Lloyd’s announces £1.9 billion profit for 2008
* Solid performance in challenging economic conditions
* Strong capital position
* Continuing focus on underwriting discipline
Lloyd’s, the world’s leading specialist insurance market, today announced a profit of £1,899 million for 2008.
* profit before tax of £1,899m (2007: £3,846m);
* combined ratio of 91.3% (2007: 84.0%) compares favourably with an estimated average of 101% for US property and casualty insurers (i)102% for US reinsurers (ii) 97% for European insurers and reinsurers and, 92% for Bermudian insurers and reinsurers (iii);
* central assets increased to £2,072 million (2007: £1,951m);
* investment return of £957m (2007: £2,007m);
* profit before tax excluding currency movements on non-monetary items of £1,529m (2007: £3,846m); and
* surplus on prior years’ reserves of £1,265m (2007: £856m).
Commenting on the results, Chairman of Lloyd’s, Lord Levene, said:
“Amidst the unprecedented slump in the world economy, Lloyd’s remains in good shape. The market has inevitably been impacted by significant claims from natural catastrophes, lower insurance rates and a reduction in investment income but this has been partially offset by currency movements and prior year surpluses.
“Our focus on risk management and underwriting discipline has been fundamental to the market’s resilience and it will stand us in good stead as we look to the opportunities and the challenges that the future brings.”
Lloyd’s Chief Executive, Richard Ward, said:
“In these testing times, it will be those businesses with clarity of vision and purpose that will stand the best chance of success. From a solid base, Lloyd’s is seeking to further improve its competitive position and develop a truly modern and sustainable marketplace.
"As we move into 2009, it is more important than ever that we continue to improve our service to our customers, enhance our partnership with the market and continue to monitor the shifting global landscape so we are prepared to create and take advantage of opportunities as they arise.“
Source: Lloyd’s Pro forma Financial Statements. Sources i) Insurance Information Institute estimate, ii) Reinsurance Association of America, iii) Company data (8 European companies; 18 Bermudian companies)
Notes to Editors
1. A copy of Lloyd’s 2008 Annual Report can be accessed at www.lloyds.com/2008annualreport
2. 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.
3. 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, excluding the callable layer and the liability in respect of the subordinated debt and securities, amounted to £2,072m at December 2008. The Society financial statements are drawn up under IFRS.
4. 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.
5. The results ultimately attributable and distributable to members are determined in proportion to their share in each syndicate for each underwriting year of account. In accordance with this, the 2006 year of account has closed at 36 months with a net profit of £4,035m at 31 December 2008 rates of exchange. This comprises a surplus on 2005 and prior years reinsured into 2005 of £964m and a pure year profit of £3,071m. Years of account in run-off during 2008 reported a profit of £104m.
6. This press release includes forward-looking statements. These statements are based on currently available information and consistent accounting policies as applied at 31 December 2008. 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.
7. Foreign exchange rates may materially fluctuate from the rates prevailing at 31 December 2008 (£1 = US$ 1.44, £1 = €1.03)
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