Lloyd’s full year results for 2023

Headline results:

• Gross Written Premium increased by 11.6% to £52.1bn (2022: £46.7bn) reflecting +4.3% organic growth and +7.2% rate increase.
• The market’s combined ratio improved by 7.9 percentage points to 84.0% (2022: 91.9%).
• Attritional loss ratio of 48.3% (2022: 48.4%), while the expense ratio remained flat at 34.4% (2022: 34.4%).
• Major claims ratio of 3.5% (2022: 12.7%)
• Prior year positive contribution of 2.2% (2022: 3.6%)
• Net investment return of £5.3bn (2022: loss of £3.1bn), reflects the higher interest rate environment and the unwind of the mark-to-market accounting treatment on fixed income portfolios.
• Underwriting profit of £5.9bn (2022: £2.6bn).
• Result before tax of £10.7bn (2022: loss of £0.8bn).
• Total capital, reserves and subordinated loan notes of £45.3bn (2022: £40.2bn).
• Central solvency ratio of 503% (2022: 412%).

John Neal reported in the 2023 Annual Report “2023 saw Lloyd’s report its best results in recent history, with outstanding performance underpinned by a strong and resilient balance sheet. The results reflect an uncompromising focus on executing against our strategy, alongside the commitment of our market participants in delivering consistent profitable performance – all of which continues to enhance the value, relevance and long term sustainability of Lloyd’s.”

Results by line of business

• The combined ratio of the property and casualty reinsurance classes improved.
• For property reinsurance, the prior years saw a release due to reductions in ultimate claims on some historical catastrophe events such as Hurricane Ian (2022) and further releases on attritional and large claims as risks expire, partially offset by deteriorations on North American Winter Storm Elliot which was a late 2022 calendar year event. Overall it reported a combined ratio of 72.8%.
• The casualty reinsurance class saw reserve strengthening driven by reinsurance to close (RITC) and Loss Portfolio Transfer (LPT) deals moving reserves from casualty insurance to reinsurance. Excluding the RITC impact, the experience on the remaining business was relatively benign. Despite this, emerging issues such as the heightened economic inflationary environment continue to drive further uncertainty on this line.
• Specialty reinsurance also saw a shortfall on the prior years mostly due to late notification of marine reinsurance claims.

• The combined ratio of the insurance classes were more varied.
• On the property insurance side, the largest individual line of business, the combined ratio was reported at 80.0%, far better than in recent years, and benefitting from a release from the prior years due to general favourable experience and lack of catastrophe activity filtering through. There have also been releases on recent catastrophe events, the largest contributor being the reduction on Hurricane Ian.
• The casualty insurance division reported a combined ratio similar to last year. The releases on casualty are predominantly driven by RITC/LPT deals moving reserves from casualty insurance to reinsurance and, to a lesser extent, better than expected experience on Cyber and more recent prior years of account on other casualty lines.
• The marine, aviation and transport division has seen its combined ratio increase to 99.1% which includes a large reserve strengthening on the aviation side in respect of the losses arising from the Russia/Ukraine conflict, partly offset by some reserve releases from the marine lines.
• The energy division reports an improved combined ratio and reserve releases similar to those seen in 2022.
• The motor division has a combined ratio of 95.7% with a lesser prior year release than seen last year.

2024 outlook

• Premium is expected to increase to £57bn
• Combined ratio should be within the range 90-95% given a ‘normal’ major loss ratio of around 10%
• 4% investment return projected

Alpha comment

This is clearly a very strong set of results for Lloyd’s for 2023 particularly amidst a difficult and complex macro-economic risk environment. The focus is now to maintain underlying profitability, keeping the attritional loss ratio under 50% whilst achieving growth. It is reported that the reserve margin increased by £0.8bn to £4.6bn with some topping up but releases still being made in several lines of business; albeit in aggregate less than last year. All lines of business were profitable with property insurance and reinsurance reported to have the lowest combined ratios.

We are advised that there is no sign of market conditions declining in the first quarter of 2024. John Neal also commented that the recent collision into the bridge in Baltimore will cause a loss to the market but not of sufficient scale to cause concern.