Lloyd’s of London’s underwriting profit nearly doubled in 2023 following ‘outstanding’ year

Lloyd’s of London saw underwriting profit jump last year as rising insurance premiums and a better-than-expected loss environment benefited the insurance marketplace. 

In a trading update published today ahead of its full-year results, slated for release on 28 March, Lloyd’s said gross written premium in the market increased 11.6 per cent last year to £52.1bn. The growth reflected a combination of organic growth (four per cent) and higher prices (seven per cent).

The market’s combined ratio – a measure of underwriting profit that shows claims and costs as a proportion of premiums –  improved by 7.9 percentage points to 84 per cent from 91.9 per cent in 2022. A combined ratio below 100 per cent signals an underwriting profit, while anything above signals a loss. 

The market was boosted by higher returns from its investment portfolio, which is mostly invested in fixed income. The portfolio, held to backup underwriting activity, returned £5.3bn compared to a loss of £3.1bn last year.

The return reflected “the higher interest rate environment” as well as the unwinding of losses on its bond portfolio last year. Last year bond prices, which move inversely to yields, fell forcing Lloyd’s to report mark-to-market losses on the holdings. This has unwound over the past year and higher rates have fed into returns. 

Overall, Lloyd’s of London reported an overall underwriting profit of £5.9bn, up £3.3bn from 2022’s figure of £2.6bn. 

Lloyd’s finance chief Burkhard Keese said: “2023 was an outstanding year for the Lloyd’s market. We continued to see sustainable, profitable growth and performance, leading to our best underwriting result in recent history and a rock solid balance sheet that gives us and our stakeholders confidence in an uncertain environment.

“We will maintain our focus on underwriting and capital discipline and we look forward to announcing our full results and strategic progress later this month.”

A wave of other public insurance groups have also reported strong results in recent weeks. Hiscox, Beazley and Lancashire, all of which have a footprint within Lloyd’s of London, have reported bumper profits off the back of higher prices and lower loss ratios. 

Lancashire reported a profit before tax of $321.5m (£252.6m) for 2023, compared with a $15.5m (£12.2m) loss in 2022 as gross premiums written rose 17 per cent year-on-year to $1.9bn. It also saw a higher investment return at $160.5m (£126.1m) last year, up from a loss of $76.7m (£60.3m) in 2022.

Hiscox’s earnings were boosted by a 36 per cent rise in profit from underwriting, which came in at $492.3m (£388m), as well as a record net investment income of $384.4m (£303m). The latter figure is up from a $187.3m (£148m) loss in 2022.

And finally, Beazley said in its full-year results this morning it had earned pre-tax profits of $1.25bn (£1bn) in the 12 months to December, up from $584m (£458m) the previous year.