Lloyd's of London reported a profit increase of 39 percent for the first six months of this year, but warned that the ongoing effects of the recession and uncertainty over natural catastrophes could still adversely affect year-end results.
The syndicated market reported profits before tax rose by ?373 million (coming to $615 million, at current exchange rates) to ?1.32 billion ($2.18 billion), compared to ?949 million ($1.57 billion) for the same period last year.
The combined ratio rose 2.6 points to 91.6 for the period, which Lloyd's said compares well to its peers in the United States, Bermuda and Europe.
The positive results were credited with "continuing underwriting discipline and a relatively low level of catastrophe claims," a statement from Lloyd's said.
"The first six months result has been achieved in what remain challenging circumstances," the chair of Lloyd's, Lord Peter Levene, said in a statement. "The market is in solid financial shape, and business volumes have increased as a result of brokers and policyholders seeking to use the security of the Lloyd's platform."
However, he warned, "external conditions remain difficult, with the U.S. windstorm season and recessionary trends continuing to pose a threat to the insurance industry."
Chief Executive Officer Richard Ward added that "Lloyd's prudent and conservative approach has ensured that our capital position and ratings remain strong. While we are well placed to take advantage of opportunities through the market's wide product range and distribution channels, our focus must remain on underwriting profitability."
Lloyd's reported investment returns more than doubled to ?708 million ($1.17 billion) compared to ?346 million ($571 million) last year.
In a video posted on the Lloyd's Web site (www.Lloyds.com), Mr. Ward echoed Lord Levene's cautionary notes that while the market's results are encouraging, Lloyd's is wary for the rest of 2009 because of the active hurricane season and recession, "which both remain significant threats for the insurance industry."
While Lloyd's is practicing underwriting discipline, he said underwriters have not seen "significant increases across all lines that some commentators have predicted."
He went on to say that Lloyd's is improving its claims-handling capabilities to gives it "a truly competitive advantage for the market."
Lloyd's continues to grow globally, especially focusing on developing nations–opening new offices in Brazil, establishing a license in Portugal, and coming to an agreement with regulators in Japan for a new business model, he added.
A number of challenges remain as Lloyd's continues to work on "becoming the platform of choice," said Mr. Ward, with the biggest hurdle being regulatory changes that will come about from Solvency II–a new principles-based and risk-based regulatory system for European insurers and reinsurers, scheduled for implementation in 2012.
He said Lloyd's is reviewing its strategic goals in the face of these challenges and will publish an updated strategy early next year.
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