The combined ratio stacks up especially favorably against industry-wide benchmarks including an estimated average of around 100.7 for U.S. property-casualty insurers, 101.2 for U.S. reinsurers, and 101.4 for European insurers and reinsurers, Lloyd's noted.

Lloyd's capacity also continues to expand steadily. The market's capacity to accept insurance premiums stands at some $26.7 billion in 2004, compared with $25.8 billion for 2003 and $21.8 billion for 2002. Lloyd's is the world's second-largest commercial insurer and sixth-largest reinsurance group, with more than 66 syndicates.

These figures bode well for Lloyd's continuing turnaround that began in 2002, when the market reported its first profit in six years after a sustained downturn, including a huge loss from the Sept. 11, 2001 terrorist attack. During the 1990s, Lloyd's suffered heavily and was brought to the verge of collapse by various costly events, including hurricanes, the Exxon Valdez oil spill and unresolved asbestos-related claims.

Lloyd's said its latest results for 2003 reflect strong pricing trends as well as low catastrophe payouts from fewer natural disasters. Its net catastrophe losses added up to $254 million for 2003, compared with $403 million in 2002. (In 2001, catastrophe losses reached nearly $3.8 billion, largely because of the 9/11 claims.)

The financial results in dollars are calculated using conversion rates of $1.79 for one British pound for 2003 and $1.61 for 2002 figures. Exchange rates were a positive factor for Lloyd's bottom line, as the dollar was stronger in 2002 than last year. Lloyd's recorded a $234 million gain last year on currency exchange with a cheaper dollar, compared to a loss of $645 million a year earlier.

Lloyd's said the 2003 profit figure is based on its transitional pro forma annual accounting basis. Using Lloyd's traditional three-year accounting system, the initial profit projection for 2003 comes in at slightly lower $3.186 billion. (Lloyd's will formally start reporting its results on an annual basis next year, using current U.K. GAAP annual accounting procedures.)

Commenting on the 2003 results, its chairman, Lord Peter Levene, said Lloyd's is in “good shape after a year of strong progress.”

Lloyd's Chief Executive Nick Prettejohn also commented that the results represent a further strengthening of the market's balance sheet following 2002s return to profitability. “The 2003 result benefited from favorable external conditions, with strong premium rates and a low financial impact on the market of catastrophic losses,” Mr. Prettejohn stated.

The task now, Mr. Prettejohn said, is to further build on that progress. “The continuing increases to reserves across the industry, and conditions in the capital markets, mean that the need for an underwriting profit is as strong as ever,” he said. “We will continue to take strong action where businesses are under-performing.”

Winifred Baker, president of Lloyd's America Inc., also told National Underwriter that the strong 2003 results “have many positive components.”

“Certainly the premium rates are still strong. And we had a few catastrophes but certainly nothing huge. That has helped,” Ms. Baker said.

Furthermore, Ms. Baker noted various reform efforts that began at Lloyd's in 2002 are going well, and that they are already showing positive results, including introducing a new franchise structure and phasing out the number of “Names” wealthy private investors who backed Lloyd's with underwriting capacity in favor of corporate capital.

“I think the progress being made in London with the Franchise Board, the overseeing of business plans and pushing the reform program has started to pay off a little bit we will see more payoffs from that as we go forward into 2004 and 2005,” Ms. Baker said.

Reproduced from National Underwriter Edition, April 9, 2004. Copyright 2004 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.