Lloyd’s Full Year Results – March 2024

LONDON, 28th March 2024 – The Lloyd’s Market has reported a pre-tax profit of £10,663m for 2023 on a combined ratio of 84% (2022: loss £769m; 91.9%), being a return of 25% on average capital (2022: -1.9%). The underwriting result benefited from a significant 9.2 point reduction in major losses outweighing the 1.4 point reduction in prior year reserve releases, with both the attritional loss and expense ratios stable. The overall result also significantly benefited from the investment result which improved by 24 points of Net Premiums Earned (NPE) reflecting both the higher interest rate environment and the unwind of the mark-to-market accounting treatment on fixed income portfolios.

The 84% combined ratio was in line with SRL’s expectation of a combined ratio of around 85% (Lloyd’s Monitor December 2023).

Gross Premiums Written (GPW) increased by 11.6% to £52.1bn attributable to 7.2% price increases (a combination of rate and inflation), 4.3% organic growth, and 0.1% foreign exchange movement. Q4 2023 was the 24th consecutive quarter of positive price movement for Lloyd’s.

The underwriting result was a profit of £5,910m (2022: £2,641m). The loss ratio was 49.6% (2022: 57.5%) with major losses (incl. Hawaii Wildfires and Middle East Earthquake) contributing a well below-average 3.5% of NPE (2022: 12.7%; 10-year average 9% excluding COVID). The attritional loss ratio was relatively flat at 48.3% of NPE (2022: 48.4%) compared to Lloyd’s target of 50%. Prior year releases reduced to 2.2% of NPE (2022: 3.6%), with releases across all lines of business other than Specialty and Casualty reinsurance and Aviation; 2023 was Lloyd’s 18th consecutive year of overall prior year releases. The expense ratio was stable at 34.4% (2022: 34.4%) with total expenses reducing slightly to 35.8% of NPE (2022: 36%).

Investment returns significantly increased to 14.4% of NPE (2022: -9.6%) reflecting the higher risk-free interest rates around the world alongside the unwind of the previously booked mark-to-market losses.

Lloyd’s overall profit of 28.9% of NPE compares to a loss of -2.4% NPE in 2022.

SRL notes that the accident year combined ratio excluding major losses was relatively stable at 82.7% (calendar year combined ratio excluding major losses 80.5%, net of prior year releases) and compares favourably to the 10-year and 5-year average major claims (excluding COVID) for Lloyd’s of 9.0% and 8.8% NPE respectively. The improvements following Lloyd’s Performance Review of 2018 and the benefits of recent price increases continue to flow through to the reported results.

For 2024, SRL expects Lloyd’s to continue to reap the benefits of sustained rate increases and previous portfolio remediation action including the re-underwriting of Cat risk, together with the focus on cost control as part of Lloyd’s target expense ratio reduction to 31.5% for 2025. However, unless the level of major losses is very low and against a backdrop of continuing concerns over social inflation, it is unlikely that 2024 will match 2023’s underwriting and investment performance. For 2024, Lloyd’s is forecasting a combined ratio of 90-95% assuming a normal level of major losses, and an investment return of around 4% (23: 5.4%) with reduced investment income.

2023 Syndicate Results

Syndicate annual results ranged from a profit of 153% NPE (Net Premium Earned) to a loss of 15% NPE1 for those syndicates trading in 2023.

The overall market weighted average profit2 for syndicates trading in 2023 (excluding RITC syndicates) was 22.5% of NPE.

The weighted average overall results2 by quartile were:
Top quartile +35.9% NPE
Second quartile +22.5% NPE
Third quartile +17.1% NPE
Fourth quartile +6.5% NPE

The overall profit2 for the bottom quartile of syndicates, representing 12% of total NPE, represented 3% of the overall market profit for those syndicates trading in 2023.

1 Results excluding RITC, Syndicate In A Box, first year syndicates and LPT-affected results.
2 Excluding capital-related returns (primarily investment returns on Funds at Lloyd’s deposited at the syndicate level); a limited number of syndicates hold capital at the syndicate level and these returns have been excluded to achieve comparability between syndicates.

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Syndicate Continuity Opinions (SCOs) – taking into account cross-cycle Returns on Capital and Group support – have been assigned to active syndicates representing some 65% of the market’s capacity, with quantitative Scorecard Indicators assigned to syndicates representing c.94% of the market’s capacity.

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