Lloyd’s ups its game: trims 2022 combined ratio to 91.9%

Lloyd's laid claim to having scaled 1.6 points from its combined ratio in 2022 to 91.9%, leveraging improved rate, a strong dollar and favourable prior year reserve development to overcome a heavy dose of major claims.

“The underwriting performance improved more than expected,” management said in a terse statement on the preliminary bean counting ahead of the release of the annual report planned for March 23.

Major claims accounted for 12.7 points on the combined ratio, including losses stemming from the Russian invasion of Ukraine and from Hurricane Ian in Florida.

Favourable prior year reserve development at 3.6% of NPW proved stronger than in the prior year to take 1.5 points from the combined ratio development. The attritional loss ratio improved by half a point to 48.4%. The expense ratio dropped to 34.4% from 35.5% in FY2021.

“Today we are presenting an underwriting performance and capital position as good as Lloyd’s has reported in recent memory,” Lloyd´s CEO John Neal said in comment. Neal likes “strong premium growth and a continued fall in expenses.”

On the top line, gross written premium increased by over 19% to more than £46 billion, with management attributing 8 percentage points of the growth to the strong US dollar, another 8 points to direct price increase and 3 points to organic growth.

Investment losses did their worst during the 2022 run-up in interest rates as they did across the industry. Lloyd’s will book an investment loss of approximately £3 billion versus a prior year gain and could only assure investors that mark-to-market losses will likely be recouped and that current reinvestment yields speak to a higher pending investment return.

The investment hit put the group to a full-year pre-tax loss of approximately £0.8 billion.

Analysts at S&P took cheer from the handful of preliminary figures, talking up Lloyd's “focus on underwriting controls and positive price increases.” The 91.9% combined ratio “compares well with European reinsurance peers.”

“We expect Lloyd's will continue its profitable underwriting momentum into 2023 with a similar combined ratio to that in 2022,” analysts said in comment to the preliminary figures.

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