Lloyd’s reports £2.3bn profit as combined ratio improves to 93.5%

Specialist insurance and reinsurance market Lloyd’s posted its best quality result in some time, with overall profit of £2.3bn and a combined ratio of 93.5%, amid a downturn increased catastrophic activity.

In 2021, market profit improved significantly from the £900m loss recorded in 2020, with the combined ratio strengthening by nearly 17 percentage points from the 110.3% recorded l ‘last year.

Underwriting profit of £1.7 billion in 2021 marks a significant improvement on Lloyd’s reported underwriting loss of £2.7 billion in 2020.

During the year, the market paid a whopping £19.9bn in gross claims and also paid £2.9bn to customers affected by the COVID-19 pandemic, representing 86% complaints notified to date.

Lloyd’s says major claims for the market were nearly £3bn in 2021, up from just under £6bn in 2020, and stemmed from Hurricane Ida and Winter Storm Uri in the United States, as well as European floods.

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The lower major loss impact reflects the lower impact of the COVID-19 pandemic in 2021 compared to the prior year, as well as the fact that 2021 saw a decrease in the frequency of catastrophe losses.

Overall, Lloyd’s attributes the “significant turnaround in performance” to its strong focus on underwriting profitability, as well as using favorable trading conditions to drive premium growth.

In fact, gross written premiums increased by around £3.7 billion, year-on-year, to reach $39.2 billion in 2021.

As Lloyd’s continues to focus on delivering sustainable and profitable performance, its efforts have led to a further 3% reduction in attrition claims ratio to 48.9%, with a 1.7% improvement in expenses at 35.5%.

In addition, the market’s capital and solvency position remains very strong and continues to develop, with net resources increasing to £36.6 billion.

On the asset side of the balance sheet, Lloyd’s reported net investment income of £900m and a return of 1.2%, compared with income of £2.3bn and a return of 2.9 % in 2020.

John Neal, Chairman and Chief Executive Officer (CEO) of Lloyd’s, said: “As we announce these results today, our thoughts are first and foremost with the people of Ukraine. In a world rocked by increasingly complex and connected risks – from the pandemic to geopolitical conflict – Lloyd’s Market stands by its clients and supports their recovery when things go wrong.

“In this context, I am delighted to see the market return to profitability following the decisive actions taken in recent years to improve its performance. The underwriting discipline of the market will enable sustainable profitability in the years to come, coupled with a balance sheet that can support our ambition for profitable growth.

Looking ahead, Lloyd’s says it expects the war in Ukraine to be a major loss for the industry in 2022; noting that business underwritten by the market in Ukraine, Russia and Belarus currently represents less than 1% of its global footprint.

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Sallie R. Loera