London, June 2, 2005 – Guy Carpenter & Company, Inc., the leading global risk and reinsurance specialist and a part of the Marsh & McLennan Companies (NYSE: MMC), today announced the release of its third annual review of the Lloyd’s market, The Lloyd’s Market in 2005. According to the report, the market experienced its third consecutive profitable year, posting a pre-tax gain of £1.36 billion in 2004 despite absorbing £1.19 billion of additional catastrophe losses relative to 2003.
“While a record year of natural catastrophe insured losses may have proven problematic for Lloyd’s in the past, the market demonstrated a newly found resilience. As the London market faces a new capital adequacy regime, debates the issue of broker remuneration and focuses on much needed business process reform, Lloyd’s is well placed to take a leading role in addressing these issues – which ultimately benefits our clients worldwide,” said Geoffrey Bromley, Chairman of Guy Carpenter’s European and Asian operations.
The report highlights three key positive indicators for Lloyd’s policyholders in the past year. First, the A.M. Best Company upgraded Lloyd’s financial strength rating to “A” (Excellent). Second, Lloyd’s raised £506 million of subordinated debt from the capital markets for the first time, demonstrating its enhanced financial flexibility and strengthening its mutually held central assets. Finally, a 9% reduction in capacity for 2005 suggests a welcome level of underwriting discipline, which is important if the market is to maintain its record of improved operating performance through the soft part of the cycle. Other major report findings include:
- Strong combined ratio – The combined ratio stood at 96.9%, including 11 points of catastrophe losses and three points of adverse prior year reserve development, which compared favorably with Lloyd’s international peer group.
- Ratings strength – In addition to the upgrade from the A.M. Best Company, the Lloyd’s market maintained its “A” (Strong) rating from Standard & Poor’s in July 2004.
- Commitment to transparency – The introduction of annual accounting in accordance with International Financial Reporting Standards (IFRS) should enhance transparency.
- Increase in net resources – Net resources (total assets minus policyholder and other liabilities) stood at £12.17 billion at the end of 2004 – a 200% increase since 2001.
- Stable capital base – The profile of the capital base has remained relatively stable for 2005, with limited liability corporate vehicles supplying 89.5% of the market’s capacity and unlimited liability Names comprising the remaining 10.5%.
The Lloyd’s Market in 2005 provides further details on market results and trends in Lloyd’s capacity, including market position, underwriting capacity, types of investor and Lloyd’s in the United States. The report also includes information on capital structure, rating agencies and regulation.
Guy Carpenter & Company, Inc. is the world’s leading risk and reinsurance specialist and a part of the Marsh & McLennan Companies, Inc. Guy Carpenter creates and executes reinsurance and risk management solutions for clients worldwide through 2,600 professionals across the globe. The firm’s full breadth of services includes 16 centers of excellence in Accident & Health, Agriculture, Alternative Risk Transfer, Environmental, General Casualty, Investment Banking*, Life & Annuity, Marine & Energy, Professional Liability, Program Manager Solutions, Property, Retrocessional, Structured Risk, Surety, Terror Risk, and Workers Compensation. In addition, Guy Carpenter’s Instrat® unit utilizes industry-leading quantitative skills and modeling tools that optimize the reinsurance decision-making process and help make the firm’s clients more successful. Guy Carpenter’s website address is www.guycarp.com.