Lloyd's of London, the specialist insurance market, said its profit halved in 2008 because of hefty hurricane losses and weaker investment returns.
Lloyd's, which traces its origins back 321 years to a London coffee house where wealthy merchants met to insure ships, reported a 2008 pretax profit of 1.90 billion pounds ($2.8 billion) on Tuesday, down from 3.85 billion in 2007.
Lloyd's said the decline reflected turmoil in global financial markets, which slashed investment returns by 52 percent to 957 million pounds, and also blamed a sharp rise in claims expenses.
Last year ranks as the insurance industry's second most costly on record after hurricanes Ike and Gustav contributed to total catastrophe-related losses of about $50 billion.
The rise in claims pushed Lloyd's 2008 combined ratio — a key measure of profitability which expresses claims and costs as a proportion of premium income — to 91 percent from 84 percent in 2007.
A combined ratio below the 100 percent break-even point denotes an underwriting profit.
PRICE OUTLOOK
Lloyd's Finance Director Luke Savage said global insurance prices look set to rise this year as underwriters seek to recover from last year's jump in claims, but warned that the increase may be moderate.
"We're cautious about the strength of that increase," he told Reuters in an interview. "The January renewals season saw a very modest increase of low single digits."
Savage also said a trend of insurers moving overseas for tax purposes did not pose a competitive threat to Lloyd's, as relocated insurers typically continued to operate in the Lloyd's market.
Two London-listed insurers, Beazley and Brit Insurance, have since the beginning of the year announced plans to relocate to Ireland and the Netherlands respectively.
"When they relocate for tax purposes, it doesn't make Lloyd's any less attractive to them. We don't see this as a threat to Lloyd's," Savage said.
Savage said the number of insurance syndicates doing business at Lloyd's had grown to 72 from 62 in 2004, in a sign the market remains attractive compared with alternative centres such as Bermuda.
Lloyd's, whose annual results aggregate the earnings of its individual syndicates, also said it had total assets of 2.07 billion pounds at the end of 2008, up from 1.95 billion a year earlier.
The assets include those held in Lloyd's central fund, used as a safety net in the event of a syndicate becoming insolvent.
