Lloyd’s of London reports $2.63 billion profit for 2016

Lloyd’s of London on Thursday said it posted a profit of $2.63 billion in 2016, pulling essentially even with 2015’s $2.65 billion in net income as a challenging market continued to push rates down.

Gross written premiums totaled $40.3 billion, up 21% from the prior year. However, the combined ratio deteriorated to 97.9% in 2016 compared with 90% in 2015, Lloyd’s said in a statement.

Lloyd’s said it saw $2.8 billion in major claims for the year, and for the first time since 2012, aggregate major claims and insured catastrophe losses were above the long-term average in 2016, mostly due to Hurricane Matthew and the Fort McMurray wildfire in Canada.

The lower underwriting result in 2016 was offset by significantly improved investment returns, driven by a downward yield shift in the bond markets, and foreign exchange gains, principally due to sterling depreciation, Lloyd’s said.

Syndicates writing motor reinsurance and direct motor and U.K. liability business have been affected by the recent announcement to change the discount rate applying to lump sum liability claims to negative 0.75% as a result of a revision to the Ogden Tables, a U.K. actuarial standard.

Lloyd’s said it saw progress across its major global markets, as it secured its position as the leading provider in excess and surplus lines in the United States; transferred over half its managing agents to the Shanghai and Beijing platforms; and was granted final approval to open an onshore office for reinsurance in Mumbai.

In light of the United Kingdom’s decision to leave the European Union, Lloyd’s said it will open a subsidiary office in Brussels with the goal of having it up and running for the Jan. 1 renewal season in 2019.

“Our collective focus must be on providing customers with the products they want, embracing innovation and modernization,” Chief Executive Inga Beale said in a statement. “The market has shown how well it reacts to the demands of its customers in a rapidly changing risk environment, with the considerable increase in cyber coverage throughout 2016 a perfect case in point. It is critical throughout 2017 we continue to demonstrate that Lloyd’s is the home for creativity and expertise.”

Lloyd’s Chairman John Nelson, who is retiring in May, said in a statement that “in the years since we launched our long-term strategy Vision 2025, our global reputation and brand has significantly strengthened; we have substantially improved our global market access; our modernization program has real momentum; (and) our increased financial strength and overall financial performance is a tribute to the underwriting skills in the Lloyd’s market.”