Market volatility hits Lloyd’s and other insurers

Madeline Ratcliffe
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Inga Beale, Lloyd’s of London chief executive
LLOYD’S of London insurance market posted a 28 per cent drop in half-year profit yesterday and said volatility and low interest rates were driving down returns.

Pre-tax profits slid to £1.19bn, and combined ratios which were up to 89.5 per cent from 87.5 per cent this time last year. The measure is of an insurer’s underwriting profitability. A combined ratio of 100 per cent is break even, so the lower, the better.

Gross written premiums rose to £15.5bn pounds, up seven per cent from a year earlier, but investment returns almost halved to 0.6 per cent.

Chief executive Inga Beale told City A.M. combined ratios were up as attractive returns were drawing new investors, putting pressure on pricing.

Investment returns were down to £300m compared to last year, driven by low interest rates and market volatility, which will continue to hit profits.

“It won’t be smooth waters over the coming months. Even since our last half year results were released we’ve seen more market volatility, and we’re expecting more to come,” she said.

Beale saw the explosion of M&A activity in the sector, most recently Mitsui Sumitomo’s purchase of Amlin, as a result of the “lack of organic growth because of the competitive environment”, and a need to diversify risk in Japanese companies.

She added there were “exciting opportunities” to look forward to as the rest of the world caught up with US companies in prioritising the risk of cyber crime, a sector for which Lloyd’s has a 15 per cent market share.