Lloyd’s, the world’s leading marketplace for commercial, corporate and specialty risk solutions, yesterday announced that its underwriting performance improved more than expected by 1.6 percentage points to deliver a combined ratio of 91.9% in the financial year ended December 31, 2022 (FY2022).
The improvement was achieved despite major claims of 12.7% including losses arising from the conflict in Ukraine and from Hurricane Ian in Florida, Lloyd’s said as it released its preliminary financial statements for FY2022.
Other FY2022 key figures are:
- Gross Written Premium (GWP) increased by over 19% to more than GBP46bn (FY2021: GBP39.2bn) reflecting a combination of growth from the strong US dollar (8%) direct price increases (8%) and organic growth (3%).
- The attritional loss ratio has improved to 48.4% (FY2021: 48.9%), prior year releases were 3.6% (FY2021: 2.1%) and the expense ratio dropped to 34.4% (FY2021: 35.5%).
- The mark-to-market accounting treatment of rising interest rates on fixed-income portfolios forced a write-down of asset values and is forecast to lead to higher yields and investment returns in future years. The reported investment loss of approximately GBP3bn (FY2021: GBP0.9bn income) is in line with the result reported at the half year. The investment loss has no cash impact, and is expected to be reversed over the next two to three years as the assets reach maturity.
- The investment loss will result in a full-year loss before tax of approximately GBP0.8bn (FY2021: profit GBP2.3bn).
Lloyd’s is scheduled to announce its final 2022 results on 23 March 2023.
S&P comments
S&P Global Ratings says that Lloyd’s (A+/Stable) strong year-end 2022 underwriting results reflect its focus on underwriting controls and positive price increases.
The global credit rating agency said, “We expect Lloyd’s will continue its profitable underwriting momentum into 2023 with a similar combined ratio to that in 2022.
“Like that of some peers, Lloyd’s year-end 2022 earnings were pressured by mark-to-market losses on its bond and equity portfolios during the year and it reported a net loss of approximately GBP800m. We expect mark-to-market losses on the bond portfolio will unwind as the portfolio reaches maturity, keeping in mind the average duration of the bond portfolio is less than three years. We expect Lloyd’s net earnings will recover to about GBP3.0bn in 2023, on the back of strong underwriting and higher investment income due to increased interest rates.
“Lloyd’s is in a good position to navigate the challenges the insurance sector faces in 2023, including elevated inflation and uncertainty around the resolution of the Russia-Ukraine conflict. This is thanks to Lloyd’s enhanced governance for ensuring disciplined underwriting; its robust capital position above the ‘AAA’ level–measured using our capital model; its market-wide solvency coverage ratio exceeding 185%; and its central fund solvency ratio exceeding 400% as of year-end 2022. We expect Lloyd’s will maintain its ‘AAA’ risk-based capital over 2023.”