15 October 2014 Insurance

Fitch affirms Lloyd’s

Rating agency Fitch has affirmed Lloyd’s of London insurer financial strength (IFS) rating at ‘AA-’ with a stable outlook.

Fitch said the affirmation reflects Lloyd's strong underwriting performance, strong and stable risk-adjusted capitalisation and low financial leverage.

It said that it expected Lloyd’s level of capital to remain strong and supportive of its ratings. In the first half of 2014, underwriting leverage as measured by net premiums written to equity was 1.0x on an annualised basis. The rating agency explained that Lloyd's capital strength is further supported by its low leverage with financial leverage at 4 percent at end-2013.

Fitch said that in the first half of 2014, Lloyd's continued its strong underwriting performance, reflected in a reported combined ratio of 88.2 percent, compared with 86.9 percent in the first half of 2013.

“The slightly higher combined ratio compared with 1H13 is predominantly due to FX movements, leading to a positive contribution in 1H13 and a subsequent reversal in 1H14, due to the movements in average dollar rates relative to the pound,” said the rating agency.

“An upgrade is unlikely in the near to medium term, as credit metrics are not expected to strengthen significantly over the rating horizon. A downgrade may occur if the normalised combined ratio remains above 97 percent or if leverage, as measured by net premiums written to equity, rises above 1.2x.”

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