Lloyd’s report £1.22bn profit for the first half of 2017
Lloyd’s, the specialist insurance and reinsurance market, today announced a profit of £1.22bn for the first half of 2017 with the publication of its interim report.
Download Lloyd's 2017 Interim Report
Lloyd’s also reported a reduction in the combined ratio to 96.9% as well as an increase in gross written premiums to £18.9bn. There was an annualised return on capital of 8.9% for the same period.
The key financial figures are:
- Pre-tax profits of £1.22bn (June 2016: £1.46bn)
- Return on capital of 8.9% (June 2016: 11.7%)
- Combined ratio of 96.9% (June 2016: 98.0%)
- Investment return of 1.5% (June 2016: 1.8%)
- Net resources of £28.0bn (June 2016: £26.6bn)
These figures do not take into account the recent storms faced by the Caribbean and United States, and instead reflect what had been, until recently, a relatively benign loss period. However, despite continuing pressure on pricing from excess capital and low interest rates, the development of new products has seen an increase in volumes.
The reporting period also features a 78% improvement in the underwriting result up from £0.21bn last year to £0.37bn. This has been shaped by the low incidents of major losses, action taken to address underperforming lines of business along with price and trading competition across other lines of businesses.
Lloyd’s capital position remains strong and our ratings with the leading ratings agencies were reaffirmed, with Fitch at AA- (very strong), Standard & Poor’s at A+ (strong) and A.M. Best at A (excellent).
Lloyd’s Chief Executive, Inga Beale, said:
“These results highlight the continued strength of the Lloyd’s market, but they do reflect the challenging conditions that have shaped the sector over recent years. Our focus on maintaining a strong underwriting discipline and concentrating on profitable lines of business is showing signs of success, but we cannot allow that focus to waver if we are to continue to ensure the Lloyd’s platform is the most attractive option for customers.
“Whilst these results do not cover the current hurricane season in the Caribbean and United States, the market is assessing claims and starting to make payments that will help local communities and businesses get back on their feet as quickly as possible. It is our ability to respond quickly and effectively in times like these that differentiates the Lloyd’s market and is ultimately what we are here to do.”
Results at a glance
| 30 June 2017 | 30 June 2016 | |
| Profit | £1.22bn | £1.46bn |
| Gross premiums | £18.9bn | £16.3bn |
| Combined ratio | 96.9% | 98.0% |
| Investment return | 1.5% | 1.8% |
| Return on capital (annualised) | 8.9% | 11.7% |
- Lloyd’s 2017 Interim Report can be accessed at: www.lloyds.com/interimreport2017
- 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 3.11 of the 2017 Interim 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 £2.9bn at June 2017. 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:
- Prices 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 2017 (£1 = US$1.30, £1 = €1.14). Premiums, claims and investment income are translated at the average exchange rate for the six months to 30 June 2017 (£1 = US$1.26, £1 = €1.16).