Lloyd’s boosts profits by 21.7% YOY in H1 2016 despite higher claims

Lloyd’s reported a significant increase in profits for the first half of 2016 despite of what it describes as challenging market conditions in its interim report.

Lloyd’s reported pre-tax profits of £1.46 billion for the six-month period ending June 30, a 21.7 percent increase year-on-year from £1.20 billion.

Investment returns were 1.8 percent in the first half compared to 0.6 percent in the same period a year ago.

Mark to market gains from falling bond yields led to the improvement in investment return, Lloyd’s said in its interim results presentation.

Its annualised return on capital was 11.7 percent in the first half of 2016, compared to 10.7 percent in the same period last year.

The combined ratio, however, deteriorated over the period to 98 percent, up 8.5 percentage points from 2015.

Underwriting results were offset by improved investment return and FX gains.

Claims were up at £6.05 billion, up 21 percent year-on-year.

The Fort McMurray fires in Alberta, Canada were one of the primary causes for increases in major claims in the 2016 period.

Inga Beale, chief executive of Lloyd’s, said: “These results reflect the highly competitive environment we are operating in, but they demonstrate that Lloyd’s is in robust financial shape. Clearly the UK’s referendum on its EU membership is a major issue for us to deal with and we are now focussing our attention on having in place the plans that will ensure Lloyd’s continues trading across Europe.”

Commenting on global access, John Nelson, chairman of Lloyd’s, added: “Whilst we are operating in difficult conditions, we have continued to make significant progress in growing our presence in the fast-growth markets across the globe.

“In 2016 we have applied for onshore reinsurance licences in India and Malaysia as well as opening a new office in Bogota, Colombia. This complements the growth we are seeing in Dubai, China and in our more traditional markets, particularly the United States.”