Lloyd's On 3-Year Profit Streak
A third straight year of profits for Lloyd's was marred by sharp catastrophe losses in 2004, according to a report put out by Benfield Ltd.
The London-based insurance brokerage said the three-year improving results were a positive sign, but that last year's catastrophe losses of ?1.3 billion ($2.3 billion) made 2003 the peak profitability year in which ?1.89 billion ($3.3 billion) was posted.
"Strengthening of prior-year reserves also hit the combined ratio," the report stated. But at 96.9 the figure still compares favorably with its peer group.
Last year the marketplace earned ?1.36 billion ($2.4 billion) in pro forma pre-tax profits.
The report noted that business process reform now underway will be key to Lloyd's success in coming years. "Commercial considerations of competition, press for change and recent regulatory threats have added impetus," Benfield said.
Meanwhile, Lloyd's is at the center of the effort to create more contract certainty with the introduction of a new London Market Principles slip in January of last year.
The response to the new slip, "while encouraging, has not reached all targets set. While individual firms are responsible for attaining this goal, Lloyd's has been instrumental in the implementation plan, which provides the basis for all operators in the London market," Benfield reported.
As for capacity, the 10 percent fall in gross premium in 2004 suggests that underwriters took a more selective underwriting stance than in previous years, Benfield noted.
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