LONDON (Reuters) - Insurance market Lloyd’s of London bounced back from a tough 2017 after ditching some loss-making business, although weak investment returns saw first-half pretax profit halve from a year ago.
The market, which covers risks ranging from oil rigs to soccer stars’ legs and recently appointed a new chief executive, racked up a loss of 2 billion pounds last year after losses from catastrophes such as hurricanes and wildfires.
The specialist insurance and reinsurance market reported a pretax profit of 600 million pounds in the first half of 2018, driven by improvements in pricing and growth in some profitable lines, it said in a statement.
However, that lagged the prior year’s 1.2 billion pounds profit as returns on its investments fell to 200 million pounds from 1 billion pounds. It did not give a reason for the weaker investment result.
“These results and return to profit demonstrate the strength of the Lloyd’s market following one of the costliest years for natural catastrophes in the past decade,” outgoing Chief Executive Inga Beale said.
“Whilst these results are welcome, Lloyd’s continues to concentrate on improving the Lloyd’s market’s long-term performance by taking action to address underperforming areas of the market.”
Beale is set to be replaced by former QBE Insurance Group boss John Neal, who starts on Oct. 15.
Lloyd’s of London, which began life in Edward Lloyd’s coffee house in 1688, focused on cutting costs and improving its underwriting performance after last year’s loss, its first in six years.
While the underlying performance showed positive trends, leaving Lloyd’s with its strongest-ever capital position, at 29 billion pounds, this year’s Hurricane Season still has several months to run.
The insurance industry faced record bills from hurricanes, earthquakes and wildfire of over $135 billion last year and global insurers are braced for a hit from Hurricane Florence which battered parts of North Carolina this month.
Risk modelling firm AIR Worldwide said insured losses from winds and the storm surge spurred by Florence will range from $1.7 billion to $4.6 billion. The estimate does not include the impact of ongoing flooding.
Exacerbating troubles for the industry, insured losses in Japan from Typhoon Jebi are expected to be between $3 billion and $5.5 billion. Industry executives have said that a spate of hurricanes similar to 2017 could push up rates this year.
For the first six months of 2018, Lloyd’s reported a combined ratio, a measure of underwriting profitability, of 95.5 percent from 96.9 percent a year earlier. A number below 100 percent indicates a profit.
The marketplace also reported an improvement in its underwriting result to 500 million pounds in the first half, from 400 million pounds a year earlier.
In advance of Brexit, the market is due to start operating a Brussels subsidiary at the start of next year.
“We have also worked tirelessly to secure the Lloyd’s market’s access to the EU27 and our Lloyd’s Brussels subsidiary will start writing business in the European Economic Area from 1 January 2019,” Beale said.
Reporting by Noor Zainab Hussain in Bengaluru; Editing by Adrian Croft and Keith Weir