market presentation: australia august 2010 adrian humphreys country manager >

Market Presentation:AUSTRALIA

August 2010

Adrian Humphreys COUNTRY MANAGER

> www.lloyds.com/MARKETPRESENTATIONS

http://www.lloyds.com/MARKETPRESENTATIONS

© Lloyd’s

Conte

nt

1

What is Lloyd's?

Conclusions 5

2

ACCESSING LLOYD’S

3

FOCUS ON DISTRIBUTION

4

LLOYD’S AUSTRALIA

© Lloyd’s3

1What is LLOYD’S?

LLOYD’S ENVIRONMENT

> History> Strong Results > Good Performance > Strength and Stability> Lloyd’s Overview

© Lloyd’s

From Coffee House……to Lloyd’s Members

1LLOYD’S Business > History

1689

Ships and goods insured by wealthy individuals

acting on a personal basis.

Lloyd’s Coffee House; first recorded February

1689.

1800 – 1850s

Development of syndicates

Present Day

iPhone

1712 First steam engine

1750s Beginning of the Industrial Revolution

1805 Battle of Trafalgar

1876 Telephone invented

Historical Context

© Lloyd’s

2009 annual results of a profit before tax of AUD7,736

1Core strength > Strong Result

29.3%

AUD 7,692m

AUD 4,014m

84.0%

AUD 32,732m

AUD 3,778mProfit before tax

AUD 1,914mInvestment return

13.7%Return on capital (pre-tax)

AUD 35,970mGross written premiums

91.3%Combined ratio

Source: Lloyd’s pro forma financial statements, 2009 Interim Results: Rate of Exchange used : 1 GBP = 2 AUD

31.4%

AUD 7,324m

AUD 3,322m

83.1%

AUD 32,828m

(0.9%)

(AUD 206m)

AUD 2,872m

111.8%

AUD 29,964m

AUD7,736m

AUD 3,538m

23.9%

AUD 43,946m

86.1%

2007 2008 2006 2005 2009

© Lloyd’s

Lloyd’s continues to do well against its PEERS.

1Core strength > Good Performance

Sources: Sources i) Insurance Information Institute (estimate-2009), ii) Reinsurance Association of America, iii) Company data (8 European companies: 17 Bermudian companies)

COMBINED RATIO

9792

102101

91

100

86

94

99

84

50

70

90

110

130

Lloyd's US P/C Industry (i) US Reinsurers (ii) European(Re)Insurers (iii)

Bermudian(Re)Insurers (iii)

2005 2006 2007 2008 2009

© Lloyd’s

Lloyd’s strengthened position is recognised by the rating agencies


Sources: Source: AM Best, Fitch and S&P, 2009

-5

-4

-3

-2

-1

0

1

2

Lloyd

's

Berks

hire

Hatha

wayACE

AXA

Hanno

ver R

e

Partn

erRe

Allianz

Zurich

RSA

SCOR XL

Mun

ich R

e

Swiss R

eAIG

Ra

ting

no

tch

es

Upgraded

Unchanged

Downgraded

Negative outlook

S&P rating actions since January 2002 - Lloyd’s IFS rating has been upgraded to A+, despite downgrades in the wider market

© Lloyd’s

Lloyd’s strengthened position is recognised by the rating agencies


Sources: Source: AM Best, Fitch and S&P, 2009

Lloyd’s insurer financial strength (“IFS”) is interactively assessed by three leading insurance rating agencies:

A (Excellent). Stable Outlook.

Affirmed July 2009

A+ (Strong). Stable Outlook.

Affirmed 4 August 2009

A+ (Strong). Stable Outlook.

Affirmed 30 July 2009

© Lloyd’s

Chain of Security provides excellent security and Capital Efficiency

1Core strength > Strength and Stability

Source: Society of Lloyd’s financial statements, Annual Report, (March 2010) - Rate of Exchange used : 1 GBP = 2 AUD

1st Link

2nd Link

3rd Link

Syndicate Level Assets

AUD 74,800m

Members’ Funds at Lloyd’s

AUD 26,318m

Several

Assets

Mutual

Assets

Central Fund AUD 1,996m

Corporation Assets AUD 286m

Subordinated Debt / SecuritiesAUD 1916m

Calla

ble

Layer

AU

D 1,366m

AUD 1.1bn

© Lloyd’s

The impact of Large losses, economic downturn and the rating environment poses various challenges

and a robust cycle management is necessary

1ACCESSING LLOYD’S > 2010 Lloyd’s Overview

…

Source: Market Review Report, 22nd June 2010, Lloyd’s Analysis Team

• Costliest 1st quarter on record : Lloyd’s continues to be impacted by frequency of large losses this year

• CERTAIN CLASSES IMPACTED BY LARGE RISK LOSSES: Energy Market again in “Deepwater” and Aviation is facing another difficult year

• ECONOMIC DOWNTURN : still poses significant threat as further claims deterioration is expected in the medium term

• Rating environment : continues to be softer than plans anticipated

• Cycle management: Robust cycle management is needed as the soft market deepens

© Lloyd’s11

2ACCESSING LLOYD’S?

