INSURANCE market Lloyd’s of London blamed its 52 per cent drop in profit yesterday on a spate of disasters including the Deepwater Horizon oil spill and the Chilean earthquake.
Lloyd’s posted a pre-tax profit of £628m for the first half of 2010, down from £1.32bn a year earlier.
Lloyd’s insurers including Catlin, Amlin and Hiscox absorbed claims in excess of £100m each for the disasters, which added 17 per cent to the group’s accident ratio and meant the group paid out more than it earned in premiums.
The group’s total claims ratio stood at 98.7 per cent of premiums for the period, up from 91.6 per cent a year ago.
Lloyd’s finance director Luke Savage said insurance prices looked set to keep falling, and most of the syndicates operating in the market would probably respond by writing less business next year.
“In an environment of slowly declining rates, people are going to be slowly reining in the amount of premium they write,” he said.
Lloyd’s generated much of its profit instead from investments, though it reported a 15 per cent drop in returns for the six months to the end of June.
Savage said the group was re-examining its investment strategy in the wake of the drop in performance.
“We are not bullish on the UK. We are considering moving into emerging markets, as we are still nervous that there will be a double dip recession – the US recovery is still very fragile and it’s the same here,” he told City A.M.
Central assets at the group, which act as a form of capital buffer for member insurers, rose to a record £2.23bn in June, up from £2bn a year earlier.
Savage said preparations for the new Solvency II insurance capital rules are progressing as planned, and that the group is on course to spend between £200m and £250m on altering its structure before the regime comes into effect in 2013.