss estimates for these events 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.

Operating Review

Strategy

The Lloyd’s Strategy 2011 – 2013 sets out 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: Market Oversight, Solvency II, the Exchange, Claims Transformation and Access to business.

Financial Review

Excess of central assets over solvency shortfalls

Management’s estimate of the excess of central assets over solvency shortfalls has increased by £73m since 31 December 2010 to £2,996m, comprising:

  31 March 201131 December 2010 
 

 £m

 £m

 Society net assets

1,450

1,447

 Subordinated liabilities

938 

930

Central assets

2,388

2,377

Callable layer

722

703

 Other solvency adjustments

 (52)

(34) 

Central assets for solvency purposes

3,058

3,046

Solvency shortfalls

(62)

(123)

Excess of central assets over solvency shortfalls    

 2,996

 2,923

 

The net assets of the Society have remained stable during the period. It should 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 £8m in subordinated liabilities in the first quarter of the year arises from an unrealised exchange loss on the translation of euro denominated debt.

Solvency shortfalls have decreased by £61m since the year end primarily as a result of the injection of capital during the period.

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.

Financial market developments in the first quarter have been characterised by volatility in connection with the tragic events in Japan. Overall, global bond yields moved higher in the period whilst global equity values rose, suggesting market confidence in continuing economic recovery. The Society's investments returned £16m in the period (31 March 2010: £49m). This modest return reflects the adverse impact of rising yields, which reduced returns from fixed interest investments, although the better performance of equity exposures has improved the overall return.


Notes to Editors

  1. A copy of Lloyd’s 2010 Annual Report can be accessed here.
  2. 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 £2,388m at 31 March 2011. The Society financial statements are prepared in accordance with IFRS.
  3. 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.
  4. This press release includes forward-looking statements. These statements are based on currently available information and consistent accounting policies as applied at 31 December 2010. 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.
  5. Foreign exchange rates may materially fluctuate from the rates prevailing at 31 March 2011 (£1 = US$ 1.60, £1 = €1.13)

For further information, please contact:

Kamran Hossain

Investor Relations

+44 (0)20 7327 5922

For urgent out of hours media calls Tel: +44 (0)7659 597 825

Lloyd's is the world's leading specialist insurance market and occupies fifth place in terms of global reinsurance premium income, and is the second largest surplus lines insurer in the US. In 2011, 78 syndicates are underwriting insurance at Lloyd's, covering all classes of business from more than 200 countries and territories worldwide. Lloyd's is regulated by the Financial Services Authority.

Contacts

Michelle Cunningham

Manager, Ratings & Investor Relations

+44 (0)20 7327 5434