Lloyd’s Reports Billion Dollar First Half Loss Due to Catastrophes

As had been more or less predicted, Lloyd’s posted a £697 million [$1.094 billion] pre-tax loss for the first six months of 2011, compared to an overall profit of £628 million [$985.6 million] as of June 30, 2010. The report noted that the “unprecedented level of natural catastrophes” was the main cause for the loss.

Other highlights included the following:
• Combined ratio of 113.3 percent (June 2010 98.7 percent), which “compares favorably with our peers in the Bermudian (re)insurance (117 percent) and the US reinsurance industries (116 percent).”
• Investment return of £548 million [$860 million] (June 2010 £597 million [$936.7 million])
• Record central assets of £2.472 billion [$3.879 billion] (June 2010 £2.232 billion [$3.5 billion])

Lloyd’s described the first six months as the costliest “on record for major catastrophes for the insurance industry, with 2011 already likely to be the second most expensive year ever for insurers.”

On a more upbeat note, Lloyd’s pointed out that its “conservative investment mix had resulted in a positive return of £548 million, despite the continuing volatility in financial markets. Central assets are at a record high, leaving the market well capitalized despite the high level of claims.”

Lloyd’s Chairman, Lord Levene, commented: “2011 has already been one of the most challenging years on record for the insurance industry with major natural catastrophes devastating communities in Australia, New Zealand, Japan and the US.

“Lloyd’s ability to pay billions in claims to help these communities rebuild is unquestioned and the fact that we have managed to do so without any call on our central capital reserves is testament to the market’s exposure management.’

Lloyd’s Chief Executive, Richard Ward, added:
‘These are tough times for the insurance industry, but we are well positioned to handle them. Despite incurring £6.7 billion [$10.51 billion] in claims from the costliest first half year on record, Lloyd’s entered the second half of the year with £57 billion [$89.4175 billion] in net assets to support our business and pay claims.”

That figure “represents the total resources of the Society of Lloyd’s and its members prior to deduction of held net technical provisions,” Lloyd’s explained in a footnote to the report.

Ward also reiterated Lloyd’s dedication to making underwriting profits, stating that “while interest rates are low and equity markets are volatile, we can’t rely on investment income to subsidize our underwriting, we must decline under-priced risks.’

A copy of Lloyd’s Interim Report and presentation to analysts can be accessed at: www.lloyds.com/2011interims

Source: Lloyd’s of London

Topics Catastrophe Profit Loss Excess Surplus Market Lloyd's