26 March 2014
Lloyd's announces profit of £3.2 billion for 2013
Lloyd's, the world's specialist insurance and reinsurance market, today announced a profit of £3.2 billion for 2013. This compares with a profit of £2.8 billion in 2012. Gross written premium income increased to a new high of £26.1 billion, with a combined ratio1 of 86.8% and a pre-tax return on capital of 16.2%.
Lloyd's capital position further strengthened with net resources of £21.1 billion. Ratings remain strong at A+ with Standard & Poor's and Fitch, and A with A.M. Best. All three ratings agencies have Lloyd's on positive outlook.
2013 was a benign year for insured catastrophes, with major claims to Lloyd's totalling £873 million. Despite this, total net incurred claims were £9.6 billion in 2013, down from £10.1 billion the previous year. UK flooding claims from 2013 are not expected to result in significant exposure for Lloyd's.
Lloyd's new CEO, Inga Beale, said:
"Disciplined underwriting and a benign year for major catastrophes have enabled us to outperform our peers and post this outstanding profit of £3.2 billion. From this base, the Lloyd's market has a great opportunity to expand in the underinsured, high growth economies around the world. We have started to build the foundations for this growth, as set out in our long term strategy 'Vision 2025', through close engagement with the market. We will continue to support our expert underwriters, through efficient operations, to attract capital and talent from these high growth economies."
Chairman of Lloyd's, John Nelson, said:
"These are outstanding results for Lloyd's and are a tribute to the talent and professionalism in the Lloyd's market. Whilst we saw few catastrophe claims in 2013, continued low interest rates saw reduced investment income and high levels of capital continuing to flow into the market which put pressure on prices."
"These conditions look set to persist. I therefore expect increased competitive pressure on the market to remain in 2014. This underlines the need for continued underwriting discipline as we seek to maintain and reinforce our position as the global centre for specialist insurance and reinsurance."
· A profit before tax of £3.2 billion (2012 £2.8 billion)
· A combined ratio of 86.8% (an improvement of 4.3 percentage points from 91.1% in 2012) compares favourably with our peer group's1 combined ratio of 93.4%
· Total resources of the Society of Lloyd's and its members at £59.5 billion (2012 £59.3 billion)
· Capital, reserves and subordinated debt and securities £21.1 billion (2012 £20.2 billion)
· Central assets of £2,384 million (2012 £2,485 million)
· Controlled premium growth of 1.6%, after taking account of the impact of foreign exchange and year on year risk adjusted rate change
· Investment return of £839 million (2012 £1,311 million)
· Prior year reserve surplus releases of £1,575 million (2012 £1,351 million)
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Notes to Editors:
1. A copy of Lloyd's 2013 Annual Report can be accessed at www.lloyds.com/2013annualresults
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. Net resources are the aggregate of members' net assets and central assets.
4. 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 £2,384 million at 31 December 2013. The Society financial statements are drawn up under IFRS.
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. 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 2011 year of account has closed at 36 months with a net profit of £911million at 31 December 2013 rates of exchange. This comprised a pure year loss that was matched by the investment return and a surplus on 2010 and prior years reinsured into 2011 of £911million. Years of account in run-off during 2013 reported a surplus of £3 million.
7. This press release includes forward-looking statements. These statements are based on currently available information and consistent accounting policies as applied at 31 December 2013. 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.
8. Foreign exchange rates may materially fluctuate from the rates prevailing at 31 December 2013 (£1 = US$ 1.66, £1 = €1.20). Premiums, claims and investment income are translated at the average exchange rate for 2013 (£1 = US$1.56, £1 = €1.18).
[i] Peer group formed of 11 companies operating in the US, European and Bermudan markets
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, 91 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.
 The combined ratio is the ratio of net incurred claims and net operating expenses to net earned premiums.