LONDON, Sept 25 (Reuters) - The Lloyd's of London insurance market posted a rise in headline first-half profit onThursday, boosted by sharp gains in its investment returns, buthighlighted that market conditions were becoming increasinglychallenging.
Pretax profit rose 21 percent to 1.67 billion pounds ($2.7billion) for the six months to end-June, compared with 1.38billion the previous year, Lloyd's said in a trading statement.
Ninety-four syndicates underwrite insurance at Lloyd's,housed in one of the most recognisable buildings in London'smain financial district, with listed companies including Catlin, Hiscox and Amlin.
Investment income rose to 642 million pounds, up from 247million in the first half of 2013, helped by higher yields inthe market's corporate bond portfolio, acting finance directorJohn Parry told Reuters.
But Lloyd's combined ratio, a measure of profitabilityshowing how much insurance premium is paid out in claims andexpenses, deteriorated to 88.2 percent from 86.9 percent. Aratio below 100 percent indicates an underwriting profit.
"It's been a fairly benign period for major catastrophes,"Parry said.
Insurance underwriters tend to perform less well in theabsence of major catastrophes, as insurance premiums fall.
New players such as hedge funds in the reinsurance sector,which helps insurers pay large damage claims in exchange forpart of the premium, have also made the sector increasinglycompetitive.
But Lloyd's return on capital rose to 16.5 percent from 14percent a year ago.
"Against the broader economic environment, insurance looksquite attractive, there's a lot of talk of it as a diversifyinginvestment," Parry said.
(1 US dollar = 0.6132 British pound) (Reporting by Carolyn Cohn; Editing by David Holmes)