Lloyd's reports £4.9 billion profit in encouraging half year statement

Lloyd’s has released a very strong set of results for the market for the six months to the end of June 2024.

Headline numbers are as follows:

These results represent the best underwriting performance (by reference to the combined ratio) at the half year stage since 2007. Although the pace of rate increases has moderated; rates for insurance and reinsurance have been increasing for more than six years. The positive rate movement in the first half has slowed to 1.5%, with the balance of the growth accounted for by increasing business volumes offset by adverse foreign exchange movements.

Despite profitable results leading to an increase in profit commissions, there is continued progress in reducing the expense base, with further reductions in acquisition costs (these are amounts paid to brokers to introduce business and to service companies and coverholders, writing on the behalf of syndicates). Favourable development of older years improved the loss ratio by 3.1 points (compared to 4.7 points in the first half of 2023). The most significant insurance event in the first half of 2024 was the collision of the cargo ship, Dali, with the Frances Scott Key Bridge in the port of Baltimore, although there were also earthquakes in Japan and Taiwan. Major losses contributed just 3.1 points to the loss ratio, down from 3.6% in the same period last year. There have been some significant events that fall into the second half of the year, these include Hurricanes Beryl, Debby and Ernesto, and the impact of the Crowdstrike botched software upgrade. Major losses often are a more significant contributor to the loss ratio in the second half of the year, largely as this period includes the tropical storm season in the North Atlantic.

John Neal, Lloyd’s Chief Executive Officer said “At Lloyd’s, our focus in the first half of 2024 remained on supporting a profitable marketplace that delivers sustainable and  attractive returns for our investors, at a time when Lloyd’s global insurance premiums are growing at more than twice the rate of GDP. That industry-leading performance has underpinned our ability to innovate and design the solutions our customers, businesses and governments need to manage their risks and balance sheets through increasing uncertainty – maintaining and growing our relevance and value proposition around the world.

“Maintaining strong, sustainable, profitable performance is our top priority, and our industry-leading results for the first half of 2024 – built on more than six years of progressively more profitable underwriting – are a testament to that focus. The superb start to the year has ensured we are well positioned to respond to global change through the second half of the year and into 2025. This, coupled with our persistent focus on strategic execution, gives us the confidence that we have frameworks in place to continue to support sustainable, long term profitability for our investors, and to respond to the needs of our market’s customers as they navigate increasing risk and uncertainty.”

For members of Lloyd’s, who receive profit payouts based on three year underwriting accounts, these results are a combination of favourable development of both the 2022 and 2023 underwriting years, both of which are forecast to be strong profits to members, coupled with a good start to the 2024 underwriting year. More detail on the year of account forecasts is available here

The full results can be found here, and the analysts’ presentation slide here.

Note: The combined ratio is a way of expressing the underwriting performance of an insurance entity. It shows claims and expenses as a proportion of premium income. At 100%, an insurer is breaking even from its underwriting operations, although the final result will depend on the performance of the investment portfolio. Below 100%, underwriting is making a positive contribution to the result. The combined ratio can be broken down into the costs of acquiring and managing the business, the expense ratio, and the proportion of premium needed to pay claims, the claims ratio.