Lloyd’s report £1.46 billion profit for first half of 2016
Lloyd’s today announced profit of £1.46 billion for the first half of 2016 with the publication of its interim report.
The figures show an increase in profits of £0.26 billion on the same period last year for the world’s specialist insurance and reinsurance market. Lloyd’s also reported an annualised return on capital of 11.7% and a combined ratio of 98.0%.
The key financial figures are:
- Pre-tax profits of £1.46 billion (H1 2015: £1.20 billion)
- Return on capital of 11.7% (H1 2015: 10.7%)
- Combined ratio of 98.0% (H1 2015: 89.5%)
- Investment return of 1.8% (H1: 0.6%)
- Net resources of £26.6 billion
2016 saw major claims increase due primarily to the Fort McMurray fires in Alberta, Canada.
Premiums continue to be under pressure due to the challenging environment the market is operating in, Lloyd’s financial ratings remain extremely strong with Fitch (AA-), A.M. Best (A) and Standard & Poor’s (A+).
Lloyd’s Chief Executive, Inga Beale, said:
“These results reflect the highly competitive environment we are operating in, but they demonstrate that Lloyd’s is in robust financial shape. Clearly the UK’s referendum on its EU membership is a major issue for us to deal with and we are now focussing our attention on having in place the plans that will ensure Lloyd’s continues trading across Europe.”
Lloyd’s Chairman, John Nelson, commented on Lloyd’s global access:
“Whilst we are operating in difficult conditions, we have continued to make significant progress in growing our presence in the fast-growth markets across the globe. In 2016 we have applied for onshore reinsurance licences in India and Malaysia as well as opening a new office in Bogota, Colombia. This complements the growth we are seeing in Dubai, China and in our more traditional markets, particularly the United States.”
Results at a glance
|30 June 2016||30 June 2015|
|Profit||£1.46 bn||£1.20 bn|
|Gross premiums||£16.31 bn||£15.51 bn|
|Return on capital (annualised)||11.7%||10.7%|
- Lloyd’s 2016 Interim Report can be accessed at: www.lloyds.com/interims2016
- 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.
- 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 £2,745 million at June 2016. The Society financial statements are drawn up under IFRS.
- 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 basis 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 30 June 2016 (£1 = US$1.34, £1 = €1.21). Premiums, claims and investment income are translated at the average exchange rate for the six months to 30 June 2016 (£1 = US$1.43, £1 = €1.28).