Slide 1: Results for the year ended 31 December 2016
Results for the year ended 31 December 2016 Friday, 3rd February 2017
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 2016 4-8 Financials Performance 10 Investments 11-12 Reserves 13-14 Capital 15-16 Underwriting review 17-22 Our vision and strategic priorities 22 Outlook for 2017 23 Appendix 25-30 3
Slide 4: Overview of 2016
Generic title white Overview of 2016
Slide 5: Good performance across the board in 2016
Good performance across the board in 2016 • Profit before income tax of $293.2m (2015: $284.0m) • Return on equity of 18% (2015: 19%) • Gross premiums written increased by 6% to $2,195.6m (2015: $2,080.9m) • Combined ratio of 89% (2015: 87%) • Rate reduction of 2% on renewal portfolio (2015: reducti
Slide 6: Strategic update – a busy year
Strategic update – a busy year • Invested in our teams Hired 63 new underwriters Acquired Leviathan and the Marketform team • Opened or expanded offices in Atlanta, Los Angeles, Miami, Houston, Paris and Birmingham • Launched our SL International business in Europe and RoW Gerard Bloom joined
Slide 7: Sustained high performance
Sustained Cover high performance Gross premiums written ($m) Combined ratio (%) 2,500 125% 2,000 100% 91% 89% 84% 87% 89% 1,500 75% 38% 40% 39% 41% 39% 2,080.9 2,195.6 1,000 1,895.9 1,970.2 2,021.8 50% 500 25% 53% 49% 48% 48% 45% 0 0% 2012 2013 2014 2015 2016 2012 2013 2014 2015 2016 Expense ratio C
Slide 8: Excellent total shareholder return - TSR 21.6% per annum since 31.12.09
Excellent total shareholder return - TSR 21.6% per annum since 31.12.09 425% 400% 375% 350% 325% 300% 275% Shareholder return (%) 250% 225% 200% 175% 150% 125% 100% 75% 50% 25% 0% 31 December 31 December 31 December 31 December 31 December 31 December 31 December 31 December 2009 2010 2011 2012 2013
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 2016 31 December 2015 Gross premiums written ($m) 2,195.6 2,080.9 6% Net premiums written ($m) 1,854.0 1,713.1 8% Net earned premiums ($m) 1,768.2 1,698.7 4% Profit before income tax ($m) 293.2 284.0 3% Earnings per s
Slide 11: Portfolio delivered highest ever investment income
Portfolio delivered highest ever investment income 100.0 7.0% 90.0 6.0% 80.0 30.4 5.0% 70.0 Annualised investment return 36.2 Investment return ($m) 60.0 46.5 4.0% 50.0 14.1 3.0% 40.0 62.7 30.0 2.0% 46.8 20.0 43.3 43.5 36.1 1.0% 10.0 0.0 0.0% 2012 2013 2014 2015 2016 1st half 2nd half Return 11
Slide 12: Minor changes to portfolio mix
Minor changes to portfolio mix 31 December 2016 31 December 2015 Illiquid Credit Assets 2.8% Illiquid Credit Assets 2.0% Hedge Funds 6.7% Hedge Funds 7.3% Equity Linked funds, 2.5% Equity Linked funds 3.3% Cash and Cash Cash and Cash Senior Secured Loans 2.0% Senior Secured Loans 2.5% Equivalents Eq
Slide 13: Prior year reserve releases very stable
Prior year reserve releases very stable 15% 225 14% 210 13% 195 12% 180 11% 165 10% 150 Reserve releases ($m) 9% 135 120 8% 105 7% 90 6% 75 5% 60 4% 45 3% 30 2% 15 1% 0 0% 2012 2013 2014 2015 2016 -15 -1% Specialty lines Political risks and contingency Life accident and health Marine Property Reinsu
Slide 14: Whole account reserve strength within our target range
Whole account reserve strength within our target range Surplus in net held reserves 10.0% Above actuarial estimate (%) 8.2% 8.2% 8.2% 7.9% 7.5% 7.4% 7.4% 7.1% 6.9% 6.7% 6.7% 6.6% 6.4% 6.1% 5.0% 0.0% 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Financial year 14
Slide 15: Capital management discipline continues
Capital management discipline continues • We have returned capital of £717.6m in the past 7 years • This represents 174% of our 2009 post rights-issue market capitalisation 750 180% 700 170% 160% 650 Percentage of market capitalisation at 2009 rights issue 150% 600 140% Funds returned to shareholder
Slide 16: Updated capital position remains strong
