Aon Benfield Analytics Releases Lloyd’s Update; 2014 Performance Examined

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Aon Benfield Analytics’ Market Analysis team has released its latest Lloyd’s Update report, which assesses the market’s 2014 financial performance and latest developments.

Key findings in the report include:

The Lloyd’s market began 2015 with 92 active syndicates and slightly reduced underwriting capacity of 拢26.0 billion [$40.4 billion].
This includes over 拢0.5 billion [$0.8 billion] of “sidecar” quota share capacity provided by 14 special purpose syndicates (SPSs).
Eight Lloyd’s managing agents now oversee more than 拢1.0 billion [$1.6 billion] of capacity, namely Catlin, Tokio Marine Kiln, Beazley, Hiscox, Amlin, QBE, Brit and Liberty.
Including sidecar support, the capacity of the 10 largest syndicates aggregates to 拢11.1 billion [$17.3 billion] in 2015, or 42 percent of the total market. Average syndicate capacity stands at 拢331 million [$514.7 million].
China Re Syndicate 2088, a former SPS, now operates on a standalone basis; Syndicate 1884 was launched on April 1, backed by The Standard Club.
SPSs continue to be a popular entry route for new and existing investors, with four new vehicles established so far in 2015. Backers include Credit Suisse Asset Management and Korean Re.
Four Lloyd’s operations gained new owners in the first half of 2015 (Ariel Re, Brit, Catlin and Sportscover) and three further deals await customary approvals (Pembroke, Montpelier and HCC).
Gross premiums written totaled 拢25.3 billion [$39.3 billion] in 2014, up 2 percent at constant exchange rates. Reinsurance volumes fell by 10 percent to 拢8.5 billion [$13.2 billion], driven by lower property catastrophe pricing.
Underwriting profit of 拢2.3 billion [$3.6 billion], (compared with 拢2.6 billion in 2013), equated to a combined ratio of 88.1 percent (86.8 percent in 2013). Prior year reserve releases were stable at 拢1.6 billion [$2.5 billion], providing 8.0 percentage points of benefit.
The total investment return rose by 25 percent to just over 拢1.0 billion [$1.6 billion] in 2014, a yield of 2.0 percent (2013: 1.6 percent), driven by unrealized gains on longer duration bonds.
Overall operating performance remains strong. Pre-tax profit was almost unchanged at 拢3.2 billion [$5.0 billion] in 2014, representing a return on capital employed of 14.7 percent (2013: 16.2 percent).
Overall net resources (capital, reserves and subordinated liabilities) grew by 11 percent to a record level of 拢23.5 billion [$36.5 billion] at December 31, 2014.
Lloyd’s has been liaising closely with the UK regulators over its preparations for the implementation of the Solvency II regime and these are nearing completion.