Investment losses drag down Lloyd’s results

Lloyd’s of London delivered its highest underwriting profit since 2015 last year at £2.6 billion ($3.2 billion), helped by average 8% rate increases, but big investment losses saw the market fall to a £769 million full-year loss, compared with a £2.3 billion profit in 2021.

The market reported £3.1 billion in investment loss last year.

Burkhard Keese, Lloyd’s chief financial officer, said U.S. interest rate increases drove fixed-income investments loss. But Lloyd’s said it expects this to unwind in the next two to three years as higher interest rates benefit investment returns.

Lloyd’s recorded average 8% rate increases last year, with all classes except energy pushing through rises between 5% and 10%. Energy rates were flat to up 5%.

Rate increases helped gross written premium grow 19% in the year to £46.7 billion, with volumes up 4%. Lloyd’s said casualty and property were the largest drivers of premium growth, both up 25%.

Lloyd’s expects premiums to grow to £56bn in 2023 as rate increases continue across most classes.

Major losses totaled £4.1 billion for 2022, with Hurricane Ian accounting for about half of the losses at £2 billion and losses related to the war in Ukraine at £1.4 billion. Despite the increase in major losses, Lloyd’s booked a 1.6 percentage point improvement in its combined ratio to 91.9% for 2022, helped by a 3.6% boost from prior year releases.

All lines added to underwriting profit last year, which was up 53%, with casualty insurance in particular staging a recovery to record an underwriting profit of £536 million after four years of losses. Commenting on the first quarter of 2023, Lloyd’s said it is increasing underwriting oversight on cyber liability insurance, directors and officers liability and property binders.

John Neal, CEO of Lloyd’s, said the underwriting result was “outstanding … following five years of hard work to get our performance, culture and digital transformation into shape.”

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