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Lloyd's publishes Interim Management statement Q3 2012

22 October 2012

Highlights:

  • Excess of central assets over solvency shortfalls of £3,074m
  • 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 nine month period to 30 September 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 during the nine month period to £3,074m, comprising:

 

30 Sept 2012
£m

31 Dec 2011
£m

Society net assets 

 1,582

1,490 

Subordinated liabilities 

889 

898 

Central assets  

2,471 

2,388

Callable layer 

722 

718 

Other solvency adjustments 

(15) 

Central assets for solvency purposes

3,200 

3,091 

Solvency shortfalls  

(126) 

(115) 

Excess of central assets over solvency shortfalls

 3,074    

2,976 

Investments

Investment assets of the Society are held principally within the Lloyd’s Central Fund. Investments are diversified between a number of asset classes, including equities and hedge funds. However, more than 80% of investments are maintained in fixed interest securities of high credit quality.

Investor concerns about the future of the euro zone appear to have receded during the third quarter amid proposals that the European Central Bank could, in certain circumstances, purchase the debt of euro sovereigns in order to control the yield of such instruments. However, global economic growth remains weak. Overall, this background has proved to be broadly positive for investment returns in the period as equities have risen, sovereign yields have fallen and credit spreads on many corporate debt securities have also reduced. The Society’s investment assets returned 1.7% in the third quarter, with all asset classes making a positive contribution. The year to date investment return is 3.7%, or £94m. Looking ahead, returns will continue to be constrained by the low yield environment and weak economic conditions.

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/archive

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 £2,471m at 30 September 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 30 September 2012 (£1 = US$ 1.61, £1 = €1.26)

For further information, please contact:

Matt Drage

Media Relations

+44 (0)20 7327 6125
Sophie Adams

Investor Relations

+44 (0)20 7327 5922

About Lloyd’s

Lloyd's is the world's specialist insurance market and occupies fifth place in terms of global reinsurance premium income, and is the largest surplus lines insurer in the US. In 2012, 88 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