LLOYD’S of London was bracing itself for a “very tough” 2010 yesterday, despite releasing a record set of results that showed pre-tax profit doubled to £3.9m last year.
A lack of natural disasters and strong investment performance helped the insurance market boost the figure from £1.9bn in 2008, when hurricanes Ike and Gustav forced to it pay out large sums to customers. The hefty payouts in 2008 helped increase the pricing of policies in 2009.
Lloyd’s, which counts insurers like Hiscox and Beazley among its members, said its combined ratio – a key measure of profitability – improved from 91.3 per cent to 86.1 per cent.
Although he was happy with the performance, finance director Luke Savage told City A.M. the year ahead would inevitably be tougher.
Savage predicted weaker equity and bond markets would impact on investment income, which grew 84 per cent to £1.8bn in 2009. In addition it would be “very fortunate” if 2010 was as benign as last year in terms of catastrophe losses, he said.
“That combination of things is going to make 2010 a very tough year,” Savage said.
He confirmed Lloyd’s was helping authorities in New York set up a rival international insurance exchange, saying the London market did not fear “healthy competition”.
“But you shouldn’t underestimate just how tough a challenge they’re setting themselves,” he added. “Lloyd’s is the evolution of 322 years in business and you can’t just go out and replicate that in a matter of months or years.”
FAST FACTS | LLOYD’S OF LONDON
Lloyd’s launched a strategic review in February, planning to strengthen broking ties.
Insurers face regulatory change in the form of Solvency II, but non-life firms at Lloyd’s will see capital requirements largely unchanged.