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Sep 10, 2020

Lloyd's announces half year results

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Lloyd's has announced the market's half year results and updated the Covid-19 estimates. The full announcement is available here on the Lloyd's website.

The full report is available here as a pdf.

The key financial figures:

  • Aggregated market loss of £0.4bn (June 2019: Profit of £2.3bn)
  • Gross written premiums of £20.0bn (June 2019: £19.7bn)
  • Net investment income of £0.9bn, 1.2% return (June 2019: £2.3bn, 3.2% return)
  • Combined ratio of 110.4% (June 2019: 98.8%)
  • Combined ratio excluding COVID-19 claims of 91.7% (June 2019: 98.8%)
  • Net resources of £32.8bn (June 2019: £32.4bn)
  • Central solvency ratio of 250% (June 2019: 266%)

John Neal, Lloyd's CEO has commented "In the first half of 2020, Lloyd’s made an overall loss of £0.4bn, driven by COVID-19 claims of £2.4bn adding 18.7% to the market’s combined ratio of 110.4%. However, excluding COVID-19 claims, the market’s combined ratio has shown substantial improvement at 91.7%, down from 98.8% in H1 2019. This encouraging development is supported by a marked 7 percentage point improvement in the attritional loss ratio which has dropped to 52.6% in the first six months of 2020 (H1 2019: 59.7%), with prior year development remaining stable at 0.5% (H1 2019: 0.4%)."

"Positive rate momentum accelerated in the first six months of 2020, with the market achieving average risk adjusted rate increases on renewal business of 8.7%. This was offset by a 8.6% decrease in business volumes across the market. This reduction in business volumes further demonstrates that over the past three years we have really understood where we want to focus on successful business, including reselecting what we underwrite."

"We have made excellent progress through the first half of 2020, in some of the best underwriting conditions we have seen in a decade. But although the indications suggest we are returning to profitability, our focus on performance must remain unerring. As we enter the 2021 business planning cycle, against the backdrop of an uncertain global economic outlook, there has never been a more crucial time for business and capital plans to be well executed to ensure we return the market to profitability on a sustainable long-term basis."

Covid-19 estimate:

Estimated losses as at May 2020 - £2.5bn to £3.5bn
Incurred losses as at 30 June 2020 - £2.36bn
Net ultimate losses as at 30 June 2020 - £2.96bn

On a gross basis, Lloyd’s expects to pay out up to £5bn of COVID 19 losses; of which £2.0bn are ceded[transferred] to reinsurers.

The attached analysts presentation (see page 14) gives more detail. A recording of the presentation is available from the Lloyd’s website.

Premium and rates:

Positive rate momentum maintained throughout 2020. Eleventh consecutive quarter of positive rate movement, with rate increases exceeding plan each month.

The vast majority of classes of business and all geographies are achieving positive rate.

Reductions in non profitable underlying business volumes have generated a 8.6% decrease in premium.

Positive risk adjusted rate increases on renewal business of 8.7%

Excluding the impact of COVID 19 losses, the combined ratio is 91.7%, a 7.1% improvement on H1 2019.

The attritional loss ratio has improved significantly to 52.6% at H1 2020, an improvement of 7.1% on the H1 2019 ratio of 59.7%.

Investment income

After the volatility in Q1, the Q2 saw a rebound in investments which added £940m to the results.

Reserves

Total net prior year releases remained largely consistent at H1 2020 with releases of £67m (0.5%) at H1 2020, from £52m (0.4%) at H1 2019. at H1 2019.

Consistent prior year releases show that syndicates continue to provide strong reserving performance.

These results read encouragingly. We will update this page as and when useful content can be added.