Lloyd’s demonstrates strength following 2017 major loss activity
Following one of the costliest years for natural catastrophes in the past decade, Lloyd’s has today announced an aggregated market loss of £2bn for 2017.
The key financial figures are:
- Aggregated market pre-tax loss of £2bn (2016: Pre-tax profit of £2.1bn)
- Gross written premiums of £33.6bn (2016: £29.9bn)
- Major claims for 2017 were £4.5bn (2016: £2.1bn)
- Net investment return of £1.8bn (2016: £1.3bn)
- Combined ratio of 114.0% (2016: 97.9%)
After a number of relatively benign catastrophe years, the frequency and scale of the disasters that struck around the world in the second half of 2017 saw major claims costing the Lloyd’s market £4.5bn, more than double the previous year (2016: £2.1bn). This significant loss activity generated an underwriting loss of £3.4bn for 2017 (2016: £0.5bn profit), resulting in a combined ratio of 114.0% (2016: 97.9%).
The Lloyd’s market has worked hard to pay claims to policyholders as quickly as possible throughout the year. A total of £18.3bn in claims gross of reinsurance was paid out by the Lloyd’s market during 2017, demonstrating the critical role the market plays in helping businesses, communities and countries recover quickly after disasters.
The Lloyd’s market has met these substantial commitments without any significant impact on total resources which remain strong at £27.6bn. Lloyd’s capital position remains robust and our ratings with the leading ratings agencies remain at A (excellent) from A.M. Best, A+ (strong) from Standard & Poor’s and AA- (very strong) from Fitch.
The market experienced an exceptionally difficult year in 2017, driven by challenging market conditions and a significant impact from natural catastrophes. These factors mean that for the first time in six years Lloyd’s is reporting a loss.Lloyd’s Chief Executive, Inga Beale
Lloyd’s is here to support customers when it matters most, providing the financial support to enable businesses, governments, and most importantly people to recover and rebuild their lives as quickly as possible and I’m proud of the market’s response.
Results at a glance
|(Loss)/profit before tax||(£2bn)||£2.1bn|
|Gross written premiums||£33.6bn||£29.9bn|
|Investment return||£1.8bn (2.7%)||£1.3bn (2.2%)|
|Return on capital (annualised)||(7.3%)||8.1%|
- Lloyd’s 2017 Annual Report can be accessed at: www.lloyds.com/about-lloyds/investor-relations/financial-performance/financial-results/annual-report-2017.
- A combined ratio is a measure of an insurer’s underwriting profitability based on the ratio of net incurred claims plus net operating expenses to net earned premiums. A combined ratio of 100% is break even (before taking into account investment returns). A ratio less than 100% is an underwriting profit.
- The metrics referred to in this release are defined in section 5 of the 2017 Annual Report, which includes details on financial metrics considered by Lloyd’s to be Alternative Performance Measures (APMs).”
- 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 £3.0bn at 31 December 2017 (December 2016: £2.9bn). The Society financial statements are drawn up under IFRS (as adopted by the EU).
- Lloyd’s is rated AA- (very strong) with Fitch, A+ (strong) with Standard & Poor’s and A (excellent) with A.M. Best.
- Members’ resources operate on a several bases and are only available to meet each member’s share of claims. Central assets are available at the Council’s discretion to meet the liabilities of any member on a mutual basis.
- This press release includes forward-looking statements. These statements are based on currently available information. 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 December 2017 (£1 = US$1.35, £1 = €1.13). Premiums, claims and investment income are translated at the average exchange rate for the year to 31 December 2017 (£1 = US$1.29, £1 = €1.14).