Slide 1: Results for the year ended 31 December 2014
Generic title white Results for the year ended 31 December 2014 Thursday, 5 February 2015
Slide 2: Disclaimer notice
Disclaimer notice Certain statements made in this presentation, both oral and written, are or may constitute “forward looking statements” with respect to the operation, performance and financial condition of the Company and/or the Group. These forward looking statements are not based on historical f
Slide 3: Contents
Contents Pages Overview of 2014 4-8 Financials Performance 10 Investments 11-12 Reserves 13-14 Capital 15-16 Underwriting review 17-21 Our vision and strategy 22 Outlook for 2015 23 Appendix 25-35 3
Slide 4: Overview of 2014
Generic title white Overview of 2014
Slide 5: Strong performance in a competitive market
Strong performance in a competitive market • Profit before income tax of $261.9m (2013: $313.3m) • Return on equity of 17% (2013: 21%) • Gross premiums written increased by 3% to $2,021.8m (2013: $1,970.2m) • Combined ratio of 89% (2013: 84%) • Rate reduction of 2% on renewal portfolio (2013: increa
Slide 6: Continued progress with our strategic initiatives
Continued progress with our strategic initiatives • Combined ratio of 89% in line with our long term average • Growth in gross premiums written of 3% to $2,021.8m US platform generated premiums in excess of $0.5bn for the first time Specialty lines, our largest division, achieved growth of 8% •
Slide 7: Sustained high performance
Sustained Cover high performance 2500 Gross premiums written ($m) 125% Combined ratio (%) 99% 2000 100% 88% 91% 84% 89% 37% 1500 75% 36% 38% 40% 39% 1000 1,895.9 1,970.2 2,021.8 50% 1,741.6 1,712.5 500 62% 25% 52% 53% 49% 45% 0 0% 2010 2011 2012 2013 2014 2010 2011 2012 2013 2014 Expense ratio Claim
Slide 8: Excellent total shareholder return (TSR) and NAV growth
Excellent total shareholder return (TSR) and NAV growth 325% 300% 275% 250% 225% Shareholder return (%) 200% 175% 150% 125% 100% 75% 50% 25% 0% 31 December 2009 31 December 2010 31 December 2011 31 December 2012 31 December 2013 31 December 2014 NAV target range NAV growth TSR growth (RFR +10% p.a.
Slide 9: Financials
Generic title white Financials
Slide 10: Strong performance across all metrics
Strong performance across all metrics Year ended Year ended % Increase / 31 December 2014 31 December 2013 (Decrease) Gross premiums written ($m) 2,021.8 1,970.2 3% Net premiums written ($m) 1,732.7 1,676.5 3% Net earned premiums ($m) 1,658.9 1,590.5 4% Profit before income tax ($m) 261.9 313.3 (16%
Slide 11: Portfolio delivered 1.9% annualised return
Portfolio delivered 1.9% annualised return 100 7.0% 90 6.0% 80 5.0% 70 Annualised Investment Return Investment return ($m) 36.2 60 46.5 4.0% 50 3.0% 40 30 16.8 2.0% 29.0 46.8 43.3 20 36.1 1.0% 10 22.5 8.5 0 0.0% 2010 2011 2012 2013 2014 1st half 2nd half Return 11
Slide 12: Minor changes to portfolio mix
Minor changes to portfolio mix 31 December 2014 31 December 2013 Cash and Cash Cash and Cash Equivalents, 8.2% Equivalents, 8.6% Illiquid credit assets, 1.0% Illiquid credit assets, 0.1% Hedge funds/uncorrelated Hedge funds/uncorrelated strategies, 8.3% strategies, 8.4% Equity linked Equity linked f
Slide 13: Continued prior year reserve releases
Continued prior year reserve releases 15.0% 225 14.0% 210 13.0% 195 12.0% 180 11.0% 165 10.0% 150 Reserve releases ($m) 9.0% 135 120 8.0% 105 7.0% 90 6.0% 75 5.0% 60 4.0% 45 3.0% 30 2.0% 15 1.0% 0 0.0% 2010 2011 2012 2013 2014 -15 -1.0% Specialty lines Political risks and contingency Life accident a
Slide 14: Whole account reserve strength within our target range
Whole account reserve strength within our target range 10% 8.2% 8.2% 7.9% Above actuarial estimate (%) 7.5% 7.4% 7.4% 7.1% 6.9% 6.7% 6.7% 6.4% 6.1% 5% 0% 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 14
Slide 15: Capital management discipline continues
Capital management discipline continues • We have returned capital of $711.6m in the past 6 years • This represents 112% of our 2009 post rights-issue market capitalisation 800 120% 750 110% Percentage of market capitalisation at 2009 rights issue 700 100% 650 Funds returned to shareholders ($m) 600
Slide 16: Updated capital position remains strong
Updated capital position remains strong • Group capital requirement: Year ended Year ended 31 December 2014 31 December 2013 $m $m Lloyd’s economic capital requirement (ECR) 1,359.0 1,321.8 Capital for US insurance company 107.7 107.7 1,466.7 1,429.5 • Our funding is made up of our own equity (on a
Slide 17: Underwriting review
Generic title white Underwriting review
Slide 18: Underwriting review – 2014 achievements
Underwriting review – 2014 achievements • Combined ratio of 89% • 3% growth achieved on gross premiums written in 2014 19% growth in locally underwritten US premiums to $537.0m • 2014 rate reduction on renewals 2% • Favourable claims experience including lower than average catastrophe activity • W
Slide 19: Underwriting review
Underwriting review Year Ended Year Ended 31 December 2014 31 December 2013 Gross premiums written ($m) 2,021.8 1,970.2 Net premiums written ($m) 1,732.7 1,676.5 Net earned premiums ($m) 1,658.9 1,590.5 Expense ratio 40% 39% Claims ratio 49% 45% Combined ratio 89% 84% Rate change on renewals (2%) 1%
