Lloyd’s 2012 Annual results

Joe Ryan contributed to the writing of this blog post

On 27 March Lloyd’s, the world’s specialist insurance market, released its 2012 annual results and it is good news for the market!

They announced a profit before tax of £2.77bn for 2012, which represents a return on capital of 14.8% for the year. Compared to the loss the previous year of just over half a billion this is very good news for the market. However, the results are still quite a way off the bumper year of 2009, which saw a pre-tax profit of £3.87bn.

Lloyd’s CEO Richard Ward said: “The Lloyd’s market has posted a strong result, despite incurring £10bn of total net claims in 2012, including Superstorm Sandy, one of the costliest natural catastrophes in history.

“While the economic environment remains challenging, the Lloyd’s market is capitalised at record levels and our overall financial strength is recognised in our A+ ratings.”

Lloyd’s strong pre-tax profits include a combined ratio1 for 2012 of 91.1%, a marked improvement on the combined ratio of 106.8% for 2011. A major contributing factor was the £1.35bn release of prior year reserves.

Gross written premium for the year increased by 8.6% to a record high of £25.50bn. This includes an overall improvement in rates of 3%.

Lloyd’s central assets at the end of 2012 totaled £2.49bn and the total investment returns for 2012 were £1.31bn (2.6%).

The statutory solvency position of the Society of Lloyd’s, as reported to the FSA as at 31 December 2012, estimated a solvency surplus of £3.12bn.

Net incurred claims for the year were £10.10bn (down from £12.90bn in 2011). Two of the largest losses came from the US with the estimated net claims to Lloyd’s of £1.35bn for Hurricane Sandy and £55m for Hurricane Isaac. Other non-US major losses included earthquakes in Italy (net cost to Lloyd’s less than £50m) and Costa Concordia (net cost to Lloyd’s estimated to be approximately £200m). This contrasts to recent years, for which weather events in the Asia-Pacific region have caused the largest insurance losses. Net ultimate claims for major losses are estimated to be £1.82bn, which is much lower than the 2011 figure of £4.61bn but still higher than the 15-year average of £1.44bn.

1. The combined ratio is the ratio of net incurred claims and net operating expenses to net earned premiums.