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© Lloyd’s 1

Update on Underwriting US risks

Tom Bolt - Director, Performance Management

25th September 2014

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Agenda

Market results

North America business

Delegated Authority strategy

Key issues for the market

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Results at a glance

3

Source: Lloyd’s pro forma financial statements, Jun 20141 Profit before tax2 Actual in first six months. FY 2013: 1.6% 3 RoC calculated on an annualised basis

30 June 2014 30 June 2013

Profit1 £1.67bn £1.38bn

Gross premiums £14.86bn £15.50bn

Combined ratio 88.2% 86.9%

Investment return2 1.3% 0.5%

Return on capital3 16.5% 14.0%

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LLOYD’S - 2013 Global premium

Source: Market Intelligence based on Lloyd’s Annual Reports: http://www.lloyds.com/Lloyds/Investor-Relations)

Europe (including UK)

33%

Other Americas

8%

Central Asia & Asia Pacific

12%Rest of

the World

4%

US (including Canada)

43%

US & Canada41% 2012

44% 2011

43% 2010

45% 2009

Other Americas8% 2012

8% 2011

7% 2010

6% 2009

UK + Europe15% + 18% = 33% 2012

16% + 18% = 34% 2011

16% + 20% = 36% 2010

16% + 20% = 36% 2009

Central Asia & Asia Pacific 13% 2012

12% 2011

10% 2010

9 % 2009

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North America figures in 2013

► Lloyd’s total Gross net premium (GNP): £20.22Bn ($33.76Bn)

► Lloyd’s total US GNP: £8.14Bn ($13.6Bn)

► Lloyd’s total MGA GNP: £6.22Bn ($10.4Bn)

► Total Lloyd’s US MGA GNP: £2.12Bn ($3.54bn)

► Total number of Lloyd’s Coverholders: 3,912

► Lloyd’s US Coverholders: 1,025

► Total numbers of Lloyd’s binders: 8,127

► Lloyd’s US binders: 2,853 (35% )

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49%

62%

55%

84%

64%

25%

52%

71%

37%

39%547

572

617

732

777

805

1,072

1,440

4,832

7,099

Source: Market Intelligence based on: SNL Financials, (June 2014) and U.S Reporting System (June 2014)

Berkshire Hathaway continue to expand their presence in the E&S market, which they entered in May 2013

Premiums in US$ m and apply to Lloyd’s and domestic US companies only

13%

-4%

15%

5%

4%

-24%

10%

36%

-3%

15%

2013 Loss Ratio

% change from 2012

Please Note: Loss ratios are on a calendar year basis for 2013

THE MARKET – 2013 E&S Top 10

© Lloyd’s 7Source: Market Intelligence based on SNL financial and Lloyd’s US reporting system (May 2014)

Please Note: These figures do not include Reinsurance premiums Gross Signed Premiums as registered by the US reporting system in 2013

1,333

932 909

463

333

241180 169 168 141

0

200

400

600

800

1,000

1,200

1,400

TX CA FL NY LA NY GA SC MA PA

Aviation General Liability Marine & Energy Motor Other Liability PA & Health Pecuniary Loss Property

LLOYD’S - Top 10 E&S states

Property

Energy

Liability

Prop + Liab

2013 Lloyd’s Market Share of E&S Premium by State

39% 23% 28% 21% 32% 25% 29% 29% 17%46%

© Lloyd’s 8Source: Market Intelligence based on: Lloyd’s US reporting system, RAA Reinsurance Underwriting report, SNL Financial, (June 2014)

US LLOYD’S

Licenced ReinsuranceExcess & Surplus lines (E&S)

Note – 1) The figures above for the market include only US based entities plus Lloyd’s figures 2) The above analysis does not include exempt business

US$ 499bn2012 vs 2013

+5%

US$ 47.3bn2012 vs 2013

-2%

US$ 34.3bn2012 vs 2013

+8%

US$ 212m2012 vs 2013

+5%

US$ 5.2bn2012 vs 2013

+6%

US$ 7.1bn2012 vs 2013

+13%

THE MARKET - 2013

Not shown: $1.1 billion Exempt business (interstate railroads, marine builder’s risk, vessels, etc.)

