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Lloyd’s of London swung back to profit in the first half as a stronger underwriting performance at the specialist insurance market marked a recovery from the substantial pandemic-related losses suffered last year.
Aggregate pre-tax profit at Lloyd’s, where underwriters agree deals with brokers to cover all manner of risks, was £1.4bn in the first half of 2021, compared with a £0.4bn loss in the same period last year.
The turnround was driven by an improved underwriting result. The market’s combined ratio — a measure of performance that includes claims and expenses as a proportion of premiums — dropped from a lossmaking 110.4 per cent in the previous period to a profitable 92.2 per cent.
That was mostly because of the scale of the Covid claims booked in 2020, but after stripping these out, the measure still improved by almost five percentage points.
“I am encouraged to see that market performance has improved as a result of our ongoing remediation efforts,” said John Neal, its chief executive.
Lloyd’s has focused in recent years on pressing the insurers within the market to improve profitability in certain lines of business, even at the expense of revenues.
Trading at Lloyd’s has been boosted by 15 consecutive quarters of rising insurance prices. Against this backdrop, gross written premiums across the market rose from £20bn in the first half of last year to £20.5bn in the six months to June.
Neal cited the amount of claims, almost £10bn, paid out in the first half of 2021 as evidence that the market was aiding in the economic recovery.
Like other City institutions, Lloyd’s is engaged in a debate over its future. After Covid closures, the historic underwriting room is not yet back up to pre-pandemic numbers, a spokesperson said last week.
The Corporation of Lloyd’s, which oversees the market, is actively encouraging participants to come back, arguing that negotiating complex risks face-to-face remains important. The corporation itself is moving to a flexible working pattern that it expects will have many employees in the office an average of three days a week.
At the same time, Lloyd’s is consulting with market participants on what it has called a “once-in-a-generation journey” to redesign its architecturally acclaimed building. Options mooted include setting aside space for events, wellness services and even a high-end restaurant. It plans to provide further details later in the year.