While Lloyd’s reported a strong underwriting profit during the first half and its best combined ratio in five years, similar to many insurers it saw an overall loss as a result of its investments.

Underwriting profits for the first six months came to £1.2 billion ($1.4 billion) compared with £963 million ($1.1 billion) in H1 2021. Lloyd’s reported a combined ratio of 91.4 compared with 92.2 in the first six months of 2021. (A combined ratio below 100 indicates an underwriting profit.)

As a result of an H1 net investment loss of £3.1 billion ($3.6 billion), blamed on rising interest rates (H1 2021: £628 million investment income), Lloyd’s reported an overall loss of £1.8 billion ($2.1 billion) (H1 2021: profit of £1.4 billion).

“This result was driven by an unrealized investment loss arising from higher interest rates, triggering a short-term hit under mark-to-market accounting, though insurers will benefit in the long term as returns on assets strengthen through 2023 and 2024,” said Lloyd’s.

S&P Global Ratings said Lloyd’s negative investment results, which were driven by the mark-to-market losses, are in common with the wider insurance sector.

The Lloyd’s market has reserved £1.1 billion ($1.3 billion), net of reinsurance, for customers affected by the conflict in Ukraine. “We expect this will be a major but financially manageable loss event for the market in 2022,” commented Lloyd’s Chief Financial Officer Burkhard Keese, who spoke during a media call to discuss the H1 results.

“Lloyd’s claims provisions for the [Ukraine] conflict are much higher than those of most similar-sized peers (for example, Swiss Re, SCOR SE and Munich Reinsurance Co.),” according to S&P Global Ratings. “This reflects Lloyd’s position as the prominent insurer of war, terrorism, aviation, political and marine risks. There could be further losses in the coming quarters due to the conflict, and it is not yet clear if policy cancellations by re/insurers will prove effective.”

“I’m pleased to say that we’re announcing the continued sustainable performance of the Lloyd’s market…with a really strong underwriting result and a very resilient capital position,” said John Neal, CEO of Lloyd’s during the press briefing.

“Our return to sustainable profitable performance at Lloyd’s has not happened by accident nor overnight. Instead, the underlying performance improvement is the result of four years of hard work undertaken by both the market and the corporation. And we are now seeing that effort manifest in the underwriting result,” he added.

Outside of the Russia-Ukraine conflict, S&P agreed, saying that “Lloyd’s underwriting performance shows the positive effects of nearly five years of price increases and the corrective actions that management has taken.”

Gross written premiums during H1 increased 17.4 percent when compared to the first six months of 2021. However, excluding the impact of foreign exchange—mainly U.S. dollars strengthening against the pound—premium growth stands at 12.4 percent, Lloyd’s said.

“This is the 19th consecutive quarter of positive price increases with rate increases seen across every single class of business,” Neal noted. Average price increases of 7.7 percent were reported in the first six months of 2022, across all major lines of business and geographies.

Other key figures reported in Lloyd’s 2022 half year results include:

• Gross written premiums of £24 billion (H1 2021: £20.5 billion)
• Attritional loss ratio of 48.9 percent (H1 2021: 50.5 percent)
• Central solvency ratio of 395 percent (Full Year 2021: 388 percent)
• Net resources at £36.5 billion (FY 2021: £36.6 billion)