Lloyd’s profit halves in H1 despite underwriting improvement

Lloyd’s of London’s pre-tax profit halved in the first six months of 2018 due to a lower investment return and despite an improvement in the combined ratio.

The pre-tax profit fell to £588 million in the first half of 2018 compared to £1.22 billion in the same period a year ago. Pre-tax profits were impacted by a reduced investment return of £204 million compared to £1.04 billion in the first half of 2017. This is consistent with the low returns seen across most asset classes over the period, according to a corporate statement.

At the same time, the combined ratio improved to 95.5 percent from 96.9 percent over the period. The underwriting result was £0.5 billion in the first half of 2018, up from £0.4 billion in the same period of 2017. This partly reflects Lloyd’s ongoing work that commenced in 2017 to review the worst performing portfolios, and the subsequent action by the market to reduce loss making lines, Lloyd’s noted. Gross written premiums increased to £19.34 billion from £18.88 billion over the period.

Outgoing Lloyd’s CEO Inga Beale stressed the return to profitability in her comments after the severe catastrophe losses experienced in 2017.

“These results and return to profit demonstrate the strength of the Lloyd’s market following one of the costliest years for natural catastrophes in the past decade. Whilst these results are welcome, Lloyd’s continues to concentrate on improving the Lloyd’s market’s long-term performance by taking action to address underperforming areas of the market.

“The corporation also remains focused on making the Lloyd’s platform more competitive. Alongside the success of the mandate for the placement of electronic risks, we have recently launched the Lloyd’s Lab, our new innovation accelerator, which will help Lloyd’s use technology to better serve our customers around the world. We have also worked tirelessly to secure the Lloyd’s market’s access to the EU27 and our Lloyd’s Brussels subsidiary will start writing business in the European Economic Area from 1 January 2019.”

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