A preliminary combined ratio (CR) of 91.9% compares favourably to a median CR of 95.9% reported by Insurance Insider’s Lloyd’s peer group, in a continuation of a positive trend which began in 2021.
Our peer group – which we compiled for the first time last year – is focused on commercial specialty insurers and reinsurers, with results from only the most comparable divisions stripped out from the group financial statements of large corporates.
This four percentage-point outperformance was largely in line with 2021, when the Lloyd’s market reported an aggregate combined ratio of 93.5% – compared to that year’s peer-group median of 97.5%. This followed a period of multiple years where Lloyd’s underwriting performance was equivalent to that of a bottom-half peer business, as the chart below shows.
Benchmarking Lloyd’s results is a complicated and subjective exercise, given that Corporation management no longer shares its internal peer group publicly. As a result, in 2021, we decided to put together our own cohort of (re)insurance businesses to make a more informed comparison.
Assessing the combined ratio reported by Lloyd’s to the distribution of underwriting results reported by these comparable companies allows us to assess whether changes from year to year are in line with the rest of the global market in which Lloyd’s operates – or whether they represent fundamental improvements specific to business on Lime Street.
A second year of positive performance by this metric will be heartening for market leaders – especially after reporting an increase of 1.5 percentage points on the major claims ratio from 2021 to 2022.
Given these significant losses – mainly from Hurricane Ian and the Russia-Ukraine conflict – continued underwriting improvement at Lloyd’s has been driven by greater control over the market-wide attritional loss ratio and the expense ratio.
Using the same peer-group approach, we can also put recent trends in premium growth at Lloyd’s in context.
After a number of years in which top-line growth lagged the rates of change (on a reported currency basis) disclosed by this publication’s peer group, Lloyd’s appears to have made up considerable ground in 2022.
Market aggregate GWP last year was 1.56x 2016 levels, according to this analysis. The median business in our peer group, meanwhile, reported 2022 premiums equal to 1.62x of 2016 levels.
Year-on-year growth at Lloyd’s was 19%, compared to a peer-group median of 13%.
However, a considerable proportion of this 19% premium growth observed at Lloyd’s last year was a result of favourable movements in exchange rates.
CFO Burkhard Keese explained last week that eight percentage points of growth could be attributed to the strengthening of the US dollar against sterling.
A summary of the 2022 results reported by the businesses in our Lloyd’s peer group can be viewed in the table below. (PartnerRe – whose P&C and specialty segments were included in last year’s analysis – had not released results at the time of writing, and so have been excluded from this year’s preliminary analysis.)
Broadly, the businesses included can be split into four groups: Bermudians, US excess and surplus lines insurers, global P&C reinsurers and the commercial specialty arms of a selection of large global carriers.
Chubb’s overseas general insurance segment reported the lowest 2022 combined ratio of any peer-group business at 84.6%; Scor’s P&C segment was highest at 113.2%.
The biggest year-on-year increases in premiums were observed among the global P&C reinsurance businesses: Hannover Re reported an increase of 26% in that segment of its operations, Scor an increase of 22% and Munich Re an increase of 19%.
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