Lloyd's of London pre-tax profits drop in first half as hurricane payouts begin

Specialist insurance market Lloyd's of London announced on Thursday that it had seen a 16% decline in profits over a "relatively benign" first half of its trading year, and would likely face a challenging second half as it began to make payouts associated with damage caused by recent storms in the Caribbean and US.

Lloyd's posted a pre-tax profit of £1.22bn in the six months leading to 30 June, down from the £1.46bn it had reported just twelve months earlier, as its return on capital also worsened from 11.7% to 8.9%.

However, the unlisted company did improve its amount of gross written premiums by 16% to £18.9bn, and raised its combined ratio, an underwriting measure of profitability wherein a number under 100% indicates a profit, to 98% from 96.9% a year earlier, despite what it called "continuing pressure on pricing from excess capital and low-interest rates."

Chief executive Inga Beale had previously warned that Lloyd's could potentially see losses of £50-150bn as a result of the catastrophic destruction of property and infrastructure caused by hurricanes Harvey and Irma, as well as damage caused by recent earthquakes in Japan, Mexico, Ecuador and Tanzania, bushfires in California and hailstorms in Texas.

"Whilst these results do not cover the current hurricane season in the Caribbean and United States, the market is assessing claims and starting to make payments that will help local communities and businesses get back on their feet as quickly as possible. It is our ability to respond quickly and effectively in times like these that differentiates the Lloyd’s market and is ultimately what we are here to do," said Beale.

"The market is assessing claims and starting to make payments that will help local communities and get businesses back on their feet as quickly as possible," she added.