Most firms reported lower underwriting profits after a tougher year, but who came out on top?

2014 cor

The six listed Lloyd’s insurers had a tougher year in 2014. Natural catastrophe losses were still relatively low, but heavy competition, particularly in property reinsurance from the capital markets, put pressure on profits, according to GR’s sister title Insurance Times.

The average combined operating ratio across the six insurers studied was 88.2% – 2.5 percentage points worse than 2013’s 85.7%.

Although there was a lighter burden of claims from natural catastrophes, there were still large one-off losses to contend with. In particular the industry was hit by a string of aviation losses during the year, including the cash of two Malaysia Airlines jets.

The companies also received far less benefit from reserve releases from old underwriting years. Four of the six players suffered double digit percentage drops in reserve releases. This was generally because 2013 was a bumper year for releases, which could not be repeated in 2014.

Lloyd’s insurers faced similar conditions during the year, but some performed better than others. Here is a guide to the top performers of 2014.

2014 cor


  • Hiscox was the best-performing underwriter and the best at making money for its shareholders. Its 2014 COR of 83.9% may have been up slightly on 2013’s 83% but it was still almost three percentage points clear of the rest of the pack. Hiscox’s return on equity of 17.1% was just enough to knock Beazley, which had the best ROE last year, off the top spot.
  • While it reported the best COR, Hiscox was also the most heavily reliant on prior-year reserve releases. Releases shaved 13.1 points from the company’s COR – far more than for any of the other listed Lloyd’s players. If reserve releases are stripped out, the picture looks very different. Hiscox drops down to fourth place, and Catlin is the best performer by current year COR.

2014 cy cor


  • Novae was the most improved Lloyd’s insurer from an overall profitability perspective. Profit before tax jumped by 46.3% to £62.6m. The company’s COR was also the least affected by the year’s events. All six listed Lloyd’s insurers suffered COR deterioration, but Novae’s 0.7 percentage point blip was the smallest. The company also enjoyed a 29% increase in investment income.
  • Overall, investment income was mixed at Lloyd’s insurers given the different make-ups of their investment portfolios and which countries their invested assets are most exposed to. Beazley fared best over the year. Its investment income almost doubled to $83m (£55.8m) from $43.3m after falls in UK and US bond yields during the year boosted the value of Beazley’s portfolio. The company also said its portfolio of hedge fund investments had an “excellent year”.
  • The fastest growing Lloyd’s insurer by quite a margin was Catlin. Its gross written premium surged by 412.4%, outstripping even Brit’s 9.8% growth. Expansion in tough market conditions is normally a warning sign, but Catlin’s underwriting performance has been consistently good, so it is unlikely that the company is chasing market share at the expense of profitability. Also, some of the growth came from foreign exchange movements.

2014 roe


Lloyd’s insurers may have had a more challenging year in 2014, but they have come out well overall. Five of the six reported CORs below 90% and Novae, the only one not to do so, had a COR of just 91%, which would be the envy of many larger insurers.

The picture will change considerably next year, when the number of listed Lloyd’s insurers will reduce to four following the acquisitions of Brit by Fairfax and Catlin by XL. It will be interesting to see how the remaining four perform.