Lloyd’s of London 2022 financial performance

Lloyd’s of London, the leading marketplace for commercial, corporate and specialty risk solutions, provided a trading update for its 2022 financial performance. 

The full year results will be released on 23 March 2023, and accompanied by guidance on expectations for FY2023. Gross written premiums rose by 19% to £46.7 billion in 2022, and includes 4% volume growth. Net earned premium jumped from £26.7 billion in 2021 to £32.5 billion in 2022.

Preliminary FY 2022 key figures:

  • Gross Written Premium (GWP) increased by over 19% to more than £46bn (FY 2021: £39.2bn) reflecting a combination of growth from the strong USD (8%) direct price increases (8%) and organic growth (3%).
  • The underwriting performance improved more than expected by 1.6 percentage points to deliver a combined ratio of 91.9%, despite major claims of 12.7% including losses arising from the conflict in Ukraine and from Hurricane Ian in Florida.
  • The attritional loss ratio has improved to 48.4% (FY 2021: 48.9%), prior year releases were 3.6% (FY2021: 2.1%) and the expense ratio dropped to 34.4% (FY 2021: 35.5%).
  • The Mark to Market accounting treatment of rising interest rates on fixed income portfolios forced a write down of asset values and is forecast to lead to higher yields and investment returns in future years. The reported investment loss of approximately £3bn (FY 2021: £0.9bn income) is in line with the result reported at the half year. The investment loss has no cash impact, and is expected to be reversed out over the next two to three years as the assets reach maturity. 
  • The investment loss will result in a full year loss before tax of approximately £0.8bn (FY2021: profit £2.3bn).
John Neal, Chief Executive Officer of Lloyd’s

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

John Neal, Chief Executive Officer of Lloyd’s

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

Through the collective intelligence and expertise of the market’s underwriters and brokers, Lloyd’s sharing risk to create a braver world.

The Lloyd’s market offers the resources, capability and insight to develop new and innovative products for customers in any industry, on any scale, in more than 200 territories. 

Lloyd’s of London reports a combined ratio of around 95% at the year-end of 2022, anticipating the same for 2023.

Despite significant reserving, rising interest rates, and investments in private assets through its newly launched investment platform, Lloyd’s market-wide regulatory solvency ratio and central solvency ratio remained stable over 2022.

Lloyd’s announced an improved underwriting profit of £2.6 billion in its 2022 full year results, although a net investment loss of £3.1 billion resulted in an overall loss before tax of £800 million.

lloyds-london-reinsurance-underwriting-roomAfter numerous years of performance improvement, the Lloyd’s market’s underwriting result improved by 53% year-on-year, helping the combined ratio strengthen by 1.6 percentage points to 91.9%, the strongest since 2015.

During the year, major losses of £4.1 billion contributed 12.7% to the combined ratio, resulting in a nat cat ratio of 8.4% compared with 11.2% in 2021.

Lloyd’s holds comfortable capital surpluses in both its half-year 2022 market-wide regulatory solvency ratio of 179% (year-end 2021 177%) and central solvency ratio of 395% (year-end 2021 388%).

S&P expect both market-wide and central solvency ratios to remain robust even in extreme stress scenarios, such as catastrophic events, or if the current inflationary environment continues in 2023 and 2024.

Hurricane Ian was the costliest event of the year for Lloyd’s at £2 billion, followed by the war in Ukraine at £1.4 billion, the eastern Australia floods at a cost of £300 million, and the winter storm Elliot at a cost of £200 million.

While major claims as a percentage of net earned premiums increased, year-on-year, the attritional loss ratio improved from 48.9% to 48.4%. The expense ratio also improved, from 35.5% to 34.4%, which the corporation says is a reflection of its efforts to deliver strong performance and reduce the cost of doing business at the marketplace.

We’re made up of more than 50 leading insurance companies, over 380 registered Lloyd’s brokers and a global network of over 4,000 local coverholders.

Behind the Lloyd’s market is the Corporation: an independent organisation and regulator working to maintain the market’s successful reputation and operation.

Lloyd’s significant exposure to natural catastrophe risk, the challenging macroeconomic environment due to rising inflation, and uncertainty around the Russia Ukraine war provide the potential for volatility in the level of its solvency cover.

This is offset by the stability in the solvency ratio maintained in 2022, better operating performance expectations, and ability to recapitalize when needed.

Yana Keller   by Yana Keller