Lloyd’s insurers face investment woes as Lancashire profits drop

LLOYD’S of London members seem to be set for substantial drops in their investment income this year, after two insurers said they have been hit by losses in the bond market.

Lancashire Holdings, a member of the FTSE 250, yesterday confirmed that its net investment income fell 22.6 per cent for the second quarter of 2013.

“Treasury yields and credit spreads increased in the first half of 2013, which had a significant impact on our portfolio,” explained Lancashire yesterday.

This echoed Tuesday’s announcement by Lloyd’s insurer Beazley that earnings from its investments had been wiped out by fluctuations in its fixed income investments.

The two insurers kicked off the insurers' results season and their investment woes are expected to be repeated elsewhere.

Yet Lancashire recorded pre-tax profits of $58.3m (£38m) in the three months ending 30 June, down slightly on the same period last year but ahead of expectations. 

This was despite the company absorbing an extra $37.7m costs relating to the Costa Concordia cruise ship, which sank off the Italian coast in January 2012. It now estimates it will pay out $96.9m as a result of wreck.