London’s insurance market Lloyd’s of London has posted a £2.2bn pre-tax profit for 2010 despite a year of heavy catastrophe losses for the industry.
Lloyd’s, which operates in 175 countries, wrote £22.6bn of gross premiums last year, up 2.9 per cent from £22bn in 2009, but pre-tax profit fell 43 per cent from the £3.9bn made in 2009.
But capital and reserves and central assets both rose to all-time highs of £19.1bn and £2.4bn respectively as Lloyds strengthened its position and recovered assets from insolvent member companies.
“The result for the year was significantly affected by the earthquakes in Chile and New Zealand as well as the loss of the Deepwater Horizon oil rig in the Gulf of Mexico,’ said Lloyd’s chairman Lord Levene.
Lloyd’s paid £2.2bn of net ultimate claims last year, substantially higher than its £1.1bn average over the past 15 years.
It had a combined ratio – a measure of its profitability – of 93.3 per cent, above 2009’s 86.1 per cent level but still profitable despite the high claims.
Profits and combined ratio were helped by the release of capital reserves held against catastrophes in the past, which reduced its combined ratio by 5.9 percentage points.
The insurance industry has been dogged by overcapacity, with insurers starting to write business at thin or unprofitable margins in order to gain market share.
Lord Levene warned the industry to be aware of the challenging environment.
“The current high levels of capital in the industry continue to drive down rates and profitability will continue to be a challenge for the market in 2011,” he said.
“The critical issue for the market is to walk away from business offered at rates which are not sustainable.”
Lloyd’s is made up of 52 managing agent insurance companies including names such as Brit Insurance, Hiscox, Amlin and Aegis.