Slide 20: Cumulative rate changes since 2008
Cumulative rate changes since 2008 120% 115% 110% Rate change (%) 105% 100% 95% 90% 2008 2009 2010 2011 2012 2013 2014 All divisions 20
Slide 21: Cumulative rate changes since 2008
Cumulative rate changes since 2008 120% 115% 110% Rate change (%) 105% 100% 95% 90% 2008 2009 2010 2011 2012 2013 2014 Life, accident & health All divisions 20
Slide 22: Cumulative rate changes since 2008
Cumulative rate changes since 2008 120% 115% 110% Rate change (%) 105% 100% 95% 90% 2008 2009 2010 2011 2012 2013 2014 Life, accident & health Marine Political risks & contingency Property Reinsurance All divisions 20
Slide 23: Cumulative rate changes since 2008
Cumulative rate changes since 2008 120% 115% 110% Rate change (%) 105% 100% 95% 90% 2008 2009 2010 2011 2012 2013 2014 Life, accident & health Marine Political risks & contingency Property Specialty Lines Reinsurance All divisions 20
Slide 24: 2015 underwriting outlook
2015 underwriting outlook • Rating trends expected to continue Increasing competition in large risk market Positive effect of US and UK economic growth • Continued opportunities for moderate growth Specialist SME products US strategy: target growth by offering more products in our major US o
Slide 25: Our vision and strategy
Our vision and strategy Our strategy is directed towards the achievement of our vision – to become, and be recognised as, the highest performing specialist insurer – and comprises: • Prudent capital allocation to achieve a well diversified portfolio that is resistant to shocks in any individual line
Slide 26: Outlook for 2015
Outlook for 2015 • Diversified and well balanced portfolio allowing flexibility in a competitive market • Difficult market for premium growth - US platform increasingly valuable • Rating environment to remain challenging • Further investment in people and products • Continue to grow organically 23
Slide 27: Any questions?
Questions? Any questions?
Slide 28: Appendix
Generic title white Appendix
Slide 29: Specialty lines incurred claims remain in line with expectations
Specialty lines incurred claims remain in line with expectations 140% 6 to latest 6 Net incurred loss ratio at each development year 5 4 3 2 ULR 115% 120% 100% Net incurred loss ratio (%) 89% 80% 74% 71% 70% 62% 62% 60% 60% 51% 52% 48% 48% 45% 40% 28% 20% 15% 0% 1993- 1997- 2001 2002 2003 2004 2005
Slide 30: US gross premium over years
US gross premium over 10 years 600 500 400 US gross premiums ($m) 300 200 100 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Architects and Engineers professional indemnity Technology, Media and Business Services Other specialty lines Property PCG, Marine & Accident and Health 27
Slide 31: Cumulative rate changes since 2001
Cumulative rate changes since 2001 250% 200% Cumulative rate change (%) 150% 100% 50% 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Life, accident & health Marine Political risks & contingency Property Reinsurance Specialty lines All divisions 28
Slide 32: Portfolio management achieves consistent combined ratio through market cycles
Portfolio management achieves consistent combined ratio through market cycles 160 140 120 Combined ratio (%) 100 80 60 40 2010 2011 2012 2013 2014 29
Slide 33: Life accident & health
Life accident & health Year ended 31 December 2014 2013 Gross premiums written ($m) 132.2 100.3 Net premiums written ($m) 113.7 96.1 • 32% increase in gross premiums written Net earned premiums ($m) 103.0 95.4 • Positive rate change, mainly in Australian business Claims ratio 60% 74% Rate change on
Slide 34: Marine
Marine Year ended 31 December 2014 2013 Gross premiums written ($m) 325.2 315.9 Net premiums written ($m) 289.9 282.1 • 3% increase in gross premium written • Combined ratio of 78% (2013: 72%) Net earned premiums ($m) 282.6 264.4 • Prior year reserve releases of $40.2m (2013: $47.3m) Claims ratio 38
Slide 35: Political risks and contingency
Political risks and contingency Year ended 31 December 2014 2013 Gross premiums written ($m) 123.2 131.2 Net premiums written ($m) 101.2 110.1 • Combined ratio of 78% (2013: 50%) • Dubai office opened Net earned premiums ($m) 96.9 98.6 Claims ratio 27% 5% Rate change on renewals (2%) (1%) Percentage
Slide 36: Property
Property Year ended 31 December 2014 2013 Gross premiums written ($m) 344.7 371.4 Net premiums written ($m) 297.6 308.7 • Combined ratio consistent at 86% (2013: 84%) Net earned premiums ($m) 287.9 302.6 • Focus on smaller risks • Continued positive contribution to group’s profitability Claims ratio
Slide 37: Reinsurance
Reinsurance Year ended 31 December 2014 2013 Gross premiums written ($m) 200.8 221.6 Net premiums written ($m) 153.8 171.5 • Combined ratio of 69% (2013: 49%) • Significant rate pressure Net earned premiums ($m) 160.1 165.3 Claims ratio 37% 18% Rate change on renewals (10%) (3%) Percentage of busine
Slide 38: Specialty lines
Specialty lines Year ended 31 December 2014 2013 Gross premiums written ($m) 895.7 829.8 Net premiums written ($m) 776.5 708.0 • 8% increase in gross premiums written • Combined ratio of 98% (2013: 97%) Net earned premiums ($m) 728.5 664.2 • Contribution to group profit of $71.8m (2013: $53.2m) • Pr