Investment losses hit Lloyd’s but underwriting vastly improved

Lloyd’s of London posted a much-improved underwriting profit and solid growth in its 2022 results as its CEO flagged 20 consecutive quarters of positive price improvement. But it still posted a loss overall due to massive net investment losses.

The market posted a loss before tax of £0.8 billion compared with a 2021 profit of £2.3 billion. This was due to a net investment loss of £3.1 billion compared with a profit of £0.9 billion in 2021. It said that mark-to-market accounting rules on fixed income investments led to this, however, the loss is expected to reverse in the coming years as assets reach maturity and benefit from favourable interest rates, the market said.

The market’s gross written premiums (GWP) increased by 19% to reach £46.7 billion, a big increase on the £39.2 billion it posted in 2021. It said this included 4% volume growth.

Lloyd’s posted an underwriting profit of £2.6 billion compared with £1.7 billion a year earlier and a combined ratio of 91.9% – a 1.6 percentage point improvement and the strongest result since 2015.

It noted that in a year that saw major losses contribute 12.7% to the combined ratio – including substantial claims from the conflict in Ukraine and Hurricane Ian in the US – Lloyd’s paid out over £21 billion to customers.

Its attritional loss ratio improved again to 48.4% (FY2021: 48.9%) while the expense ratio improved by 1.1 percentage points to 34.4% (FY 2021: 35.5%). With prices increasing by 8%, the Lloyd’s market has now seen 20 consecutive quarters of positive price improvement.

John Neal, CEO of Lloyd’s said: “This is an outstanding underwriting result that follows several years of performance improvement, a comprehensive plan to digitalise our market, steady and sustained progress on our culture and purposeful action to help our industry and society manage the biggest challenges of our time.

“Looking to 2023, Lloyd’s expects strong premium growth to around £56 billion, a combined ratio below 95% and a total investment performance on our assets of more than 3% – enabling us to support customers through the uncertain times ahead.”