Lloyd's of London's pretax profit surged year over year in the first half, carried by a strong investment return for the insurance marketplace.
Pretax profit rose to £2.33 billion from £588 million a year earlier, as the investment return jumped year over year to £2.32 billion from £204 million. The market benefited from unrealized gains due to reducing U.S. and U.K. bond yields, as well as robust returns from equities in the first six months.
Gross written premiums climbed year over year to £19.69 billion from £19.34 billion. However, the insurance marketplace said the elimination of foreign exchange rate movements and growth from new syndicates points to a like-for-like year-over-year reduction of 2.6%, being the net impact of a 6.5% reduction in business volumes and an average risk-adjusted rate increase of 3.9%.
"These changes reflect the strengthened underwriting discipline being applied in 2019 post the underwriting performance seen in 2017 and 2018," Lloyd's added. It noted that premium volumes are down in several major lines of business, most significantly marine insurance, but that "isolated growth" is being seen in specialized lines "and most significantly cyber, which continues to see more buyers come to the market."
The combined ratio weakened to 98.8% from 95.5% in the prior-year period. Lloyd's said a combination of higher individual risk losses in the first half and lower prior-year releases of 0.4%, versus 3.8% a year ago, contributed to an increase in the loss ratio to 60.7% from 56.2%, but added that the attritional loss ratio is down year over year.
The operating expense ratio dropped to 38.1% from 39.3%. Lower administrative expenses, reflecting the continued effort by the market to manage its controllable costs, contributed a 1.5% reduction while there was a small increase of 0.3% in the acquisition cost ratio from changes in the mix of business.
Also, David Sansom has been confirmed as chief risk officer, subject to regulatory approval. He had served in an interim capacity since October 2018.
Chief People Officer Annette Andrews will be leaving at the end of 2019.
