* Too early to estimate coronavirus losses on members
* Market operating remotely, at 85-90% efficiency
* Coronavirus accelerating modernisation efforts
(Updates after CEO interview)
By Sinead Cruise
LONDON, March 26 (Reuters) - Lloyd's of London reported its
first annual pretax profit in three years on Thursday, thanks to
tighter underwriting and robust investment returns, and
signalled it was well prepared to cope with the cost of the
coronavirus pandemic.
The 330-year-old insurance market, which reports aggregate
results of its syndicate members, posted profits of 2.5 billion
pounds ($3 billion), up from losses of 1 billion pounds in 2018
and 2 billion pounds in 2017, when a slew of hurricanes,
typhoons and wildfires ravaged its returns.
But it gave no early indications of the extent to which its
members this year might be hurt by claims linked to the
coronavirus outbreak, which has paralysed the global economy,
forced the lockdown of billions of people and claimed thousands
of lives worldwide.
Chief Executive John Neal told Reuters it would be another
six to eight weeks before an approximate quantum and costs of
claims could be estimated, with more than 14 insurance products
seen to have some exposure or response to Covid-19.
"I don't think we have deep rooted concerns on the cost.
It's what we do for a living," he said, adding that the market
typically sets aside 10% of premiums received each year to help
manage catastrophe claims.
Lloyd's of London insurers will be exposed to losses due to
the cancellation of sports events and other mass gatherings, as
well as the postponement of the Olympics, though the losses will
be less severe than if the Games had been cancelled altogether,
industry sources say.
Lloyd's solvency ratio - a key measure of balance sheet
strength - was 205%, despite a high degree of turbulence in
financial markets in recent weeks.
Its combined ratio, a measure of underwriting profitability,
also strengthened to 102.1% from 104.5%. A level above 100
percent indicates a loss.
Lloyd's insurers include listed firms Beazley and
Hiscox.
CULTURAL CATALYST
With thousands of Lloyd's brokers and underwriters now
working remotely, Neal said "it had never been more important"
to accelerate progress on its Future at Lloyd's modernisation
plan, which would speed up claims processing and eventually see
around 80% of its business supported digitally.
Lloyd's has shut its "underwriting room" - where insurers
and brokers transact deals face-to-face - for the first time in
its history due to the pandemic.
It had already started the process of moving the market to
electronic exchanges, to streamline operations and cut costs and
Neal said the Lloyd's community was so far coping well with the
new working environment.
"If I was putting a percentage on it, I'd say the market is
at 85 to 90% of efficiency," he said, with indicative volumes of
activity on electronic trading tools up by between 20-30% over
the past week.
"My sense is this crisis will ultimately be good for us.
People want to accelerate the modernization agenda and
demonstrate their ability to operate much more effectively
digitally," he said.
"And the small minority who have asked whether we really
need to do this are now quickly finding that they have lost the
argument."
The syndicate is also battling a sexual harassment storm and
is trying to beef up its record on diversity. Neal said senior
management remained committed to the cultural revamp and would
provide a progress update in the second quarter.
($1 = 0.8430 pounds)
(Reporting by Sinead Cruise; editing by Simon Jessop and Mark
Potter)
Hiscox (HSX)
Beazley (BEZ)
