Lloyds of London 2019 results overview

7 May 2020

Lloyds Results show a return to profit for 2019. The full annual report shows a profit of £2.5Bn against a loss of some £1Bn in 2018, but is this a reflection on improving underwriting results?

Half yearly results showed a positive position for the first half of 2019, but drilling down further suggested that the interim result of £2.5Bn profit really relied on a positive return on investment rather than a vast improvement in underwriting results.

Losses in 2017 and 2018 had clearly led to a challenging marketplace in a number of classes of business, and many an insurance observer had a keen eye on what the annual results would show and how this might have an impact.

A snapshot of the results are as follows:

  • Profit before tax £2,532m (2018: loss of £1,001m)
  • Gross written premium £35,905m  (2018: £35,527m)
  • Combined ratio* 102.1 (2018: 104.5%) %
  • Investment return* £3,537m (2018: £504m)

Even though investment income for the full year was up on the half yearly figure overall profit remained pretty much the same. That’s was to be expected quite frankly with the claims during the second half of the year.

The report states:

“The first half of 2019 experienced a low level of catastrophic activity. In the second half of 2019 the largest insured natural catastrophe event to impact the result was Typhoon Hagibis, which struck Japan and caused extensive flood and wind damage. This event was the second major typhoon loss event to impact Japan during 2019, with Typhoon Faxai occurring one month earlier. Hurricane Dorian was an extremely destructive category 5 storm which caused extensive damage and devastated parts of the Bahamas. Other notable events included US and Australian wildfires and Chilean riots.”

On the positive side Lloyds reported an adjusted rate increase of 5.4% and an improving underlying accident year ratio (exclusive of major claims) improved to 96%. In addition, operating expense ratio was marginally improved over the previous year.

So, what does this mean?

Fundamentally Lloyds of London is still a financially strong business clearly intent on improving underwriting results, which suggests no let-up in rate hardening for the UK General insurance market.

Then you add in the uncertainty of the Coronavirus pandemic and the impact it will have on the global economy. Lloyds is well placed to respond to both policyholders and the changing economic climate, but there can be no doubt that the consequences will be far reaching.

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