Results for the six months ended 30 June 2014 Tuesday, 22 July 2014 - - PowerPoint PPT Presentation

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Cover

Results for the six months ended 30 June 2014

Tuesday, 22 July 2014

Disclaimer notice

Certain statements in the presentation, are or may constitute “forward looking statements”. Such forward looking statements involve risks, uncertainties and

• ther factors which may cause the actual results,

performance or achievements of the company, or industry results, to be materially different from any future results, performance or achievements expressed by such forward looking statements. The information and opinions contained in this presentation are provided as at the date of this presentation and are subject to change without notice. There is no intention, nor is any duty or obligation assumed to supplement, amend, update or revise any of the information contained in this presentation.

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Contents

Pages Overview 4-5 Business update 6 Financials Performance 7-8 Investments 9-10 Reserves 11-12 Financial Commentary 13 In Focus: Specialty Lines and the US 14-20 The Outlook 21-23 Appendix 25-34

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Overview

Overview – strong results in a competitive market

• Profit before income tax of $132.9m (2013 profit: $82.3m)
• Gross written premiums increased 1% to $1,077.7m (2013: $1,066.7m)
• Combined ratio 90% (2013: 89%)
• Rate change on renewal business -1% (2013: 1%)
• Prior year reserve releases of $72.9m (2013: $60.8m)
• Investment return of $46.8m (2013: $0.3m)
• Annualised return on equity of 17% (2013: 12%)
• Interim dividend up 7% to 3.1p

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• Continue to achieve rate increases in specialty lines
• Rates on short tail lines of business under pressure
• More profitable opportunities in small business lines
• Continued expansion in the US
• Continue to attract good people
• Property
• Terrorism
• Surety reinsurance
• Senior Investment Officer

Business update

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Financials

Six months financial performance

6 months ended 30 June 2014 6 months ended 30 June 2013 % increase

Gross written premiums ($m) 1,077.7 1,066.7 1% Net written premiums ($m)* 889.2 758.0 17% Net earned premiums ($m) 804.5 758.8 6% Profit before tax ($m) 132.9 82.3 61% Earnings per share (pence) 13.5 9.3 Dividend per share (pence) 3.1 2.9 Net assets per share (pence) 146.0 152.0 Net tangible assets per share (pence) 135.4 138.0

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* 2014 net written premiums includes $120m benefit from timing of proportional written premiums ceded to reinsurers compared to 2013. Underlying growth in net written premiums is 2%. The timing difference has no impact on net earned premium in the period and will not impact full year net written premiums.

On track to deliver a 2% return in 2014

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43.5 8.5 22.5 36.1 0.3 46.8 46.9 29.0 16.8 46.5 43.0

0.0% 1.0% 2.0% 3.0% 4.0% 0.0 10.0 20.0 30.0 40.0 50.0 60.0 70.0 80.0 90.0 100.0 2009 2010 2011 2012 2013 2014 2nd half 1st half Return $m Investment Return Annualised Investment Return

No material changes to the portfolio

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Cash and Cash Equivalents, 8.5% Fixed Income: Sovereign and Supranational, 44.2% Investment Grade Credit, 33.6% Other Credit, 1.7% Capital Growth Assets, 12.0%

June-14

Cash and Cash Equivalents, 8.7% Fixed Income: Sovereign and Supranational, 47.0% Other Credit, 2.1% Capital Growth Assets, 11.7%

Dec-13

Prior year reserve releases remain stable

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• 2.0%

0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 16.0% 18.0% 20.0% 22.0%

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20 40 60 80 100 120 140 160 180 200 220 2009 2010 2011 2012 2013 2013 HY 2014 HY Specialty lines Political risks and contingency Life accident and health Marine Property Reinsurance % of NEP $m % of NEP

Whole account reserve strength within our target range

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Preferred upper end % above actuarial estimate

6.1% 6.7% 6.4% 6.7% 7.5% 7.4% 8.2% 7.9% 7.4% 6.9% 8.2% 6.0%

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 (HY) Financial year

Financial commentary

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• Robust surplus capital position – revised disclosure at year end
• Restructuring of investment management on track – completion 30 September 2014
• SII on track for 1 January 2016 go live

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In Focus – Specialty Lines and the US

Specialty Lines portfolio since 2008

15 Premium mix

Total SL premium $m 600 650 700 750 800 850 900 950 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 2008 2009 2010 2011 2012 2013 2014 Forecast % of SL premium Healthcare Management Liability Professions Small business Technology & Cyber Treaty Total SL premium

2008 to 2014 rate change by product

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80% 85% 90% 95% 100% 105% 110% 115% 2008 2009 2010 2011 2012 2013 2014 (B) Professions Healthcare Management Liability Technology and cyber Treaty Small Business Total Rate change

• Continue to achieve positive rate increase
• Positive about US economy
• Growth in US
• Focus on growth areas and new business
• Cyber
• Environmental
• Miscellaneous medical
• Crime
• Opening loss ratio for 2014 reverting to pre-recession levels
• Leveraging the different strengths of our Lloyd’s & US platforms

Specialty Lines – business update

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• Distribution
• Coordination
• Concentration
• Definition
• Product development
• Differentiation
• Prioritisation
• Project management
• Full life cycle cost recognition

Priorities for the US in 2014 - 15

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• Underwriting process
• Standardisation and simplification
• Leverage the system
• Invest in automation
• Footprint
• 6 key hubs
• Core products in each hub
• Dovetail with distribution strategy

US originated business for HY 2014 $238.2 (2013: $208.1)

