Insights
Lloyd’s 1H24 trading statement
Posted 05/09/2024 – Insights
Lloyd’s today reported its half year results for 2024.
Headline figures:
- Gross Written Premium (GWP) increased by 6.5% (excluding currency exchanges) to £30.6bn (2023: £29.3bn)
- Expense ratio of 34.5% (2023: 35.4%)
- Underwriting return of £3.1bn (2023: £2.5bn)
- Investment return of £2.1bn (2023: £1.8bn)
- Combined ratio of 83.7% (2023: 85.2%)
- Profit before tax of £4.9bn (2023: £3.9bn)
- Central solvency coverage ratio of 520% (2023: 503%)
John Neal, Chief Executive Officer, said:
“The first half of 2024 has presented a superb set of results for the Lloyd’s market which represents a combination of disciplined underwriting, smart organic growth and real strength in the Lloyd’s balance sheet.”
John Neal and Burkhard Keese (Chief Financial Officer) presented the figures at the Lloyd’s Half Year Results 2024 meeting. The key takeaways were the following:
- The market is on target to achieve its 2024 plan which includes GWP of £57bn (plus or minus 5%), combined ratio of 90-95% (with a ‘normal’ average catastrophe loss year) and an investment return of ~4%.
- Lloyd’s continues to support managing agents that can evidence sustainable growth and disciplined underwriting to deliver profit targets.
- Lloyd’s 6.5% GWP growth was achieved with rate increases of +1.5% and 5% business growth.
- Lloyd’s rating agency upgrades from AM Best and S&P to A+ and AA- respectively are the highest grades ever achieved by the Lloyd’s market. Burkhard highlighted that the promotion to A+ from AM Best was particularly promising for Lloyd’s brand, especially from business originating from the US.
- US general liability, D&O and political violence & terrorism classes remain under increased scrutiny from Lloyd’s. US general liability prior years’ reserves have deteriorated as social inflation and litigation costs continue to increase and not just affecting the reported 2014 – 2019 years – it includes 2020 and 2021. D&O is in focus as rates are decreasing and political violence & terrorism are still subject to global geopolitical uncertainty.
- Major losses for the year are currently running at 3.1% with a market reserve for the Baltimore Bridge collapse of £500m and the Taiwanese earthquake of £100m.
- The Blueprint Two revised timetable has been supported by Lloyd’s and Velonetic as the market continues to plan to replace legacy systems with a new cloud based underwriting platform which is proving to be more complex and difficult to implement than originally envisaged.
- Whilst unaudited at the half year there is confidence that the reserve margins are as at least as before.
- There is an expectation the reduced expense ratio will continue to head in the right direction.
- The strength of the balance sheet means that 10 year average catastrophe activity can be absorbed in the forecast investment income. Movements in interest rates will also not cause material problems.
- Assets and liabilities are currency matched so the vulnerabilities to the $ : £ relative rates are just reporting issues.
Alpha comment
Lloyd’s published an impressive set of half year results today, with improvements across all key metrics compared to 2023 with the strong caveat that we are still amidst the US hurricane season. Particularly encouraging were John and Burkhard’s remarks on how the ratings upgrades have further strengthened Lloyd’s already strong global reputation. It is a positive message coming from senior management at Lloyd’s to continue emphasis the need for sustainable and disciplined underwriting across the market following twelve quarters of an underlying combined ratio (excluding major catastrophe losses) of around 80%. We are also pleased with the expense ratio reduction achieved by Lloyd’s, which has been something that Alpha has highlighted as stuttering for some time. While the final impact of the U.S. hurricane season remains uncertain, Lloyd’s appears well positioned to manage potential adverse events based on the strong metrics from this half-year result.
