Lloyd’s Bermuda operations largely underperformed in 2018: report

The Lloyd’s operations of the Bermuda re/insurance sector largely underperformed in 2018, with all of their managing agents reporting underwriting losses, according to a report from equity research firm Jefferies.

Jefferies’ report, ‘Lloyd’s of London - Testing the Underwriting Mettle’, found that overall, Hiscox, Beazley and QBE recorded the highest earnings in the Lloyd’s market, while Asta, XL Catlin, Axis and MS Amlin produced the highest losses.

“Having weathered a second consecutive year of abnormally high catastrophe losses and unprofitable underwriting, all underwriters at Lloyd’s have been sorely tested,” the report said.

In terms of the Lloyd’s operations in the Bermuda sector, Jeffries suggested the market relevance of these losses was low, due to their small scale.

Between them, Hiscox and Beazley earned £167 million in Lloyd’s, ranking them first and second in the overall Lloyd’s market in terms of earnings. This accounts for more than a third of the earnings from profitable businesses.

By contrast, XL Catlin’s £284m of net losses accounted for more than 20 percent of the losses from unprofitable business.

“In our view, this suggests that amongst the units AXA acquired in its takeover of XL, reunderwriting the Catlin syndicate will likely be one of the more pressing needs,” the report added.

Overall, Lloyd’s remains under pressure, having los around £1 billion in 2018, on top of £3.4 billion in 2017, the report showed.

Jefferies highlighted that in 2019, eight syndicates with collective premiums of £1,523 million ceased writing business, and only one syndicate began writing.

“Although prices have risen since 2017, the magnitude of the rating turn has been less than we anticipated and further capital exits may be needed,” the report said.