Press Release

LL 08/08 03/04/2008

Lloyd's announces £3.8 billion (US$7.7bn) profit for 2007

  • Profitable underwriting conditions
  • Strengthened capital resources
  • Continuing focus on underwriting discipline

Lloyd’s, the world’s leading specialist insurance market, today announced a profit of £3,846 million (US$7,654 million) for 2007.

Financial highlights:

  • profit before tax of £3,846 million (US$7,654 million) (2006: £3,662m);
  • combined ratio of 84.0% (2006: 83.1%) compares favourably with an estimated average of 93.8% for US property and casualty insurers (i) 94.7% for US reinsurers (ii) 96.0% for European insurers and reinsurers and, 85.1% for Bermudian insurers and reinsurers (iii);
  • 34% increase in central assets to £1,951 million (US$3,882 million) (2006: £1,454m);
  • investment return up 21% to £2,007m (US$3,994) (2006: £1,661m); and
  • release of surplus reserves of £856m (US$1,703 million) (2006: £270m).

Commenting on the results, Chairman of Lloyd's, Lord Levene, said:

“2007 was another profitable year for Lloyd’s with the market reporting a £3.8 billion (US$7.7 billion) profit and continuing to outperform its major international peers.

“Lloyd’s benefited from a limited exposure to catastrophes but this has resulted in increased pressure on rates across all lines of business. The need to exercise underwriting discipline and maintain a focus on underwriting for profit rather than market share remains essential.”

Lloyd's Chief Executive, Richard Ward, said:

“Lloyd’s is in good shape to meet the challenges that face us but we cannot expect the strong underwriting conditions and low levels of catastrophes to continue. Last year’s softening market conditions reinforced, once again, the need for a clear strategy to enable the market to maintain discipline and strength in the face of increasing competition. As a marketplace we have a responsibility to our policyholders and to ourselves to ensure that we maintain our financial strength and security throughout the course of a cycle.”

Footnotes

Source: Lloyd's Pro forma Financial Statements. Sources i) Insurance Information Institute estimate, ii) Reinsurance Association of America, iii) Company data (8 European companies; 15 Bermudian companies)

Notes to Editors

1. A copy of Lloyd’s 2007 Annual Report can be accessed at www.lloyds.com/2007results

2. A combined ratio is a measure of an insurer’s underwriting profitability based on the ratio of net incurred claims plus net operating expenses to net earned premiums. A combined ratio of 100% is break even (before taking into account investment returns). A ratio less than 100% is an underwriting profit.

3. Central assets include the assets of the Central Fund and the other assets of the Corporation. In aggregate, the value of Lloyd's central assets, excluding the callable layer and the liability in respect of the subordinated debt and securities, amounted to £1,951m at December 2007. The Society financial statements are drawn up under IFRS.

4. Balance due to/from Members and Funds at Lloyd’s represent the aggregate of each member’s resources. These resources operate on a several basis and are only available to meet each member’s share of claims. Central Assets are available at the Council’s discretion to meet the liabilities of any member on a mutual basis.

5. The results ultimately attributable and distributable to members are determined in proportion to their share in each syndicate for each underwriting year of account. In accordance with this, the 2005 year of account has closed at 36 months with a net profit of £340m. This comprises a surplus on 2004 and prior years reinsured into 2005 of £622m and a pure year loss of £282m. Years of account in run-off during 2007 reported a profit of £75m.

6. This press release includes forward-looking statements. These statements are based on currently available information and consistent accounting policies as applied at 31 December 2007. They reflect Lloyd’s current expectations, projections and forecasts about future events and financial performance. All forward-looking statements address matters that involve risks, uncertainties and assumptions. Based on a number of factors, actual results could vary materially from those anticipated by the forward-looking statements. These factors include, but are not limited to, the following:

• Rates and terms and conditions of policies may vary from those anticipated.

• Actual claims paid and the timing of such payments may vary from estimated claims and estimated timings of payments, taking into account the preliminary nature of such estimates.

• Claims and loss activity may be greater or more severe than anticipated, including as a result of natural or man-made catastrophic events.

• Competition affecting the basis of pricing, capacity, coverage terms or other factors may be greater than anticipated.

• Reinsurance placed with third parties may not be fully recoverable, or may not be paid on a timely basis, or such reinsurance from creditworthy reinsurers may not be available or may not be available on commercially attractive terms.

• Developments in the financial and capital markets may adversely affect investments of capital and premiums, or the availability of equity capital or debt.

• Changes in legal, regulatory, tax or accounting environments in relevant countries may adversely affect (i) Lloyd’s ability to offer its products or attract capital, (ii) claims experience, (iii) financial return, or (iv) competitiveness.

• Economic contraction or other changes in general economic conditions could adversely affect (i) the market for insurance generally or for certain products offered by Lloyd’s, or (ii) other factors relevant to Lloyd’s performance.

• The foregoing list of factors is not comprehensive, and should be read in conjunction with other cautionary statements that are included herein or elsewhere. Lloyd’s undertakes no obligation to update or revise any forward-looking statement, whether as a result of new information, future developments or otherwise.

7. Foreign exchange rates may materially fluctuate from the rates prevailing at 31 December 2007 (£1 = US$ 1.99, £1 = €1.36)


For further information, please contact:


Louise Shield

Tel: +44 (0)20 7327 5793 Fax: +44 (0)20 7327 5229 Email: louise.shield@lloyds.com

Bart Nash

Tel: +44 (0)20 7327 6272 Fax: +44 (0)20 7327 5229 Email: bart.nash@lloyds.com

For urgent out of hours media calls Tel: +44 (0)7659 597 825


Lloyd's is the world's leading specialist insurance market. Lloyd's underwriting capacity at 1 January 2008 is £15.95 billion which will be underwritten through 75 syndicates (including SPS and RITC syndicates), managed by 46 managing agents and supported by 176 brokers. It is the world's third largest non-life reinsurer, and is the second largest surplus lines insurer in the US.

Lloyd's is regulated by the Financial Service Authority.