Lloyd’s Full Year Results – March 2020

The Lloyd’s Market has reported a pre-tax profit of £2,532m for 2019 on a combined ratio of 102.1% (2018 loss £1,001m, 104.5%), being a profit of 9% on average capital (2018 4% loss). The result benefited from substantially higher investment income and a below-average burden from major claims, partly offset by a material reduction in prior year reserve releases.

Gross Premiums Written (GPW) rose 1.1% to £35.9bn. On a like for like basis (constant FX and adjusted for new syndicates), GPW fell 2.6%. A 5.4% increase from higher premium rates was more than offset by a volume reduction of 8.0%, in line with underwriting measures taken to improve underwriting performance. Premium rate increases were reported in substantially all business classes.

The underwriting result was a loss of £538m (2018 loss £1,130m). The loss ratio was 63.4% (2018 65.3%) with major losses reducing to 7.0% of Net Premiums Earned (NPE) (2018 11.6%). The attritional loss ratio for all syndicates reduced to 57.3% NPE (2018 57.6%); active syndicates’ attritional loss ratio improved by 1.7%. Prior year releases decreased to 0.9% NPE (2018 3.9%), strengthening in Aviation and US Casualty, together with increases in Typhoon Jebi reserves of c.1% NPE, offsetting releases in other classes. The operating expense ratio reduced to 38.7% (2018 39.2%).

Investment returns increased significantly to 13.7% NPE (2018 2.0%), reflecting significant mark to market gains following the reduction in interest rates; a loss of £1.8bn, 7% 2019 NPE, has been recorded since the year-end for the period to 19th March 2020. Total expenses showed a slight reduction at 40.5% NPE (2018 40.8%).

Lloyd’s overall profit of 9.8% NPE compares to a loss of 4.0% NPE in 2018.

SRL notes that the accident year combined ratio excluding major losses was 96% (calendar year combined ratio excluding major losses 95%, net of prior year releases) and compares to the 10-year average major claims for Lloyd’s of 11% NPE. However, SRL recognises that the improvements following Lloyd’s Performance Review of 2018 are only just now beginning to flow through to the reported results.

An assessment of the estimated losses for Lloyd’s arising from the Covid-19 pandemic has yet to be finalised.

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

Syndicate Continuity Opinions (SCOs) have been assigned to active syndicates representing some 72% of the market’s capacity, with quantitative Scorecard Indicators assigned to syndicates representing c.95% of the market’s capacity.

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