Lloyd's, the world's specialist insurance and reinsurance market, today announced a full-year 2016 profit of £2.1 billion, even though its combined ratio rose from 90.0% to 97.9%. 2016 was a highly challenging year: continued market pricing pressure, and traditional and alternative capital continuing to flow into the insurance industry.

        Lloyd's major claims for the full year 2016 reached £2.1 billion—the fifth-highest claims total for Lloyd's this century and above the long-term average. The main sources of claims were Hurricane Matthew and the Fort McMurray wildfire in Canada.

        Lloyd's underwriting profit in 2016 was relatively low, but investment returns improved significantly, mainly because falling bond market interest rates raised the fair value of the bonds Lloyd's holds, while the depreciation of sterling boosted foreign exchange income.  

        In addition, the recently announced change of the discount rate to minus 0.75% (the Ogden tables) adversely affected long-term claims liabilities paid in motor reinsurance and direct business and in liability business within the UK, hitting syndicates underwriting such business harder.

        Lloyd's continued to make progress in expanding into major overseas markets. In the U.S. market, Lloyd's maintained its position as a leading provider of excess and surplus lines insurance; more than half of managing agents have joined Lloyd's platform in China; and in India, Lloyd's received approval to establish a reinsurance operation in Mumbai.

        Following the UK's decision to leave the European Union, Lloyd's finalized plans to establish a subsidiary in Brussels, the capital of Belgium. The company will be able to underwrite business in the 27 EU member states and the 3 European Economic Area member states.

        Inga Beale, CEO of Lloyd's, said these annual figures underscore the principal responsibility of the Corporation of Lloyd's as the overseer of the Lloyd's market—delivering real value for capital, and focusing on supervising underwriting and reducing costs.  

        Commenting on Lloyd's 2016 financial results, Inga Beale said:

        "The past year was challenging for the global insurance industry, which faced continued downward pressure. We must do everything possible to support the Lloyd's market, make the platform more attractive, and prove our value to capital."  

        "Our common goal and top priority is to work hard to provide products that fully meet customer needs, keep innovating, and modernize the Lloyd's market. In 2016, Lloyd's cyber insurance business rose sharply, fully demonstrating that the Lloyd's market can respond to and meet customers' real needs in a rapidly changing risk environment in a very timely and effective manner. In 2017, we must continue to prove to the industry that the Lloyd's market remains highly innovative and professional."

        John Nelson, chairman of Lloyd's, said:      

        "The figures in the annual report show that in 2017 we must remain relentlessly focused on underwriting discipline. Our challenge is to work hard to reduce the cost of doing business in order to protect the market's underwriting margin."  

        "This is my final annual report as chairman of Lloyd's. Since Lloyd's launched its long-term 'Vision 2025' strategy in 2012, Lloyd's global reputation and brand influence have been further and significantly enhanced; we have achieved tremendous results in expanding and gaining access to markets around the world; our market modernization program has good momentum; and our financial strength and overall financial performance are proof of, and reward for, the market's professional underwriting capability. All of these achievements enable Lloyd's to maintain the strength to continue fully leveraging its position of advantage in specialist insurance and reinsurance worldwide, while withstanding the test of many risks."

        The company's key operating figures are listed below:

Source: Lloyd's, 2017-05-12