Moody's Sees $6.1 B Lloyd's Profits In ?02-?03
NU Online News Service, Sept. 25, 12:09 p.m. EDT?Moody's Investors Service, in its latest forecast for the Lloyd's of London insurance market, finds that Lloyd's could produce around GBP3.7 billion [$6.1 billion] of profit for the 2002 and 2003 years of account,
Moody's said that following a Lloyd's loss of some GBP2.1 billion [$3.5 billion] for 2001, Moody's has increased its forecast profit for 2002 to around GBP1.9 billion [$3.2 billion] and anticipates further profit potential for 2003 of around GBP1.7 billion [$2.8 billion], assuming a "normal" loss year.
Commenting further on its forecasts, Moody's stated that, according to its Underwriting Index, market conditions for the 2002 and 2003 years of account are comparable to those last seen in 1993 and 1994.
With almost full capacity utilization and a relative absence to-date of major loss activity, Moody's has increased its forecast for 2002 to a significant profit of around 14.5 percent of capacity.
Market conditions, Moody's said, have remained exceptionally strong for 2003, with improving conditions in certain sectors off-setting reductions in others, and with overall market conditions remaining similar to 2002.
Assuming a "normal" loss year, Moody's currently predicts a 12 percent return on capacity for the market. Moody's said it expects a wide variance between the results of the best and worst performing syndicates, with a number of syndicate results likely to be around or in excess of 20 percent of capacity.
With regard to the 2001 year of account, Moody's stated that the year was dominated by the impact of WTC. However, the year benefited from a number of syndicates being able to take advantage of the greatly improved rating environment following WTC, while the underlying conditions for 2001 were already markedly improved on the 2000 year.
Notwithstanding this improvement, with a number of WTC-related underwriting issues potentially taking years to resolve, the significant recoverables still due from reinsurers for 2001 and prior-year reserves, and the potential for further deterioration on prior-year reserves, a prudent approach has been taken by Moody's in forecasting the final result.
Mark Hewlett, Managing Director of Moody's European Insurance Division, commented: "Lloyd's looks set to achieve a period of strong profitability for 2002 and 2003 in the current upturn, notwithstanding events such as Hurricane Isabel. However, we remain cautious with regard
to reserves for 2001 and prior in light of the significant reserving issues faced in closing these accounts."
Moody's Lloyd's global forecasts for September 2001: – GBP 2.1 billion [- $3.5 billion] (- 18.7 percent); 2002: + GBP 1.9 billion [$3.2 billion] (+ 14.5 percent) 2003: + GBP 1.7 billion [$2.8 billion] (+12 percent).
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