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GWP by Product

• 50.00

100.00 150.00 200.00 250.00 300.00 350.00 400.00 450.00 500.00 10 20 30 40 50 60 70 80 90 100 110 120 130 140 150 160 170 2008 2009 2010 2011 2012 2013 2013 HY 2014 HY Architects and Engineers professional indemnity Technology, Media and Business Services Other specialty lines Property Political risks & contingency Total US premiums Product $m Total US $m

US footprint – 2010 - 2015

* Excludes Homeworkers

San Francisco (CA) 2010 2015 Underwriters 11 16 Products 3 8 Los Angeles (CA) 2010 2015 Underwriters 2 6 Products 1 6 Dallas (TX) 2010 2015 Underwriters 7 Products 6 Chicago (IL) 2010 2015 Underwriters 19 21 Products 7 8 Minneapolis (MN) 2010 2015 Underwriters 2 Products 1 New York (NY) 2010 2015 Underwriters 15 21 Products 5 8 Philadelphia (PA) 2010 2015 Underwriters 10 13 Products 4 6 Atlanta (GA) 2010 2015 Underwriters 11 20 Products 3 9 Farmington (CT) 2010 2015 Underwriters 7 4 Products 4 2 Boston (MA) 2010 2015 Underwriters 9 4 Products 2 3 Miami (FL) 2010 2015 Underwriters 1 Products 1 Total 2010 2015 Underwriters 84 115

• Av. Products Per Office

2.6 5.3

The Outlook

Cumulative rate change since 2001

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50% 100% 150% 200% 250% 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 HY 2014 Underwriting Year Life, accident & health Marine Political risks & contingency Property Reinsurance Specialty lines All divisions Rate Change

• Competition remains intense
• Growth in premium and profit will be challenging in the current environment
• Rate pressure, particularly on short tail catastrophe exposed lines
• We see more attractive opportunities in small business lines
• Continued focus on growth from US operations which are 10 years old this year
• We are expecting to achieve moderate growth in 2014
• Continuing focus on profitable, disciplined underwriting across a diverse portfolio.

Outlook

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Questions?

Any questions?

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Appendix

US interest rates

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0.00% 0.50% 1.00% 1.50% 2.00% 2.50% 3.00% 3.50% US Government Bond Yields US 10 Year Index US 5 Year Index US 2 Year Index

Specialty lines incurred claims remain in line with expectations

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75% 114% 85% 57% 41% 42% 41% 45% 62% 65% 56% 56% 47% 23% 9% 82 115 56 96 275 328 346 358 434 470 431 447 435 450 479 0% 20% 40% 60% 80% 100% 120% 140% 1993- 1996 1997- 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Underwriting Year Net Incurred loss ratio at each development year 6 5 4 3 2 ULR Development

Net ultimate premium $m

Net incurred loss ratio

Diversified portfolio achieves consistent combined ratio through market cycles

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40 60 80 100 120 140 160 2009 2010 2011 2012 2013 2014 HY Year

Life, accident & health

6 months ended 30 June 2014 2013 Gross premiums written ($m) 81.5 56.4 Net premiums written ($m) 62.9 39.0 Net earned premiums ($m) 42.9 45.4 Claims ratio 62% 76% Rate change on renewals 12% (1%) Percentage of business led 77% 78%

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• Significant rate increase
• Improved claims and

combined ratios

Marine

6 months ended 30 June 2014 2013 Gross premiums written ($m) 196.7 197.1 Net premiums written ($m) 163.1 165.2 Net earned premiums ($m) 143.9 131.5 Claims ratio 36% 43% Rate change on renewals (5%) (2%) Percentage of business led 42% 44%

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• Combined ratio of 76%

(2013: 79%)

• Prior year reserve releases
• f $21.3m (2013: $17.0m)
• Rate reduction of -5%

Political risks and contingency

• Reduction in gross premium

driven by increased rate pressure

• Combined ratio of 85%

(2013: 76%)

• Prior year reserve releases
• f $9.4m (2013: $10.2m)

6 months ended 30 June 2014 2013 Gross premiums written ($m) 60.4 63.3 Net premiums written ($m) 47.7 46.0 Net earned premiums ($m) 42.8 46.3 Claims ratio 35% 33% Rate change on renewals (3%) (1%) Percentage of business led 74% 74%

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Property

• Prior year releases of

$14.8m (2013: $5.5m)

• Combined ratio of 88%

(2013: 91%) 6 months ended 30 June 2014 2013 Gross premiums written ($m) 190.7 199.0 Net premiums written ($m) 151.8 130.1 Net earned premiums ($m) 145.9 150.2 Claims ratio 47% 52% Rate change on renewals

• 3%

Percentage of business led 69% 71%

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Reinsurance

• Significant downward

pressure on rates

• Prior year reserve releases
• f $10.1m (2013: $14.9m)

6 months ended 30 June 2014 2013 Gross premiums written ($m) 163.1 170.3 Net premiums written ($m) 124.8 121.1 Net earned premiums ($m) 80.1 70.8 Claims ratio 45% 24% Rate change on renewals (10%) (1%) Percentage of business led 43% 41%

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Specialty lines

• 1% growth in gross

premiums written

• 1% rate increase on renewal

business

• Prior year reserve releases
• f $16.6m (2013: $17.9m)

6 months ended 30 June 2014 2013 Gross premiums written ($m) 385.3 380.6 Net premiums written ($m) 338.9 256.6 Net earned premiums ($m) 348.9 314.6 Claims ratio 61% 62% Rate change on renewals 1% 4% Percentage of business led 95% 95%

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