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© Lloyd’s 1
< Picture to go here >
© Lloyd’s 1
Update on Underwriting US risks
Tom Bolt - Director, Performance Management
25th September 2014
© Lloyd’s 2© Lloyd’s 2
Agenda
Market results
North America business
Delegated Authority strategy
Key issues for the market
© Lloyd’s 3© Lloyd’s 3
Results at a glance
3
Source: Lloyd’s pro forma financial statements, Jun 20141 Profit before tax2 Actual in first six months. FY 2013: 1.6% 3 RoC calculated on an annualised basis
30 June 2014 30 June 2013
Profit1 £1.67bn £1.38bn
Gross premiums £14.86bn £15.50bn
Combined ratio 88.2% 86.9%
Investment return2 1.3% 0.5%
Return on capital3 16.5% 14.0%
© Lloyd’s 4
LLOYD’S - 2013 Global premium
Source: Market Intelligence based on Lloyd’s Annual Reports: http://www.lloyds.com/Lloyds/Investor-Relations)
Europe (including UK)
33%
Other Americas
8%
Central Asia & Asia Pacific
12%Rest of
the World
4%
US (including Canada)
43%
US & Canada41% 2012
44% 2011
43% 2010
45% 2009
Other Americas8% 2012
8% 2011
7% 2010
6% 2009
UK + Europe15% + 18% = 33% 2012
16% + 18% = 34% 2011
16% + 20% = 36% 2010
16% + 20% = 36% 2009
Central Asia & Asia Pacific 13% 2012
12% 2011
10% 2010
9 % 2009
© Lloyd’s 5
North America figures in 2013
► Lloyd’s total Gross net premium (GNP): £20.22Bn ($33.76Bn)
► Lloyd’s total US GNP: £8.14Bn ($13.6Bn)
► Lloyd’s total MGA GNP: £6.22Bn ($10.4Bn)
► Total Lloyd’s US MGA GNP: £2.12Bn ($3.54bn)
► Total number of Lloyd’s Coverholders: 3,912
► Lloyd’s US Coverholders: 1,025
► Total numbers of Lloyd’s binders: 8,127
► Lloyd’s US binders: 2,853 (35% )
© Lloyd’s 6
49%
62%
55%
84%
64%
25%
52%
71%
37%
39%547
572
617
732
777
805
1,072
1,440
4,832
7,099
Source: Market Intelligence based on: SNL Financials, (June 2014) and U.S Reporting System (June 2014)
Berkshire Hathaway continue to expand their presence in the E&S market, which they entered in May 2013
Premiums in US$ m and apply to Lloyd’s and domestic US companies only
13%
-4%
15%
5%
4%
-24%
10%
36%
-3%
15%
2013 Loss Ratio
% change from 2012
Please Note: Loss ratios are on a calendar year basis for 2013
THE MARKET – 2013 E&S Top 10
© Lloyd’s 7Source: Market Intelligence based on SNL financial and Lloyd’s US reporting system (May 2014)
Please Note: These figures do not include Reinsurance premiums Gross Signed Premiums as registered by the US reporting system in 2013
1,333
932 909
463
333
241180 169 168 141
0
200
400
600
800
1,000
1,200
1,400
TX CA FL NY LA NY GA SC MA PA
Aviation General Liability Marine & Energy Motor Other Liability PA & Health Pecuniary Loss Property
LLOYD’S - Top 10 E&S states
Property
Energy
Liability
Prop + Liab
2013 Lloyd’s Market Share of E&S Premium by State
39% 23% 28% 21% 32% 25% 29% 29% 17%46%
© Lloyd’s 8Source: Market Intelligence based on: Lloyd’s US reporting system, RAA Reinsurance Underwriting report, SNL Financial, (June 2014)
US LLOYD’S
Licenced ReinsuranceExcess & Surplus lines (E&S)
Note – 1) The figures above for the market include only US based entities plus Lloyd’s figures 2) The above analysis does not include exempt business
US$ 499bn2012 vs 2013
+5%
US$ 47.3bn2012 vs 2013
-2%
US$ 34.3bn2012 vs 2013
+8%
US$ 212m2012 vs 2013
+5%
US$ 5.2bn2012 vs 2013
+6%
US$ 7.1bn2012 vs 2013
+13%
THE MARKET - 2013
Not shown: $1.1 billion Exempt business (interstate railroads, marine builder’s risk, vessels, etc.)
