Lloyd’s reports 21% return-on-capital for 2024. Shows ability to deliver for investors: Neal
In reporting its full-year results for 2024 this morning, the Lloyd’s insurance and reinsurance market delivered positive returns across both underwriting and investments, while despite a more than doubling of the major claims ratio during the year, still saw the underlying combined ratio come down.
Lloyd’s reported a combined ratio of 86.9%, which is up from 84.0% in 2023, due to the higher major claims burden, with the main drivers of that being hurricane Milton, hurricane Helene, and the Dali Baltimore Bridge collision.
These disasters contributed to an increase in the major claims ratio to 7.8% for 2024, more than double 2023’s 3.5%.
However, an underlying combined ratio of 79.1%, which was improved from 2023’s 80.5%, demonstrates the profitability of the market and the returns being generated by investors that allocate capital to Lloyd’s market insurance and reinsurance opportunities.
For full-year 2024, Lloyd’s has reported profit before tax of £9.6 billion, down on 2023’s £10.7 billion, with the underwriting result coming in a little lower at £5.3 billion, down on 2023’s £5.9 billion, plus an investment return of £4.9 billion, also down on 2023’s £5.3 billion.
Given the hard market has tapered off, investment markets have been more volatile and major loss activity more elevated in 2024, it’s no surprise the result is down on the previous year.
John Neal, Lloyd’s CEO, still called 2024, “one of our most profitable underwriting years in recent history.”
Profitability comes on the back of continued growth, as Lloyd’s reported a 6.5% increase in premiums underwritten in the market, which rose to £55.5 billion in 2024, up from 2023’s £52.1 billion.
Volume was up by 8.5%, while price changes contributed 0.3%, but foreign exchange effects offset the growth by 2.3%.
For investors and allocators Lloyd’s has become increasingly attractive in recent years, not least as it has expanded the range of entry points to the market through the use of insurance-linked securities (ILS) technology.
A 21% return-on-capital for 2024 serves to demonstrate the opportunity for investors that might look to allocate capital to the marketplace.
CEO Neal commented on the results, “The Lloyd’s market has delivered another year of outstanding financial performance, with a superb combined ratio, underlying combined ratio and attritional loss ratio supporting a capital position and claims reserve strength that is as strong as it has ever been.
“This excellent result demonstrates the market’s ability to deliver sustainable and attractive returns for investors, and provide solutions to protect our customers’ balance sheets. I would like to congratulate members of the market for their disciplined underwriting and profitable growth and thank Corporation employees for their commitment and support in 2024.”
Neal added today, “Our market’s ability to continue to deliver sustainable and attractive returns for our investors, and provide the solutions customers need to protect their balance sheets and revenue streams, is underpinned by our relentless focus on sustainable, profitable performance – which will always be our number one priority.”
Highlighting the Lloyd’s market value proposition by saying, “This is built on three distinct areas: strong and consistent financial performance; our relentless focus on underwriting discipline; and the benefits of global scale. These characteristics, alongside our trusted brand, a combination of our heritage and innovation, our expertise and our commitment to customers, create a distinct proposition to investors, but also underwriters, brokers and talent.”
The return on capital at Lloyd’s was 21% for 2024, down on 2023’s significant 25.3%, but taking the seven year average now back to 7.6%.
The two profitable years of 2023 and 2024 have driven significant returns to investors into certain Lloyd’s market strategies, similar to in the ILS market.
These high-return years have helped to expand awareness of the opportunity to invest into insurance and reinsurance business at Lloyd’s, which is set to encourage more capital to that marketplace over time.
As we reported this week, certain large ILS allocators have turned to look more closely at Lloyd’s as they seek diversification within the insurance-linked asset class.
Two years of very strong returns does not make a track-record in many allocators eyes, but with 20%+ returns-on-capital for the Lloyd’s market it is certainly getting more of their attention.
