The capital position of Lloyd’s of London increased significantly during the first half of 2009, due to improved conditions in the investment markets and the advent of new capacity, according to Aon Benfield’s latest research report released today.

The new study, Lloyd’s Update – Evolution, reveals that in the six months to June 30, 2009, Lloyd’s pro forma capital increased by 13% to GBP16bn, and 30% year on year. Meanwhile, gross premiums written increased by 35% from 1H 2008, to GBP13.5bn – largely due to currency movements and firmer pricing in some of the key Lloyd’s markets.

Pro forma pre-tax profits at Lloyd’s rose by 39% to GBP1.3bn, with GBP315mn in prior year reserve releases being offset by the adverse effect of the accounting treatment of foreign exchange on non-monetary items.

Lloyd’s 2009 opening capacity was estimated at GBP17.4bn and, with new players entering the Lloyd’s market during 2009, Aon Benfield estimates current capacity at GBP17.6bn. 

While the investment approach of Lloyd’s remains conservative, the Corporation has benefited from improved investment market conditions in the second quarter of the year. Equities and alternative investments each accounted for 2% of Lloyd’s total invested assets at June 30, 2009, while cash and letters of credit accounted for the largest proportion of invested assets, at 35% of the total. Corporate and government bonds accounted for 32% and 29%, respectively; around 72% of Lloyd’s corporate bond portfolio was rated ‘AA’ or ‘AAA’.

Lloyd’s also took advantage of favorable market conditions to repurchase GBP102mn of subordinated debt during the period, generating a gain of GBP36mn for the Central Fund.

Dominic Christian, Chief Executive Officer International of Aon Benfield, said: “Lloyd’s has continued to prosper during 2009, most significantly with the resolution of the Equitas deal in June. Lloyds' capacity structure in 2008 meant that it did not suffer the same level of capacity loss as other global reinsurance and insurance markets. In 2009, however, while we estimate an increase in Lloyd’s capacity, the Lloyd’s market will face increased competition, as capital at other insurers and reinsurers has rebounded materially in the first nine months of the year. Lloyd’s remains an attractive platform for companies looking to diversify their risk portfolio, and, in line with other insurance and reinsurance markets across the world, it has continued to provide capacity to clients through testing conditions in the wider global financial landscape.”

Late 2008 and early 2009 saw high levels of interest in the Lloyd’s market, as the subscription market model increased its attractions to ceding companies looking to diversify risk – aside from a number of mergers and acquisitions, nine new syndicates were established at Lloyd’s for, or during 2009.

To date, one new syndicate has been announced to commence writing business in 2010.

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About Aon Benfield
Aon Benfield is the world’s premier reinsurance intermediary and capital advisor, providing clients with integrated capital solutions and services. The company offers clients access to every traditional and alternative market in the world, through an international network of offices spanning over 50 countries and more than 4,000 professionals. Its worldwide client base is able to access the broadest portfolio of integrated capital solutions and services, world-class talent, unparalleled global reach and local expertise to best meet their business objectives. Aon Benfield is the industry leader in treaty, facultative and capital markets transactions.

For further information please contact:

David Bogg  
Aon Benfield London 
t: +44 (0)20 7522 4016 
e: david.bogg@aonbenfield.com 

Andrew Wragg  
Aon Benfield London 
t: +44 (0)20 7522 8183 
e: andrew.wragg@aonbenfield.com