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Thursday, May 1, 2008
Disciplined approach

Lloyd’s has announced a profit of £3,846 million for 2007, compared to £3,662m the year before. Its combined ratio was  84.0% (2006: 83.1%), which it says compares favourably with an estimated average of 93.8% for US property and casualty insurers.

Lloyd’s also enjoyed a 34% increase in central assets to £1,951 million (2006: £1,454m); an investment return up 21% to £2,007m (2006: £1,661m); and a release of surplus reserves of £856m (2006: £270m).
Commenting on the results, Chairman of Lloyd’s, Lord Levene, said, the business continued to outperform its major international peers.
“Lloyd’s benefited from a limited exposure to catastrophes but this has resulted in increased pressure on rates across all lines of business. The need to exercise underwriting discipline and maintain a focus on underwriting for profit rather than market share remains essential.”
Lloyd’s Chief Executive, Richard Ward, added, “Lloyd’s is in good shape to meet the challenges that face us but we cannot expect the strong underwriting conditions and low levels of catastrophes to continue. Last year’s softening market conditions reinforced, once again, the need for a clear strategy to enable the market to maintain discipline and strength in the face of increasing competition. As a marketplace we have a responsibility to our policyholders and to ourselves to ensure that we maintain our financial strength and security throughout the course of a cycle.”
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 2005 year of account has closed at 36 months with a net profit of £340m. This comprises a surplus on 2004 and prior years reinsured into 2005 of £622m and a pure year loss of £282m. Years of account in run-off during 2007 reported a profit of £75m.
Lloyd’s is the world’s leading specialist insurance market and expects to have the capacity to write approximately £15.95-billion of business in 2008. It occupies sixth place in terms of global reinsurance premium income, and is the second largest surplus lines insurer in the US. In 2008, 75 syndicates are underwriting insurance at Lloyd’s, covering all classes of business from more than 200 countries and territories worldwide. Lloyd’s is regulated by the Financial Services Authority in the UK.

Notes. A copy of the Lloyd’s 2007 Annual Report can be accessed at www.lloyds.com/2007results. 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.

Copyright © Insurance Times and Investments® Vol:21.4 1st May, 2008
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