Lloyd's reported flat profits for the first half of this year, attributing the result in part to the market's conservative investment mix, while warning that to maintain profitability in a market and economy like this, sound underwriting must prevail.

Lloyd's said its 2010 first-half profit before tax was ?628 million ($942 million at current exchange rate), up just 0.2 percent compared to the same period last year.

The Lloyd's market recorded an accident-year combined ratio for the first six months of June 2010 of 103.3, compared to 95.5 the year before. This was reduced by a prior-year reserve release of 4.6 percent to give an overall combined ratio of 98.7.

The results reflect a period of major losses and extremely challenging investment conditions, according to Lloyd's.

Lloyd's said its investment mix resulted in a positive return of ?597 million ($896 million) during a period of continuing volatility in the financial markets, noting that central assets are at a record high.

“We are quietly satisfied with the result–we turned in a profit,” Lloyd's Chief Executive Richard Ward told National Underwriter. “It's been challenging, with big claims going out–Chile [at] ?1.4B net, that's close to $2 billion net…which is a pretty significant number.”

To still generate a profit despite major catastrophe losses, a lingering recession and a soft commercial insurance market, he said, is “satisfying.”

Mr. Ward added that Lloyd's will be “really focused until the end of the year on underwriting–getting the pricing right, and where the pricing's not right, [being] willing to walk away from business.”

He said Lloyd's careful underwriting is also the focus of performance management, working with the syndicates “in monitoring their performance against the plan that they have agreed to with us.”

At this point, he noted, “2010 doesn't have the hallmarks of a very profitable year, certainly not of a record year, though we've got to wait and see what happens by the end of the year. We still have another three months to go.”

Mr. Ward concluded that the results are also “a reminder of why we're in business, which is to pay claims. It's a reminder that some years we have record profits when we have very benign catastrophe seasons, and then when the catastrophes come, our profits fall–which is not surprising, because we're out there paying the claims that we should be paying.”

He observed that the market is soft and that claims are not sufficient to cause market conditions to change globally. The market is being driven “in part by the economic climates, in part by the surplus of capital in insurance, and probably in part by the previous year's results. And so we need to see capital exit the business before market rates improve,” Mr. Ward said.

Lloyd's Chair Lord Peter Levene added in a statement that “the first six months of 2010 were the costliest on record since we began interim reporting, testing not only Lloyd's but insurers around the globe.”

“While events such as the Chilean earthquake and the Deepwater Horizon loss have proved challenging, paying these claims and supporting our policyholders is what we are here to do,” he said.

“It is a true indication of the strength of the Lloyd's market that despite challenging investment conditions, softening rates and exceptional catastrophic events, we have returned a first-half profit of $942 million,” he concluded.

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Lloyd&#039;s Sees Flat First-Half Profits Thanks To Cat Losses, Soft Market

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Lloyd's Sees Flat First-Half Profits Thanks To Cat Losses, Soft Market