Lloyd’s Six Month Profits Fall 47.5% to $1.76 Billion

Lloyd’s has reported interim results, which show a marked decline in profits for the first six months of 2008. Nonetheless, compared to what’s been happening in the global financial sector (where Lloyd’s has very little exposure), profits were better on average than most of its competitors.

Highlights included the following:
— Profit before tax of £949 million [$1.764 billion], compared to £1.807 billion [$3.36 billion] for the first six months of 2007.)
— Combined ratio of 89 percent, which Lloyd’s said, “continues to compare well with our peers who recorded an estimated average of 99 percent for US P/C insurers, 98 percent for US reinsurers, 86 percent for Bermuda, and 96 percent for European insurers and reinsurers.” (the sources for the comparisons are given in the full bulletin)
— Investments returned £346 million [$643.3 million]
— Strongest ever central assets of £1.936 billion [$3.6 billion]

Lloyd’s explained the decline as reflecting “softening in market conditions and a rise in attritional claims.” Its investment returns were approximately 1 percent, reflecting a very conservative strategy. In the current financial turmoil that’s a good result. Lloyd’s noted that its investments had “outperformed many peers, but showed the impact of the extreme volatility in the capital markets, with both equity and bond holding adversely affected.”

Chairman Lord Levene commented: “We have reported a strong performance in extremely challenging circumstances. The result reported for the first half comes as no surprise with profits heavily influenced by falling investment income and increased cost of claims, while the second half will remain subject to the incidences of natural catastrophes.”

CEO Richard Ward added: “The market remains in a good position to face the challenges ahead even though the external conditions in which we operate are about to test our structure and resolve.”
The full report and Lloyd’s presentation to analysts can be accessed at: www.lloyds.com/2008interims.

Source: Lloyd’s – www.lloyds.com