Lloyd’s of London reported a strong rise in gross written premiums in 2022 but swung into the red as increasing interest rates forced a revaluation of its assets.
The insurance and reinsurance broker located in London reported a pre-tax loss of £769mln in the 12 months to 31 December 2022 compared to a profit of £2.28bn in 2021 “due to mark-to-market accounting rules on our investments requiring us to mark the value of assets down to reflect prevailing market conditions – in this case, rising interest rates”.
However, this loss is expected to reverse out over the coming years as higher interest rates lead to greater investment returns on our assets, the firm said.
Gross written premiums increased by 19% to £46.7bn from £39.2bn in 2021, including 4% volume growth. Lloyd’s said its focus on sustainable performance resulted in an underwriting profit of £2.6bn, up from £1.7bn a year ago, and a combined ratio of 91.9%, a 1.6 percentage point improvement and the strongest result since 2015.
In a year that saw major losses contribute 12.7% to the combined ratio, including substantial claims from the conflict in Ukraine and Hurricane Ian in the US, Lloyds said it paid out over £21bn to customers.
The attritional loss ratio improved to 48.4% (2021: 48.9%) while the expense ratio improved by 1.1 percentage points to 34.4% (2021: 35.5%), reflecting efforts to deliver strong performance and reduce the cost of doing business at Lloyd's.
The company said its capital and solvency position continues to strengthen, with a central solvency and market-wide solvency ratio of 412% and 181% respectively (2021: 388% and 177%).
Net resources stood at £40.2bn despite the investment loss, demonstrating the exceptional strength and resilience of Lloyd's balance sheet.
Chief executive John Neal said: "Looking to 2023, Lloyd's expects strong premium growth to around £56bn, a combined ratio below 95% and a total investment performance on our assets of more than 3% - enabling us to support customers through the uncertain times ahead."