Lloyd's swings to £2.3bn profit in 2021
Specialist re/insurance market reports best-quality results for six years as it books underwriting profit of £1.7bn despite catastrophe losses, but it warns Ukraine war will be a ‘major claim’
Lloyd’s returned to profit in 2021 as it reported the best-quality result for six years, driven by improved underwriting profits and premium growth.
The specialist re/insurance market booked an overall profit of £2.3bn ($3.03bn) for the full year 2021, compared with a £900m loss a year earlier.
Underwriting profits surged to £1.7bn from a loss of £2.7bn a year earlier, despite last year’s heightened natural catastrophe losses, as the market benefitted from previous years' remediation work and a “focus on achieving sustainable, profitable performance”.
As a result, the combined ratio fell 16.8 points to 93.5% from 110.3% in 2020 (or 97.0% excluding Covid-19 losses).
In a year with more than $100bn of natural catastrophe losses, major claims added 11.2 points to the combined ratio in 2021. This compared to a major claims burden in 2020 - excluding Covid-19 - of 9.7% and 7.0% in 2019.
The attritional loss ratio improved 3.0 points to 48.9%.
Favourable trading conditions supported the market’s growth, which saw gross written premiums rise 11% in 2021 to £39.2bn, including some exposure growth.
Premium rates increased 10.9%, continuing the trend of 16 consecutive quarters of positive rate movement and showed no signs of slowing down.
Rate increases were seen across all classes of business, with risk adjusted rate change in excess of 5% in all material classes of business, Lloyd's reported. The largest rate increases were observed across the business areas where performance improvement is still needed, chief financial officer Burkhard Keese said.
Rates are expected to continue to rise in 2022, with increases already observed in the first quarter of 2022, Keese said.
Lloyd's reported progress in cutting expenses, with the market's expense ratio falling 1.7 points to 35.5%, although Keese said "further work was needed by all market participants".
The Future at Lloyd’s programme is expected to take out a significant amount of cost after implementation. The digitalisation and platform rebuild is designed to reduce costs further with the latter bringing a 40% reduction, Keese said.
The results were released amid the ongoing war in Ukraine.
Lloyd’s said the conflict would be a “major claim” for the market in 2022, although direct and indirect claims are expected to fall within “manageable tolerances and will not create solvency challenges”.
Business underwritten by the Lloyd’s market in Ukraine, Russia and Belarus represents less than 1% of the market’s global footprint at present.
Lloyd’s said it continues to work with governments and regulators around the world to support and implement a complex series of sanctions on the Russian state.
John Neal, chief executive of Lloyd’s, said: “As we announce these results today, our thoughts are first and foremost with the people of Ukraine.
“Against this backdrop, I’m pleased to see the market return to profitability following the decisive action taken in recent years to improve performance. The market’s underwriting discipline will enable sustainable profitability in the years to come, coupled with a balance sheet that can support our ambition to grow profitably,” Neal added.