Lloyd’s says its 2012 half-year net income more than doubled compared to last year because of benign catastrophe activity, but the insurance market warned that loss events in the second half of the year could still weigh on year-end results.
“I am highly conscious that I am writing this during the Atlantic windstorm season,” says John Nelson, chairman, in a statement. “Nevertheless, this is our most profitable first six months in five years.”
In a report released today, Lloyd’s says net income rose from £697 million (U.S. $1.12 billion) in 2011’s first half to £1.53 billion ($2.4 billion) this year.
Nelson went on to say that the “strong figures” were “the result of a benign climate with just a few major events,” citing the sinking of the Costa Concordia earlier this year as one such major event.
Nelson adds that the syndicates had “limited exposure” to U.S. tornadoes and U.K. floods this year.
“However, we cannot count on an extended period of low claims activity lasting until the end of 2012,” he says, adding that the markets should also not rely on investments “to make up for underwriting deficits.”
Nelson says underwriting discipline remained “the top priority” through the first half of the year, and attention to underwriting profit must remain the focus of the markets through the end of the year.
Richard Ward, chief executive officer of Lloyd’s says premium income increase was driven by foreign-exchange rates, price hardening in some lines of some business and inflation in insured values.
“I am confident this growth is consistent with the market taking a prudent approach to underwriting in current conditions,” says Ward.
Lloyd’s reports its combined ratio dropped close to 27 points in the first half of the year to 88.7. Net incurred claims were down 32 percent, or more than £2 billion ($3.42 billion), to £4.58 billion ($7.24 billion).
Investment returns rose 13 percent, or £71 million ($115 million), to £619 million ($978 million).
Gross written premium was up 10 percent over last year, or £1.5 billion ($2.4 billion) to £15 billion ($24 billion).
Ward says Lloyd’s has improved market efficiency with improved “speed and accuracy of claims processes” and adds that further technology improvements are expected in the future, he says.
“As we move into the second half of 2012, we will build on these achievements to ensure that Lloyd’s is even better placed to fulfill its responsibilities to the market and policyholders alike,” Ward says.