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LLOYD’S - 2013 US profile

Source: Market Intelligence based on Lloyd’s US reporting system (May 2014)

TotalUS$ 13.6bn

© Lloyd’s 10Source: Market Intelligence based on Lloyd’s US reporting system (May 2014)

28% 28% 30% 32%

29% 29% 30% 29%

43% 43% 40% 39%

0%

20%

40%

60%

80%

100%

120%

2010 2011 2012 2013

Reinsurance

Open MarketCorrespondent

Binding Authority

LLOYD’S – US premium distribution

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0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2

23

4 4 5 56 6 6 6 6 6 6

71

1

11 1 1

11 1 1

1 11

1

3

4

4 4 34

55 5

65 5

5

5

6.5

8.0

9.1 9.2 8.99.5

12.112.5 12.3

12.812.1 12.1

12.4

13.6

0

2

4

6

8

10

12

14

16

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Pre

miu

m i

n U

S$

bn

Reinsurance

Exempt

E&S

Licenced

YearSource: Xchanging LEG720 (Jan 2014)

LLOYD’S - Premium trends by segment

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LLOYD’S – Coverholders in the US

Total premium written by Lloyd’s coverholders (MGA’s) in 2013 was US$ 2.9bn Joint outreach to this critical distribution force by London and Lloyd‘s America remains a priority in 2014.

Activities include participation in AAMGA and NAPSLO conferences and support of their member education

efforts (AAMGA University, NAPLSO E&S School)

1

1

13

3

310

159

3

15

11

34

6

22

96

23

16

111

4

5

64 1511

6

8

-

5

28

4

39

5

23

14

-

2

18

11

116

1

4

1

2

3

11

11

3

14

116

1

1

2

8

10

14

4

15

9

39

6

58

8 20

18

8

1211

9

5

113

46

15

20

8

44

1

29

63

5

20 (MD)

11 (RI)

4 (DC)

2 (DE)

25 (CT)

26 (MA)

64 (NJ)

Source: Market Intelligence based on Lloyd’s Delegated Authority Team and country manager (May 2014)

Total Coverholders = 1025 (May 2014)

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Class of business % of MGA premium

Global US

A&H £0.59Bn 10% £0.09Bn 4%

Aviation £0.08Bn 1% - 0%

Casualty £1.70Bn 27% £0.56Bn 26%

Casualty Treaty £0.02Bn 0% - 0%

Energy £0.13Bn 2% £0.04Bn 2%

Marine £0.65Bn 10% £0.05Bn 3%

Overseas Motor £0.23Bn 4% £0.08Bn 4%

Property (D&F) £2.37Bn 38% £1.30Bn 61%

Property Treaty £0.07Bn 1% 0.01Bn 0%

UK Motor £0.38Bn 6% - 0%

Total £6.22Bn 100% 2.12Bn 100%

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By class of business (Licenced, E&S, Exempt and Reinsurance)

Property Treaty

Property (D&F)

Overseas Motor

Marine

Energy

Casualty Treaty

Casualty

Aviation

Accident & Health

Gross Signed Premiums in US$ m

Source: Market Intelligence based on Lloyd’s US reporting system (May 2014)

12,73011,950 11,971 12,326

13,688

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

2009 2010 2011 2012 2013

Total Written Premium grew by 11% (US$ 1.4bn) in 2013

LLOYD’S – All lines premium trends

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Planned acquisition cost remained reasonably constant by method of placement….

Source: SBFs 164 2008 – 2014 approved plans

20

08

20

09

20

10

20

11

20

12

20

13

20

14

0%

5%

10%

15%

20%

25%

30%

35%

Direct Binders Outside Direct Lineslips Direct Other

Direct Service Companies RI Other

YOA

Acq

uis

itio

n c

ost

% o

f G

WP

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…..however change in business profile causes overall planned acquisition cost to increase

Source: SBFs 164 2008 – 2014 approved plans

20

08

20

09

20

10

20

11

20

12

20

13

20

14

0%

5%

10%

15%

20%

25%

30%

35%

20% 20% 20% 21% 20% 21% 21%

Direct Binders Outside Direct Lineslips Direct Other

Direct Service Companies RI Other Grand Total

YOA

Acq

uis

itio

n c

ost

% o

f G

WP

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Delegated Underwriting strategy highlights

► Audit coordination

► Compliance coordination  

► Straight through processing

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Key issues for the market

► Capital

► Investment Income

► Underlying Economy

► Broker concentration

► Benign Nat Cat

► Frequency and severity

– Casualty

► Portfolio versus Subscription approach

► Regulatory pressure

– Localisation

– Solvency II

– Conduct Standards

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