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The Actuary The magazine of the Institute & Faculty of Actuaries

Lloyd’s H1 losses hit £697m

The specialist insurance market said the loss followed the costliest six months on record for insurance companies in terms of major catastrophes. It added the year as a whole was already likely to be the second most expensive ever for insurers.

Lloyd's also revealed a combined operating ratio of 113.3% for the half year (H1 2010: 98.7%) and highlighted that its investments had led to a return of £548m (H1 2010: £597m).

It added that record central assets of £2.47bn meant the market was well capitalised despite the high level of claims.

The figures were ahead of predictions such as from accountants Mazars who forecast a £1.5bn loss and a COR in excess of 120%.

Lloyd's chairman, Lord Levene, commented: "2011 has already been one of the most challenging years on record for the insurance industry with major natural catastrophes devastating communities in Australia, New Zealand, Japan and the US.

"Lloyd's ability to pay billions in claims to help these communities rebuild is unquestioned and the fact that we have managed to do so without any call on our central capital reserves is testament to the market's exposure management."

Chief executive at Lloyd's, Richard Ward, added: "These are tough times for the insurance industry, but we are well positioned to handle them.

"Despite incurring £6.7bn in claims from the costliest first half year on record, Lloyd's entered the second half of the year with £57bn in net assets to support our business and pay claims. However, while interest rates are low and equity markets are volatile, we can't rely on investment income to subsidise our underwriting, we must decline under-priced risks."

Mazars described the £697m half year loss by Lloyd's as a good result having predicted a £1.5bn loss and combined operation ratio of over 120% for the specialist insurance market.

The accountancy firm admitted Lloyd's performed better than it had expected based on its comparison with losses from the larger UK-listed Lloyd's vehicles, and the major European reinsurers.

Andrew Goldsworthy, insurance partner at Mazars, commented: "Last year the average combined loss ratios of UK-listed insurers were slightly better than Lloyd's. This year they were significantly worse.

"Of course, Lloyd's half year numbers were boosted by a £470m release from prior year profits, which reduces the combined ratio by 5.5%. If this was added back, the combined loss ratio would have been 119%.

"Another positive note was the performance of their investments, which held up remarkably well given the current global financial markets."

Source: Insurance Age