Lloyd’s reports US$4.9billion (£3.2billion) profit for 2014

Accountancy, Associations — By on March 26, 2015 at 9:29 PM

Lloyds-of-London-AAS-225x300Thursday 26 Mar 2015 – Lloyd’s, the world’s specialist insurance and reinsurance market, today announced a pre-tax profit of US$4.9billion (£3.2billion), with a return on capital of 14.7%. (source: Lloyd’s of London)

  • Pre-tax profit of US$4.9billion (£3.2billion)(2013: £3.2bn)
  • Combined ratio of 88.1% (2013: 86.8%)
  • Return on capital of 14.7% (2013: 16.2%)
  • Robust capital and reserves increase by 11.2% to US$41.7bn (£23.5bn) (2013: £21.1bn)
  • Investment return of 2% (2013: 1.6%)
  • Lloyd’s outperforms competitor group
  • Strong and stable ratings with Fitch upgrade to AA- in June 2014.

We continue to outperform our competitor group (1) with a combined ratio (2) for Lloyd’s of 88.1%, compared with their average of 93.1%.

The 2014 profit was driven by a relatively benign year for major natural catastrophes, favourable prior year development, and an improved investment return.

Investment returns reflect the conservative asset mix and low interest rate environment.

Lloyd’s CEO, Inga Beale, said:

“This is a strong set of results for Lloyd’s, despite challenging market conditions. The robust performance of the market in 2014 reflects a collective achievement, of which we should be proud.

“In the face of global challenges, an abundance of capital and the low interest rate environment, Lloyd’s is being proactive in seizing the opportunities out there for growth and diversification. We will continue to engage with our global network of syndicates and brokers, to ensure Lloyd’s remains at the forefront of innovation in the industry.”

Lloyd’s Chairman, John Nelson, said:

“This is another excellent set of results for the Lloyd’s market, achieved against a backdrop of low interest rates and softening premium rates.

“We are making substantial progress against our long term growth strategy, Vision 2025, with plans to modernise the market and international growth gaining real momentum.

“As regards global access, we have made really excellent progress. Just this month Lloyd’s Dubai platform opened along with our new branch of Lloyd’s China in Beijing. We are opening our office in Mexico this year and the Indian government has now passed legislation to allow Lloyd’s to operate onshore in India. We are continuing to work hard to open up markets such as Turkey, Malaysia and Colombia.”

Results at a glance

2014 2013
Pre-tax result (3) $4.9bn (£3.2bn) £3.2bn
Gross written premiums $41.7bn (£25.3bn) £25.6bn
Combined ratio (%) 88.1 86.8
Investment return (%) 2.0 1.6
Capital and Reserves $36.6bn (£23.5bn) £21.1bn
Return on capital (%)  14.7 16.2

(1) Competitor group comprises: Ace, AIG, Arch, Everest Re, Hannover Re, Mapfre, Munich Re, Partner Re, SCOR, Swiss Re, XL

(2) Combined ratio – a measure of an insurer’s underwriting profitability based on the ratio of net incurred claims plus net operating expenses to net earned premiums.
(3) Profit before tax

  1. Lloyd’s 2014 Annual Report can be accessed at: www.lloyds.com/annualreport2014
  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 US$4, 022m (£2, 578m) at December 2014. The Society financial statements are drawn up under IFRS.
  4. Lloyd’s is rated AA- (very strong) with Fitch, A+ (strong) with Standard & Poor’s and A (excellent) with A.M. Best. Lloyd’s is currently on positive outlook with A. M. Best.
  5. 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.
  6. This press release includes forward-looking statements. The financial statements are based on currently available information and 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 2014 (£1 = US$ 1.56 £1 = €1.29). Premiums, claims and investment income are translated at the average exchange rate for 2014 (£1 = US$1.65, £1 = €1.24).

About Lloyd’s
Lloyd’s is the world’s specialist insurance market and occupies fifth place in terms of global reinsurance premium income, and is the largest surplus lines insurer in the US. In 2014, 94 syndicates are underwriting insurance at Lloyd’s, covering all classes of business from more than 200 countries and territories worldwide. Lloyd’s is authorised under the Financial Services and Markets Act 2000 and regulated by the Financial Conduct Authority and Prudential Regulation Authority.

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