Aon Benfield has issued a thorough “latest update” report on Lloyd’s, detailing its syndicates, assets and other pertinent facts.
Mike Van Slooten, international head of Market Analysis at Aon Benfield Analytics, who authored the report said: “Lloyd’s continues to produce solid headline results, thanks to the combined effect of below average major losses and material favorable development of prior year reserves.”
He noted, however that “beneath the surface, weakening pricing is impacting accident year underwriting margins and the market’s overall expense ratio is rising, giving renewed impetus to the need to maintain underwriting discipline and drive business process improvements. On the plus side, the balance sheet remains strong and the inherent advantages of operating at Lloyd’s continue to attract strong investor interest.”
Key findings include the results from Lloyd’s first half year 2015 operations, as follows:
— Gross premiums written totaled £15.5 billion [$23.75 billion] in 1H 2015, up 1.4 percent at constant exchange rates. In the aggregate, risk-adjusted rates fell by 4.6 percent.
— Underwriting profit fell by 12 percent to just under £1.1 billion [$1.685 billion]. The combined ratio stood at 89.5 percent (1H 2014: 87.4 percent), with major losses contributing 2.7pp (1.4pp).
— Favorable development of prior year reserves rose by 6 percent to £0.8 billion [$1.226 billion], benefitting the combined ratio by 8.0pp (8.0pp).
— On a pure accident year basis, the combined ratio stood at 97.5 percent (95.4 percent), with all major reporting classes other than Property and Reinsurance reporting underwriting losses.
— The investment return halved to £339 million [$519.5 million], representing an annualized yield of 1.2 percent (2.6 percent), driven by economic volatility in Europe in June and the continued low interest rate environment.
— Pre-tax profit fell by 28 percent to £1.2 billion [$1.84 billion], representing an annualized return on capital employed of 10.7 percent (16.3 percent).
— Overall net resources fell by 2 percent to £22.8 billion [$34.94 billion] over the six months to June 30, 2015, driven by the distribution of earned profit to members.
— Funds at Lloyd’s supporting members’ underwriting commitments rose by 3 percent to £16.2 billion [$24.827 billion], of which 50 percent was held in the form of letters of credit and bank guarantees.
— Mutual assets rose by 3 percent to £2.7 billion [$4.138 billion], including the Central Fund of £1.7 billion [$2.6 billion] and subordinated debt of £0.9 billion [$1.379 billion].
The report also provides an analysis off Lloyd’s prospects for 2016, which were listed as follows:
— Lloyd’s continues to attract strong interest from new and existing investors, as evidenced by high levels of corporate activity in the market.
— Five Lloyd’s managing agents are likely to change hands in the next few months, as part of broader acquisitions (Amlin, Chubb, HCC, Pembroke and Sirius).
— Three new syndicates (Probitas 1492, Everest Re 2786 and Credit Suisse 1856) and at least two new special purpose syndicates are being formed for the 2016 year of account.
— Lloyd’s has been considering ways in which structures could be developed that would be attractive to alternative capital. A progress report will be published prior to the end of 2015.
— Lloyd’s opened its Beijing office and launched its Dubai platform in March. Since then, the market has received formal permission to open offices in Colombia and Mexico.
— Lloyd’s has submitted its Solvency II internal model application to the Prudential Regulatory Authority and is seeking approval by the year-end.
— Efforts to streamline operations and reduce costs across the London market have gathered pace over the past year, as leading industry bodies cooperate to drive a five year modernization plan.
Source: Aon Benfield
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