Lloyd’s Neal reveals £2.3bn profit in H1 2019 but says ‘brave choices’ ahead

Lloyd’s of London has posted a £2.3 billion profit before tax for the first six months of 2019, prompting CEO John Neal to emphasise the importance of “maintaining momentum” and the need for ‘brave choices’ in the future.

The results, published today (18 September), revealed gross written premiums of £19.7 billion up 1.8 percent from £19.3 billion for H1 2018. However, Lloyd’s said that if the results were adjusted to account for foreign exchange rate movements and growth from new syndicates they would show a reduction in premiums of 2.6 percent. It said this was the net impact of a 6.5 percent reduction in business volumes “as underwriters adjusted their books to improve performance” plus average risk adjusted rate increases of 3.9 percent.

The market’s combined ratio deteriorated to 98.8 percent in the first six months of the year from 95.5 percent in the same period in 2018, while investment income was £2.3 billion, representing a rise from £0.2 billion reported for the same half year in 2018.

Explaining the figures further, Lloyd’s said it had “benefitted from unrealised gains due to reducing US and UK bond yields as well as robust returns from equities in the first six months of 2019”.

It said: “The quality of Lloyd’s balance sheet remains exceptionally strong, with net resources growing to £32.4 billion [up from £28.2 billion reported in December 2018] and the central solvency coverage ratio increasing to 266 percent [up from 249 percent reported in December 2018].”

The results also showed a reduction in the attritional loss ratio for the current underwriting year (2019) when compared to 2018. “Taken together, these changes reflect the strengthened underwriting discipline being applied in 2019,” it said.

The market’s operating expense ratio fell 1.2 percent to 38.1 percent in H1 2019, from 39.3 percent for the same six months in 2018. And administrative expenses also fell by 1.5 percent “reflecting the continued effort by the market to manage its controllable costs”.

Neal said: “We are pleased to report a profit during the first six months of 2019. It is encouraging that the Lloyd’s market is showing increased discipline in 2019 as evidenced by a reduction in gross written premiums and an improvement in the attritional loss ratio for the current underwriting year. However, we recognise the importance of continued focus on performance management to maintain this momentum throughout the rest of 2019 and beyond.

“At the same time as ensuring that our market can deliver sustainable, profitable growth, we need to make some brave choices on how to meet the expectations of our customers and all our stakeholders in the future. The Future at Lloyd’s strategy will ensure that our marketplace is ready for these challenges and opportunities ahead of us, with the first blueprint to be published on 30 September.”

The CEO also highlighted its efforts to tackle unacceptable behaviour around the market and said the aim was to “ensure that we set the tone for a culture that encourages the brightest minds to remain in and join our industry”.

He said the Lloyd’s market-wide culture survey had helped build “the most comprehensive picture ever commissioned of the culture across the insurance industry”, saying the market would announce the survey results and the actions it plans to take at the Dive In Festival on 24 September.

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