Updated capital position remains strong • Group capital requirement Year ended Year ended 31 December 2016 31 December 2015 $m $m Lloyd’s economic capital requirement (ECR) 1,489.2 1,326.9 Capital for US insurance company 107.7 107.7 1,596.9 1,434.6 • Our funding is made up of our own equity (on a S
Slide 17: Underwriting review
Generic title white Underwriting review
Slide 18: Underwriting review – 2016 achievements
Underwriting review – 2016 achievements • Combined ratio of 89% • Growth in gross premiums written of 6% to $2,195.6m Specialty lines, our largest division, achieved growth of 14% 20% growth in locally underwritten US premium • Rating environment remains challenging with reductions of 2% across
Slide 19: Underwriting review
Underwriting review Year ended Year ended % Increase 31 December 2016 31 December 2015 Gross premiums written ($m) 2,195.6 2,080.9 6% Net premiums written ($m) 1,854.0 1,713.1 8% Net earned premiums ($m) 1,768.2 1,698.7 4% Expense ratio 41% 39% Claims ratio 48% 48% Combined ratio 89% 87% Rate change
Slide 20: Cumulative rate changes since 2008
Cumulative rate changes since 2008 120% 115% 110% 105% Rate change (%) 100% 95% 90% 85% 80% 75% 2008 2009 2010 2011 2012 2013 2014 2015 2016 All divisions Life, accident & health Marine Political risks & contingency Property Reinsurance Specialty Lines 20
Slide 21: 2017 underwriting outlook
2017 underwriting outlook • Competitive market conditions expected to continue • Diverse portfolio allows disciplined underwriting approach where competitive pressures are strongest • We see opportunities for growth in 2017 Cyber demand continues to increase Locally underwritten US premium SL
Slide 22: Our vision and strategic priorities
Growth in the US Growth in Small Enterprise (SE) Growth in Asia Pacific Our vision and strategic priorities Sales and Service specialist insurer Innovation and the highest performing Product Development To become, and be recognised as, Growth in Europe Data and Analytics 22
Slide 23: Outlook for 2017
Outlook for 2017 • Political and economic landscape remains uncertain • Premium rates expected to decline across portfolio as a whole • Continue our organic growth strategy by attracting talented teams and individuals • Opportunities for high single digit growth led by our specialty lines business •
Slide 24: Any questions?
Questions? Any questions?
Slide 25: Appendix
Generic title white Appendix
Slide 26: Specialty lines incurred claims remain in line with expectations
Specialty lines incurred claims remain in line with expectations 6 to Latest 140% Specialty lines net incurred loss ratio at each development year 6 5 120% 113% 4 3 2 100% ULR 89% Net incurred loss ratio (%) 77% 80% 73% 74% 70% 67% 62% 64% 60% 52% 54% 49% 48% 45% 42% 40% 28% 20% 11% 3% 0% 1993- 1997
Slide 27: US gross premium growth
US gross premium growth 900 800 700 US gross premiums ($m) 600 500 400 300 200 100 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Architects and engineers professional indemnity Technology, media and business services Other specialty lines Property PCG & marine Accident and health 27
Slide 28: Cumulative rate changes since 2001
Cumulative rate changes since 2001 250% 200% Cumulative rate change (%) 150% 100% 50% 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Life, accident & health Marine Political risks & contingency Property Reinsurance Specialty lines All divisions 28
Slide 29: Portfolio management achieves consistent combined ratio through market cycles
Portfolio management achieves consistent combined ratio through market cycles 160 140 120 Combined ratio (%) 100 80 60 40 2012 2013 2014 2015 2016 Year 29
Slide 30: Performance by division
Performance by division Year ended 31 December 2016 Life, accident & Specialty health Marine PCG Property Reinsurance lines Gross premiums written ($m) 126.6 247.4 118.7 329.7 213.4 1,159.8 Net premiums written ($m) 118.0 220.7 97.6 277.1 141.2 999.4 Net earned premiums ($m) 117.5 223.2 103.6 287.0