Lloyd's of London sees profits surge
By Abigail Townsend
Date: Wednesday 18 Sep 2019
(Sharecast News) - Lloyd's of London has reported a surge in interim profits, boosted by bumper investment gains.
Pre-tax profits at the specialist insurance and reinsurance market came in at £2.3bn, compared to £0.6bn a year earlier, after net investment income rose to £2.3bn with a 3.2% return, compared to £0.2bn and a 0.3% return a year previously.
Lloyd's said it had "benefitted from unrealised gains due to reducing US and UK bond yields as well as robust returns from equities". Lloyd's has a significant bond portfolio, which backs insurance policies sold by the market.
Gross written premiums were up 1.8% at £19.7bn, although once foreign exchange rate movements and growth from new syndicates were stripped out, there was a like-for-like year-on-year reduction of 2.6%.
Lloyd's attributed the decline to a more disciplined underwriting approach: "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 combined ratio - a key measure of an insurer's profitability - weakened to 98.8% from 95.5%, however. A combined ratio of 100% is breakeven; anything below is an underwriting profit.
John Neal, chief executive, said: "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 the 2019 and beyond."
Andreas Van Embden, analyst at Peel Hunt, said: "Lloyd's will be publishing a blueprint for the future at the end of the month, which will seek to tackle the high cost of doing business at Lloyd's. The expense ratio showed some improvement, declining 1.2% points to 38.1%, but more work will be done to drive down both distribution and administrative expenses in the future."
The 330-year old market also announced on Wednesday that Annette Andrews, chief people officer, was leaving after four years with the firm, and named David Sansom chief risk officer. Formerly director of financial services risk at EY, Sansom was seconded to Lloyd's as interim chief risk officer last year.
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