© Lloyd’s 9
LLOYD’S - 2013 US profile
Source: Market Intelligence based on Lloyd’s US reporting system (May 2014)
TotalUS$ 13.6bn
© Lloyd’s 10Source: Market Intelligence based on Lloyd’s US reporting system (May 2014)
28% 28% 30% 32%
29% 29% 30% 29%
43% 43% 40% 39%
0%
20%
40%
60%
80%
100%
120%
2010 2011 2012 2013
Reinsurance
Open MarketCorrespondent
Binding Authority
LLOYD’S – US premium distribution
© Lloyd’s 11
0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2
23
4 4 5 56 6 6 6 6 6 6
71
1
11 1 1
11 1 1
1 11
1
3
4
4 4 34
55 5
65 5
5
5
6.5
8.0
9.1 9.2 8.99.5
12.112.5 12.3
12.812.1 12.1
12.4
13.6
0
2
4
6
8
10
12
14
16
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Pre
miu
m i
n U
S$
bn
Reinsurance
Exempt
E&S
Licenced
YearSource: Xchanging LEG720 (Jan 2014)
LLOYD’S - Premium trends by segment
© Lloyd’s 12
LLOYD’S – Coverholders in the US
Total premium written by Lloyd’s coverholders (MGA’s) in 2013 was US$ 2.9bn Joint outreach to this critical distribution force by London and Lloyd‘s America remains a priority in 2014.
Activities include participation in AAMGA and NAPSLO conferences and support of their member education
efforts (AAMGA University, NAPLSO E&S School)
1
1
13
3
310
159
3
15
11
34
6
22
96
23
16
111
4
5
64 1511
6
8
-
5
28
4
39
5
23
14
-
2
18
11
116
1
4
1
2
3
11
11
3
14
116
1
1
2
8
10
14
4
15
9
39
6
58
8 20
18
8
1211
9
5
113
46
15
20
8
44
1
29
63
5
20 (MD)
11 (RI)
4 (DC)
2 (DE)
25 (CT)
26 (MA)
64 (NJ)
Source: Market Intelligence based on Lloyd’s Delegated Authority Team and country manager (May 2014)
Total Coverholders = 1025 (May 2014)
© Lloyd’s 13© Lloyd’s 13
Class of business % of MGA premium
Global US
A&H £0.59Bn 10% £0.09Bn 4%
Aviation £0.08Bn 1% - 0%
Casualty £1.70Bn 27% £0.56Bn 26%
Casualty Treaty £0.02Bn 0% - 0%
Energy £0.13Bn 2% £0.04Bn 2%
Marine £0.65Bn 10% £0.05Bn 3%
Overseas Motor £0.23Bn 4% £0.08Bn 4%
Property (D&F) £2.37Bn 38% £1.30Bn 61%
Property Treaty £0.07Bn 1% 0.01Bn 0%
UK Motor £0.38Bn 6% - 0%
Total £6.22Bn 100% 2.12Bn 100%
© Lloyd’s 14
By class of business (Licenced, E&S, Exempt and Reinsurance)
Property Treaty
Property (D&F)
Overseas Motor
Marine
Energy
Casualty Treaty
Casualty
Aviation
Accident & Health
Gross Signed Premiums in US$ m
Source: Market Intelligence based on Lloyd’s US reporting system (May 2014)
12,73011,950 11,971 12,326
13,688
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
2009 2010 2011 2012 2013
Total Written Premium grew by 11% (US$ 1.4bn) in 2013
LLOYD’S – All lines premium trends
© Lloyd’s 15© Lloyd’s 15
Planned acquisition cost remained reasonably constant by method of placement….
Source: SBFs 164 2008 – 2014 approved plans
20
08
20
09
20
10
20
11
20
12
20
13
20
14
0%
5%
10%
15%
20%
25%
30%
35%
Direct Binders Outside Direct Lineslips Direct Other
Direct Service Companies RI Other
YOA
Acq
uis
itio
n c
ost
% o
f G
WP
© Lloyd’s 16© Lloyd’s 16
…..however change in business profile causes overall planned acquisition cost to increase
Source: SBFs 164 2008 – 2014 approved plans
20
08
20
09
20
10
20
11
20
12
20
13
20
14
0%
5%
10%
15%
20%
25%
30%
35%
20% 20% 20% 21% 20% 21% 21%
Direct Binders Outside Direct Lineslips Direct Other
Direct Service Companies RI Other Grand Total
YOA
Acq
uis
itio
n c
ost
% o
f G
WP
© Lloyd’s 17© Lloyd’s 17
Delegated Underwriting strategy highlights
► Audit coordination
► Compliance coordination
► Straight through processing
© Lloyd’s 18© Lloyd’s 18
Key issues for the market
► Capital
► Investment Income
► Underlying Economy
► Broker concentration
► Benign Nat Cat
► Frequency and severity
– Casualty
► Portfolio versus Subscription approach
► Regulatory pressure
– Localisation
– Solvency II
– Conduct Standards
© Lloyd’s 19
© Lloyd’s 20