Press Release – syndicate 1200

21st September 2022 – SRL affirmed the C+ (Below Average) Continuity Opinion of syndicate 1200 (Argo Managing Agency Limited). The outlook for the Continuity Opinion has been changed to positive from stable following the announcement that Westfield group (US) is due to acquire Argo Underwriting Agency and syndicate 1200’s business.

Lloyd’s Interim Results H1 2022

September 8th 2022 – The Lloyd’s Market reported an underwriting profit of £1,217m on a combined ratio of 91.4% for the six months to 30 June 2022 (2021 H1 £963m and 92.2%). The investment return was a loss of £3,122m, generating an overall pre-tax loss of £1,801m or 12.7% of net premiums earned (2021 H1 profit £1,432m, 11.6% NPE), equivalent to an annualised return on average capital of -9.8% (H1 2021 +8.3%).

The combined ratio improved by 0.8 percentage points (pp), while the attritional loss ratio improved by 1.6pp to 48.9%. The expense ratio improved by a further by 0.4pp to 35.4%. Major claims contributed 9.9% of net premiums earned (2021 H1 6.8%), largely attributable to IBNR reserves for losses arising from the conflict in Ukraine (7.8% NPE). Covid-19 losses were unchanged at £3.2bn. Prior year reserve releases (across all classes other than Casualty) were 2.8% of net premiums earned (H1 2021 1.0%).

Sharply rising bond yields over the period caused mark-to-market unrealised losses, leading to an investment loss of £3,122m. Lloyd’s expects these losses to unwind through 2023 and 2024 as the short duration portfolio matures, with returns benefiting from reinvestment at higher yields.

Asset allocation remains conservative with 34% held in government bonds, 32% in investment grade corporate bonds and 16% in cash. Growth assets were 10% of the total. Lloyd’s has maintained a deliberate duration mismatch in anticipation of rising yields with the average asset duration 1.8 years and liabilities 4 years.

Gross premiums written rose 17.4% to £24.0bn with FX movements (chiefly the US dollar against sterling) generating 5.0% and volume growth 4.7%. Price rises contributed 7.7%, marking 19 consecutive quarters of positive pricing momentum, which is expected to be maintained through the rest of 2022 and into 2023.

Total capital / net resources, including the Corporation’s subordinated debt, were unchanged at £36.5bn. Lloyd’s stated that the margin on carried loss reserves above best estimate are considered sufficiently strong to withstand latent claims movement including social inflation. 65% of syndicates adjusted reserves for inflation and a further 25% made explicit considerations but no uplift for inflation.

Lloyd’s Central Solvency Capital Requirement (CSCR) indicative coverage ratio was 395% at 30 June 2022 (FY 2021 388%) compared to Lloyd’s risk appetite / minimum of 200%. The Market-wide Solvency Capital Ratio was 179% at 30 June 2022 (2021 FY 177%).

2021 Syndicate Results

Syndicate annual results¹ ranged from a profit of 71% NPE (Net Premium Earned) to a loss of 107% NPE for those syndicates trading in 2021, excluding RITC syndicates.

The overall market weighted average profit¹ for syndicates trading in 2021 (excluding RITC syndicates) was 7.0% of NPE.

The weighted average overall results¹ by quartile were:
Top quartile +20.5% NPE
Second quartile +8.8% NPE
Third quartile +0.3% NPE
Fourth quartile -14.7% NPE

The overall loss¹ for the bottom quartile of syndicates, representing 11% of total NPE, represented 24% of the overall market profit for those syndicates trading in 2021.

¹ 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 Research Limited (SRL) provides in-depth research, analysis and commentary on all trading syndicates operating in the Lloyd’s of London insurance market.

Syndicate Continuity Opinions (SCOs) – taking into account cross-cycle Returns on Capital and Group support – have been assigned to active syndicates representing some 71% of the market’s capacity, with quantitative Scorecard Indicators assigned to syndicates representing c.93% of the market’s capacity.

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