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NU Online News Service, Sept. 24, 1:25 p.m. EDT
Lloyd’s of London reported profit increased 39 percent for the first six months, but warned that recession effects and uncertainty over natural catastrophes could adversely affect year end results.
The syndicated market reported profit before tax rose £373 million (U.S. $615 million) to £1.32 billion (U.S. $2.18 billion) compared to £949 million ($1.57 billion) for the same six month period last year.
The combined ratio deteriorated 2.6 points rising to a still profitable 91.6 for the period, which Lloyd’s said compares well to its peers in the United States, Bermuda and Europe.
Lloyd’s attributed the positive results to “continuing underwriting discipline and a relatively low level of catastrophe claims.”
In a statement, Lloyd’s Chairman Lord Peter Levene said, “The first six months results have been achieved in what remain challenging circumstances. The market is in solid financial shape and business volumes have increased as a result of brokers and policyholders seeking to use the security of the Lloyd’s platform.”
“External conditions, however, remain difficult with the U.S. windstorm season and recessionary trends continuing to pose a threat to the insurance industry,” said Lord Levene.
Lloyd’s Chief Executive Richard Ward added, “Lloyd’s prudent and conservative approach has ensured that our capital position and ratings remain strong. While we are well placed to take advantage of opportunities through the market’s wide product range and distribution channels, our focus must remain on underwriting profitability.”
The syndicate reported investment returns of £708 million ($1.17 billion) compared to £346 million ($571 million) last year.
In a video posted on the Lloyd’s Web site, Mr. Ward noted that while the results are encouraging, Lloyd’s remained cautious because of the active hurricane season and the global recession, “which both remain significant threats for the insurance industry.”
While Lloyd’s is practicing underwriting discipline, he said underwriters have not seen “significant increases across all lines that some commentators have predicted.”
He went on to say that Lloyd’s is improving its claims handling capabilities that gives it “a truly competitive advantage for the market” and will prove a great benefit for customers.
The syndicated market continues to grow globally, especially focusing on developing nations and has opened new offices in Brazil, establishing a license in Portugal and an agreement with regulators in Japan for a new business model, he added.
A number of challenges remain as Lloyd’s continues to work on “becoming the platform of choice,” said Mr. Ward, paramount of these is regulatory changes that will come about from Solvency II.
He said Lloyd’s is reviewing its strategic goals in the face of these challenges and will publish an updated strategy early next year.