Lloyd's of London profit slips; concerns remain about British E.U. exit
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LONDON — Lloyd’s of London said Wednesday it made a profit of £2.1 billion ($3.04 billion) for 2015, a 30% reduction from 2014 due largely to lower investment results, and its chairman said costs are one reason why the U.K. should stay in the European Union.
While the market posted gross written premiums of £26.7 billion ($38.65 billion), up 5.5% from 2014, it reported a slightly higher combined ratio of 90.0% for 2015, compared with 88.4% for 2014.
Lloyd’s Chairman John Nelson said if Britain did leave the E.U., commonly known as “Brexit,” that likely would require Lloyd’s to set up more offices, increasing costs.
“About 90% of our capital and business comes from outside the U.K.,” Mr. Nelson told Reuters. “It would diminish our attraction as a market to invest in if we were not part of the E.U.”
Lloyd’s investment return was £402 million ($581.8 million) in 2015 versus £1.0 billion ($1.56 billion) the prior year, Finance Director John Parry said during a press briefing.
Low yields on many of Lloyd’s investments, notably bonds and cash, was a major driver in the reduced profit for 2015, he said.
Underwriting conditions continue to be challenging for many lines of business, which renewed within Lloyd’s at average rate reductions of 5%, Mr. Parry said.
Price drops have been particularly significant in energy and property reinsurance lines, he noted.
While there were relatively few catastrophe losses, Mr. Parry said one of the largest losses to hit the Lloyd’s market last year stemmed from the explosions at the Chinese port of Tianjin, which caused Lloyd’s a loss of about £200 million ($287.4 million).
Mr. Parry said for 2016, Lloyd’s would continue to improve its market access amid ongoing challenging market conditions.
He also said Lloyd’s is preparing for the possibility that the United Kingdom might leave the European Union after the binding referendum on the subject June 23.
Still, Mr. Parry said, Lloyd’s position is clear that it is “better for us if we stay in.”
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