Lloyd’s reported an interim full-year 2022 loss before tax of $947.6 million (£800 million ) as a result of investment losses of approximately $3.6 billion (£3 billion).
This compares to a profit of $2.7 billion (£2.3 billion) and investment income of $1.1 billion (£900 million) in 2021.
Nevertheless, Lloyd’s expects to report a strong underwriting performance when it announces its final full-year 2022 numbers on March 23.
In its preliminary results’ statement, Lloyd’s said its underwriting performance improved more than expected by 1.6 percentage points to deliver a combined ratio of 91.9, compared with 93 in 2021.
Lloyd’s strong year-end 2022 underwriting results reflect its focus on underwriting controls and positive price increases, said S&P Global Ratings in a market bulletin, which noted that the market’s combined ratio compares well with its European reinsurance peers.
The Lloyd’s underwriting result was achieved despite provisions of $1.7 billion for claims relating to the Russia-Ukraine conflict and $2.4 billion of losses from Hurricane Ian, which were key contributors to major losses that added 12.7 points to the combined ratio, said S&P. “We expect Lloyd’s will continue its profitable underwriting momentum into 2023 with a similar combined ratio to that in 2022.”
Also like some of its peers, S&P said, Lloyd’s year-end 2022 earnings were pressured by mark-to-market losses on its bond and equity portfolios during the year, which brought the net loss of approximately £800 million.
“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 £3.0 billion in 2023, on the back of strong underwriting and higher investment income due to increased interest rates,” the ratings agency continued.
“[W]e are presenting an underwriting performance and capital position as good as Lloyd’s has reported in recent memory. 2022 showed both strong premium growth and a continued fall in expenses, which alongside a high-quality balance sheet, demonstrate that our market is in the best shape to offer both an attractive return to capital and investors as well as providing businesses the insurance protection they need in these uncertain times,” commented John Neal, Lloyd’s CEO, in a statement.
S&P said Lloyd’s is in a good position to navigate the challenges the insurance sector faces, 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,” S&P said.
S&P has rated Lloyd’s as “A+” Stable.
Source: Lloyd’s and S&P Global Ratings