Lloyd's expects improved underwriting results, hails 'exceptional' local growth

Lloyd’s underwriting results improved last year, lifted by organic growth and rate increases in key markets including Australia, the business says in a preliminary update.

However, an investment loss of around £3 billion ($5.4 billion) will drag the business into a pre-tax loss of about £800 million ($1.4 billion). In 2021 Lloyd’s earned £2.3 billion ($4.1 billion) in profit before tax and investment income of £900 million ($1.6 billion).

Lloyd’s provided the preliminary figures for the year to December 2022 overnight from London ahead of the scheduled release of its final results later this month on March 23.

Australia and New Zealand Regional Head Chris Mackinnon says the business here performed solidly last year.

Total gross signed premium in Australia is expected to exceed $4 billion for the first time, which would be up from $3.4 billion in 2021.

“The market’s growth in premium from Australia has been exceptional in 2022,” Mr Mackinnon told insuranceNEWS.com.au today.

“We are delighted with these results, and with the significant contribution that has come from Lloyd’s strong position in the Australian market.”

Lloyd’s is a major capacity provider to underwriting agencies here and Australia is its fourth largest market.

The preliminary update says gross written premium (GWP) grew in excess of 19% to more than £46 billion ($82 billion) last year, up from £39.2 billion ($70.4 billion) in 2021.

The higher GWP reflected a combination of growth from the strong US dollar, direct price increases (8%) and organic growth (3%).

Underwriting performance improved more than expected, by 1.6 percentage points. The result led to a combined ratio of 91.9% despite major claim losses including from the conflict in Ukraine and from Hurricane Ian in Florida. In 2021 Lloyd’s combined ratio was 93.5%.

At the same time the expense ratio dropped to 34.4% from 35.5% and the attritional loss ratio improved to 48.4% from 48.9%.

“We are presenting an underwriting performance and capital position as good as Lloyd’s has reported in recent memory,” CEO John Neal said.

“2022 showed both strong premium growth and a continued fall in expenses, which, alongside a high-quality balance sheet demonstrate that our market is in the best shape to offer both an attractive return to capital and investors as well as providing businesses the insurance protection they need in these uncertain times.”

Lloyd’s says the mark-to-market accounting treatment of rising interest rates on fixed income portfolios forced a write down of asset values and is forecast to lead to higher yields and investment returns in future years.

It says the £3 billion in investment loss has no cash impact, and is expected to be reversed out over the next two to three years as the assets reach maturity.