Lloyd's underwriting profit rises amid Ukraine, catastrophe challenges

Lloyd’s underwriting profit rises amid Ukraine, catastrophe challenges

12 September 2022

Lloyd’s has reported a stronger half-year underwriting result despite challenges from the invasion of Ukraine, natural catastrophes and inflation, while slipping to an overall loss after investment revaluations.

The result included £1.1 billion ($1.9 billion) reserved net of reinsurance for the conflict in Ukraine, with the approach in line with “early and realistic” action taken on Covid-19, Lloyd’s said last week.

The underwriting profit increased to £1.2 billion ($2 billion) from £960 million ($1.64 million) in the year-earlier period and the combined operating ratio improved to 91.4% from 92.2%.

The overall loss before tax of £1.8 billion ($3.1 billion) compared to a profit of £1.4 billion ($2.4 billion).

“Rising interest rates, while prompting an unrealised investment loss on paper at the half year, will be good news for insurers in the long term as returns on assets strengthen in 2023 and beyond,” CEO John Neal said.

“Meanwhile, with the conflict in Ukraine continuing to inflict devastating consequences, we’ve taken proactive steps to protect our customers from the fallout while ensuring we can support them – and continue driving sustainable performance – through the uncertain times ahead.”

The underwriting improvement was driven by a 7.7% increase in pricing, continuing a trend of five consecutive years of positive rate movement. Gross written premium rose 17.4% to £24 billion ($40.9 billion) as volume also grew.

The major net losses included the Ukraine impact and £200 million ($341 million) for the Eastern Australia floods.

Looking ahead, Lloyd’s says it expects expenses to continue falling as it invests in digitalisation through its Blueprint Two efficiency program, while it will also continue to focus on price adequacy in the inflationary environment.