£2.9bn was paid to customers impacted by Covid-19
Lloyd’s of London has announced a strong return to profit in its 2021 full year financial results published yesterday (24 March 2022), with an overall pre-tax profit of £2.3bn and a combined operating ratio (COR) of 93.5%.
This is in comparison to the previous financial year – 2020, when Lloyd’s saw a £0.9bn loss and COR of 110.3%.
Overall, this is the best result it has reported for six years. The material turnaround in performance has been driven by the Lloyd’s market’s focus on underwriting profitability and leveraging favourable trading conditions to achieve premium growth.
For example, premium rates increased by 10.9%, continuing the trend of 16 consecutive quarters of positive rate movement.
The drive to improve performance has subsequently resulted in a further 3.0% reduction in attritional loss ratio to 48.9%, down from 51.9% in 2020.
Meanwhile expense ratio was 35.5% compared to 37.2% in 2020 – an improvement of 1.7%.
Lloyd’s focus on sustainable performance and investment in digitalisation through its Blueprint Two programme is designed to continue to drive down expenses.
John Neal, Lloyd’s of London chief executive, said: “As we announce these results today, our thoughts are first and foremost with the people of Ukraine.
“In a world buffeted by increasingly complex and connected risks – from the pandemic to a geopolitical conflict – the Lloyd’s market is standing by its customers and supporting their recovery when things go wrong.”
Lloyd’s continued to provide significant support to its customers around the world, paying £19.9bn of gross claims in 2021.
It also paid £2.9bn to customers impacted by Covid-19, representing 86% of claims to date.
Against a year of heightened natural catastrophe activity, the combined ratio fell to 93.5% – this was 110.3% in 2020 and 97.0% excluding Covid-19.
This was a 16.8% improvement, which Lloyd’s said was a testament its continued focus on achieving sustainable, profitable performance.
The capital and solvency position at Lloyd’s remains very strong and continues to build.
Meanwhile, net resources increased by £2.6bn to £36.6bn, underlining the exceptional strength and resilience of Lloyd’s balance sheet with central solvency and market solvency ratios of 388% and 177% respectively. This was 209% and 147% in 2020.
Neal added: “Against this backdrop, I’m pleased to see the market return to profitability following the decisive action taken in recent years to improve performance.
“The market’s underwriting discipline will enable sustainable profitability in the years to come, coupled with a balance sheet that can support our ambition to grow profitably.”
Lastly, the quality of Lloyd’s balance sheet, protection offered to customers and opportunities for market growth were further reinforced by the announcement in 2021 of a landmark £650m five-year protection for its Central Fund.