Lloyd’s of London returns to profit with ‘bulletproof’ balance sheet

Lloyd’s of London is back in the black (Ian West/PA) (PA Archive)
Lloyd’s of London is back in the black (Ian West/PA) (PA Archive)

Lloyd’s of London swung back into profit today, helped by a rise of over a fifth in the premiums written at the world’s largest insurance marketplace.

A rebound in the valuation of its bond portfolio helped, after the impact of writedowns sparked by rising interest rates rippled out of its half-year results. But the improvement was driven by rising profitability in Lloyd’s core underwriting business, which reached £2.5 billion for the first half of 2023, up from £1.2 billion a year ago.

Overall, a 21.9% rise in new insurance business of £29.3 billion helped it return to profit before tax, of £3.9 billion, up from a loss of £1.8 billion in the same period a year ago. Total capital ticked up to £40.8 billion from £40.2 billion and Lloyd’s described its balance sheet as “bulletproof.”

Bruce Carnegie-Brown, chairman, told the Standard that “both sides of the balance sheet are now working in a way that hasn’t happened for 20 years,” with rising interest rates becoming supportive for it after initially eroding the value of its bond holdings.

“We’ve been a prisoner of essential zero interest rates for 20 years, and now we’re beginning to get a return, which helps with underlying profitability … the bad news is that inflation is still higher than interest rates, but nevertheless it helps us to build reserves over time to pay claims.”

He also pointed to “greater confidence” that “we’re getting to the top of the interest rate cycle”, with stable rather than rising rates helping with insurers’ bond portfolios.

Lloyd’s is made up of over 50 insurance companies and 200 registered brokers and is the leading international venue for major insurance and re-insurance, known globally for its iconic headquarters on Limeburner Lane in the heart of the City.

One of the key risks faced by its members has been exposure to payouts over the war in Ukraine. Lloyd’s left its net provision for Ukraine claims at £1.4 billion.

Much of Lloyd’s exposure to the war relates to claims over aircraft. Around 500 were  seized by Russia when it began, creating uncertainty over liability and potential payouts and setting up one of the biggest talking points among underwriters on London’s global insurance market.

Carnegie-Brown told the Standard that there had been “a very positive development” with the matter”, saying: “Yesterday, $645 million dollars was paid by Russian insurance companies in respect of 17 of the aircraft, that helps to mitigate the losses of our customers and potentially, ultimately by the Lloyd’s insurance market.”

He added: “It would be ideal if that was the start of a pattern of Russian insurance companies settling those claims. Twelve months ago I would have been pretty surprised if Russia had been willing to make payments.”

The Lloyd’s figures came as one of its biggest underwriters Beazley delivered record first half profits of $366.4 million (£294 million). Insurance written premiums increased to $2,92 billion from $2,57 billion last year.

CEO Adrian Cox, said: “We have had a successful first half of the year, achieving record profits of $366.4m. Key highlights include significant  growth in our North American property business and momentum in cyber across Europe.”

He added: “Our platform strategy andcapital position have been important drivers in delivering our ambitious growth targets. Looking ahead, I am confident  we are on track to deliver the guidance we set out at the start of the year.”

Beazley manages seven syndicates at Lloyd’s.