Lloyd’s records $3.0bn (£2.3bn) profit for the first six months of 2019
Lloyd’s today announced a pre-tax profit of $3.0bn (£2.3bn) for the first six months of 2019 with the publication of its interim results.
The key figures reported in Lloyd’s 2019 Interim Report are:
- Aggregated market profit of $3.0bn (£2.3bn) (June 2018: £0.6bn)
- Gross written premiums of $25.4bn (£19.7bn) (June 2018: £19.3bn)
- Net investment income of $3.0bn (£2.3bn), 3.2% return (June 2018: £0.2bn, 0.3% return)
- Combined ratio of 98.8% (June 2018: 95.5%)
- Net resources of $41.2bn (£32.4bn) (December 2018: £28.2bn)
- Central solvency ratio of 266% (December 2018: 249%)
Lloyd’s profit before tax for the period was $3.0bn (£2.3bn) (June 2018: £0.6bn), underpinned by a combined ratio of 98.8% (June 2018: 95.5%) and investment income of $3.0bn (£2.3bn) (June 2018: £0.2bn), as the market benefitted from unrealised gains due to reducing US and UK bond yields as well as robust returns from equities in the first six months of 2019.
The quality of Lloyd’s balance sheet remains exceptionally strong, with net resources growing to $41.2bn (£32.4bn) (December 2018: £28.2bn) and the central solvency coverage ratio increasing to 266% (December 2018: 249%). The financial strength of the Lloyd’s market was underscored by the recent affirmations of Lloyd’s ratings by Standard & Poor’s (A+ Strong), AM Best (A Excellent) and Fitch (AA- Very Strong).
Gross written premiums for the period to June 2019 were $25.4bn (£19.7bn), representing a 1.8% increase over the same period in 2018. However, the elimination of foreign exchange rate movements and growth from new syndicates points to a like-for-like year-on-year reduction in premiums of 2.6%. This is the net impact of a 6.5% reduction in business volumes as underwriters adjusted their books to improve performance and average risk adjusted rate increases of 3.9%. The Lloyd’s market also saw a reduction in the attritional loss ratio for the current underwriting year (2019) when compared to the 2018 underwriting year at the same point in time. Taken together, these changes reflect the strengthened underwriting discipline being applied in 2019.
Lloyd’s operating expense ratio has seen a 1.2% reduction in the period, from 39.3% in 2018 to 38.1% in 2019. Lower administrative expenses, reflecting the continued effort by the market to manage its controllable costs, contributed a 1.5% reduction whilst there was a small increase, 0.3%, in the acquisition cost ratio from changes in the mix of business.
We are pleased to report a profit during the first six months of 2019. It is encouraging that the Lloyd’s market is showing increased discipline in 2019 as evidenced by a reduction in gross written premiums and an improvement in the attritional loss ratio for the current underwriting year. However, we recognise the importance of continued focus on performance management to maintain this momentum throughout the rest of 2019 and beyond.John Neal, Lloyd’s Chief Executive Officer
At the same time as ensuring that our market can deliver sustainable, profitable growth, we need to make some brave choices on how to meet the expectations of our customers and all our stakeholders in the future. The Future at Lloyd’s strategy will ensure that our marketplace is ready for these challenges and opportunities ahead of us, with the first blueprint to be published on 30 September.
Lloyd’s has also not hesitated to put in place a robust set of actions to tackle unacceptable behaviour around the market and ensure that we set the tone for a culture that encourages the brightest minds to remain in and join our industry. The centrepiece of these actions is the Lloyd’s market-wide culture survey which has built the most comprehensive picture ever commissioned of the culture across the insurance industry. We will be announcing the results of that survey and the actions that we will be taking at the Dive In Festival on 24 September.
Notes to Editors
- Lloyd’s studio is available for TV and radio broadcasts.
- On 30 September 2019 Lloyd’s will issue the first blueprint representing how the Future at Lloyd’s strategy will be managed and progressed.
- The Lloyd’s 2019 Interim Report is available at: lloyds.com
- 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 amounted to $4.3bn (£3.4bn) at 30 June 2019 (December 2018: £3.2bn). 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 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.
- Foreign exchange rates may materially fluctuate from the rates prevailing at 30 June 2019 (£1 = US$1.27, £1 = €1.12). Premiums, claims and investment income are translated at the average exchange rate for the period to 30 June 2019 (£1 = US$1.29, £1 = €1.15).
- 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.
Senior Media Relations Manager
Tel: +44 (0)20 7327 6125
Lloyd’s is the world’s leading insurance and reinsurance marketplace. Through the collective intelligence and risk-sharing expertise of the market’s underwriters and brokers, Lloyd’s helps to create a braver world.
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