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Lloyd's publishes Interim Management Statement Q1 2012

1 May 2012

Highlights

  •  Excess of central assets over solvency shortfalls of £3,026m (31 December 2011: £2,980m)
  •  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 2012. 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.

Operating Review

Strategy
The Lloyd’s Three-Year Plan 2012 – 2014 sets out to deliver Lloyd’s vision to be the global centre for specialist insurance and reinsurance. The main priorities for 2012 are Market Oversight, Solvency II, Claims Transformation Programme and Market Operations Review.

Financial Review

Excess of central assets over solvency shortfalls 

Management’s estimate of the excess of central assets over solvency shortfalls has increased by £46m since 31 December 2011 to £3,026m, comprising:

  31 Mar 201231 Dec 2011 
  20122011 
  £m £m
 Society net assets 1,544 1,490
 Subordinated liabilities 898 898
 Central assets 2,442 2,388
Callable layer721718
Other solvency adjustments(22)(11)
Central assets for solvency purposes3,1413,095
Solvency shortfalls(115)(115)
Excess of assets over solvency shortfalls3,0262,980

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.

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 vast majority of assets are invested in fixed interest securities of high credit quality.

The first three months of 2012 have seen a material change of sentiment in the financial markets. A significant injection of liquidity from the European Central Bank to banks in the euro zone, together with tentative signs of economic growth in some parts of the world, have led to greater investor confidence, generating an improvement in the value of equities and other more volatile asset classes. Investors view of the creditworthiness of banks generally has also improved, resulting in a rise in the value of many bonds issued by financial institutions. However, the very low general level of available yields continues to constrain investment returns. Investment assets of the Society returned £49m in the first quarter, benefitting from the rise in global equity values. Developments in the first weeks of the second quarter have been less encouraging, as fears about the solvency of sovereigns in the euro zone re-emerge. However, the diversified nature of the Society's investment portfolio continues to provide some protection against adverse market developments.

For further information, please contact:

Jessica Stalley

Investor Relations

+44 (0)20 7327 5148

Notes to Editors

  1. A copy of Lloyd’s 2011 Annual Report can be accessed at https://www.lloyds.com/about-lloyds/investor-relations/financial-performance/financial-results
  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 £2,442m at 31 March 2012. 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 2011. 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 2012 (£1 = US$ 1.60, £1 = €1.20)

Contacts

Michelle Cunningham

Manager, Ratings & Investor Relations

+44 (0)20 7327 5434