News Focus - Lloyd's CFO Goomy about investment.

Wednesday, Apr 08,2009, 11:03:42 AM Click:

Copyright 2009 Timothy Benn Publishing LimitedAll Rights Reserved Reinsurance Magazine

April 6, 2009 Monday

Pg. 6

315 words

News Focus - Lloyd's CFO gloomy about investment.

UK

As with a number of its reinsurance peers, Lloyd's is gloomy about the prospect of achieving any investment returns from 2009.

In an interview with Reinsurance, Luke Savage the corporation's chief financial officer, said: "It's tough. So far in 2009, equities are down for the year and corporate bonds spreads have widened. The only good thing that's going in our favour is interest rate cuts. These are tough conditions; it's not like Lloyd's can be a hedge fund and simply short equities."

Last year was a surprisingly good year for Lloyd's investment return, which rose 2.5%. Although it was less than half of 2007's return of 5.6%, it was better than the returns of some (re)insurers.

The corporation's results - an amalgam of all the syndicates' results - fell to £1.9bn from £3.9bn a year before.

The combined ratio rose to 91.3% from 84%, up strongly because of losses stemming from Hurricanes Ike and Gustav, though Lloyd's pointed out that this was still better than its US and Bermuda-based peers. The fortunes for Lloyd's may be hard to predict, Savage said: "In a market in which it is hard to make any investment returns, we've seen slim but positive movements in rates. At the end of the day, we don't know what our catastrophe claims are going to be. If the wind blows or the earth shakes then it'll have a major affect on syndicates' results."

One of the worries that some market insiders have been pointing to is a projected flood of claims stemming from the financial crisis. In the mid-1990s, syndicates were inundated with claims when energy titan Enron and telecommunications company WorldCom collapsed.

However, Savage said that this scenario is unlikely to be repeated: "At the time of Enron and Worldcom, Lloyd's syndicates had large market share to the insurance of financial institutions; after that, we reduced our exposure and market share. We've learned our lessons."

April 7, 2009