Lloyd’s to reveal latest strategy
Lloyd’s of London will further outline its market strategy in the coming weeks, according to John Parry, director of finance at Lloyd’s.
Speaking at the Lloyd’s annual results briefing in London, he said that the re/insurer would soon reveal its latest plans, as he spoke of its ongoing 2025 vision.
Announced last year, the 2025 vision will see Lloyd’s become a mutual supported by a Central Fund, increasing the efficiency of trading inside Lloyd’s and gaining access to all major overseas territories, including emerging markets, through its global licence network.
As reported, pre-tax profits remained stable for the insurer at £3.2 billion for the year ended December 31, 2014, while gross written premiums dropped slightly to £25.3 million for 2014, compared with £25.6 million in 2013.
Return on capital for 2014 reached 14.7 percent, while the five year average reached 11.1 percent, which Parry said was a fantastic result for Lloyd’s.
“2014 was well below average for losses, which has been a big driver for 2014 results,” he said. “Major claims reached £670 million, with the largest claim coming from Hurricane Odile at £153 million. The worst hit area was aviation as there have been a series of notable disasters, but this is a relatively small class.”
Gross written premiums (GWP) were down by one percent year on year, attributable to a 3 percent decrease in both pricing and currency movements and a 1 percent increase in new syndicates and a four percent increase in existing syndicates.
“Property cat demonstrated the largest fall, but more attritional classes held up well,” he said. “The US surplus lines showed growth with rates holding up better than other classes.”
Looking to industry trends, Parry said that he expected M&A to continue, stating that the industry has seen similar market conditions and trends before and that despite this, Lloyd’s continues to be an attractive proposal.
Speaking of Solvency II, he said that Lloyd’s was well prepared and ready for the implementation of the directive.
Parry also spoke of the re/insurer’s successful launch of operations in Beijing and Dubai, and other positive factors including the completion of the claims transfer project, the clearance of £500 million of debt and the central fund.
“The $500 million of debt clearance allowed us to redeem outstanding notes,” he said, “and assets have gone up while there have been no new hits to the Central Fund, which is going up year on year.”
Reserve strength remained in a similar position to the previous year, which helped across all lines of business.
Questions asked during the briefing touched on Lloyd’s’ historically cautious approach towards assets and whether Lloyd’s was reconsidering its philosophy.
“We could move a long way from where we are now; we’re very conservative,” said Parry. “In 2013 we entered into commodities which turned out very well.”
Turning talks to the proposal of the UK becoming an ILS jurisdiction, Tom Bolt, director of performance management at Lloyd’s said that the use of alternative capital was not new to Lloyd’s and that the industry simply faces a new wall of capital that wants to participate.
“Aon predicts that the ILS market is now worth $62 billion,” he said, “so you’d be wrong to plan your business around the alternative capital going away.”
Other topics included Lloyd’s’ expense ratio, which Parry said was likely to remain stable, and the introduction of a Lloyd’s consortium, which Bolt said was being well received and provided the best of class within underwriting.
