(Alliance News) - Insurance and reinsurance market Lloyd's Of London on Thursday reported a return to profit in 2019 and stressed it is in a "strong position" to combat the Covid-19 outbreak.
For 2019, Lloyd's reported pretax profit of GBP2.53 billion, compared to the GBP1.00 billion loss in 2018.
The sharp improvement was attributed to a strong investment performance, recording a 4.8% return in 2019, representing income of GBP3.54 billion, compared to a 0.7% return in 2018, or GBP504 million in investment income.
Lloyd's also cited its improved underwriting discipline for the return to profit.
"During 2019, premium levels have increased by 1.1%. Stable or increased pricing levels continued with favourable price movements experienced across all lines of business. The Lloydâ€™s market experienced a weighted average increase in prices on renewal business of approximately 5.4% in 2019," Lloyd's said.
The market's gross written premiums increased 1.1% to GBP35.91 billion from GBP35.53 billion the year before. Lloyd's noted, however, new syndicate growth and removing foreign exchange rate movements results in a like-for-like year-on-year reduction in premiums of 2.6%.
The market's combined ratio worsened to 102.1% in 2019 from 104.5% in 2018. A ratio above 100% indicates that an insurer is making underwriting losses, while a ratio below 100% means it is making a profit, so the lower the better.
"2019 again saw some significant catastrophic losses for the insurance industry and so too for the Lloydâ€™s market, with notable losses in the second half of 2019 including Typhoons Faxai and Hagibis (in Japan) as well as Hurricane Dorian (impacting the Bahamas)," Lloyd's explained.
Insured losses arising from catastrophic events cost the Lloyd's market GBP1.8 billion, net of reinsurance, in 2019 compared to GBP2.9 billion in 2018, and added 7.0% to the combined ratio.
The impact of these major events on the Lloyd's market result was offset slightly by prior year releases of GBP232 million, representing a 0.9% improvement to the combined ratio, however these releases are at a reduced level when compared to previous years.
Chief Executive John Neal said: "Whilst we are pleased to be announcing Lloyd's return to profitability in 2019 and continued progress across our priorities, our primary focus right now is on supporting our customers and business partners in their time of need. I am confident in Lloyd's ability to meet the challenges before it, and in doing so demonstrate the market's unrivalled ability to support people, businesses and countries around the world in response to the far-reaching impacts of Covid-19."
Lloyd's noted its net resources grew by 8.6% in 2019, ending the year at GBP30.6 billion and its solvency ratio stood at 205% at March 19.
Lloyd's added: "Similarly to 2019, the 2020 planning cycle was challenging for the Lloyd's market, with significant effort placed on performance improvement activities against poor-performing lines of business and syndicates. A strong portfolio management led approach was taken, with improvement activities balanced by profitable growth, in syndicates and lines of business with a track record of delivering plan and a sustainable and profitable performance."
As a result of these actions, the market plans to grow in 2020, mainly driven by the positive pricing environment, and to continue to improve planned levels of profit.
The market, however, noted the full impact of Covid-19 on the insurance industry, including the Lloyd's market, is uncertain.
Lloyd's said: "Our initial assessment has identified those lines of business most likely to be impacted, however the full extent of the losses and the impact upon pricing will become clearer as the year progresses."
By Paul McGowan; email@example.com
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