> Priorities> Coverholders> Initiatives > Brokers> Claims

LLOYD’S ENVIRONMENT

© Lloyd’s

The 2010 Priorities of Lloyd’s have been identified as follows:

2ACCESSING LLOYD’S > 2010 Lloyd’s Priorities


• Performance management - A resolute focus on underwriting discipline and risk management

• Solvency II - Implementing Solvency II at Lloyd’s in a way that protects, and where possible, enhances Lloyd’s capital structure and efficiency

• The Exchange - Increasing adoption and use of The Exchange

• Claims Transformation - Driving a transformation in the way the Lloyd’s market handles claims to enhance the experience of the customer

• Access to business - Improving access to business through streamlining coverholder management strengthening broker relationships and gaining new trading rights

© Lloyd’s

Lloyd’s holds the coverholder market as an important segment of the overall business

2ACCESSING LLOYD’S > Lloyd’s and Coverholders


• Strategically important distribution channel providing Lloyd’s with local expertise, access to local markets without costly operations

• Sources of product innovation and intelligence

• Allows Lloyd’s to access smaller and medium sized risks across different classes and territories

© Lloyd’s

Flexibility, Underwriting Freedom and Extra Capacity were given as the 3 biggest advantages of being a coverholder for Lloyd’s


Source: Lloyd’s US MGA Survey

What are the biggest advantages to your business being an MGA for Lloyd’s?

0%

5%

10%

15%

20%

25%

30%

35%

% o

f re

spon

dent

s

Source: Lloyd's US MGA Survey

© Lloyd’s

The principal factors that would make MGAs choose an insurer other than Lloyd’s are admitted status, coverage, claims payment and ease of doing business



What factors would make you choose to operate an MGA with another insurer ahead of Lloyd’s?

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

% o

f res

pons

es

Source: Lloyd's US MGA Survey.

© Lloyd’s

“..The development of the coverholder channel, subject to proper and appropriate controls, will be a particular area of focus, with the objective of improving both awareness and the efficiency of this distribution channel” (Lloyd’s Strategy 2010 – 2012)

2ACCESSING LLOYD’S > Coverholder Initiative


• Technology & Standards: We want to improve operational efficiency of the coverholder distribution model through information standards and taking advantage of e-trading opportunities.

• Routes to market: We want to make the route to market for new coverholder business as simple and transparent as possible.

• Coverholder experience: We want to make life easier for a coverholder to do business with Lloyd’s.

© Lloyd’s

Distribution findings – Lloyd’s will remain a broker market

2ACCESSING LLOYD’S > Coverholder Initiative

Source: xx

• The Corporation is clear that Lloyd’s is and will remain a broker market

• Brokers are changing – they are increasingly placing in most ‘efficient’ markets and have greater

reach internationally

• Winners will have scale or a strong niche position; Others will be challenged in the near term by the rate of change in Lloyd’s and wider environments

• The Corporation’s focus is on reducing the cost of access to the Lloyd’s market

• Existing Lloyd’s brokers are playing a significant role in managing the change successfully

© Lloyd’s

The corporation has specific actions for the 2010 to maintain and develop market attractiveness

ACCESSING LLOYD’S > Brokers

Source: Lloyd’s Strategy 2010-2012

2

• Support but not cross into the work of the Brokers and Managing Agents

• Make placing businesses into the Lloyd’s Market more efficient

• Support Small Brokers to Develop and Grow

• Undertake Promotional and Educational Activities aimed at existing and potential brokers and coverholders

• Provide more detailed market insight for Managing Agents and Brokers

© Lloyd’s19

The claims services in Lloyd's compared to our peers is very good

australia > Claims services vs Competitors 2

Source ‘The Claims Landscape Claims Monitor 2009’, December 2009, Gracechurch Consulting

© Lloyd’s

Source: Market Intelligence calculation based on Xchanging figures. Rates of exchange calculated using 2009 average – Rate of Exchange used : 1 USD = 1.1 AUD

Australia is Lloyd’s 4th largest market…

Growth has been steady over the past 10 years

3LLOYD’S Business >Global Context

Lloyd’s Top 7 territories

2009 Direct 2009 Reinsurance

Lloyd’s premiums (AUD)

14.3bn

5.61bn

1.76bn

0.99bn

0.77bn

0.55bn

1.21bn

53%

53%

13%

76%

87%

56%

56%

47%

47%

87%

24%

13%

44%

44%

Germany

France

Bermuda

Australia

Canada

UK

US

© Lloyd’s

2007 – 2009 LLOYD’S PREMIUMS: BY DISTRIBUTION

Lloyd’s data is based on Xchanging “REG 258”, (2010); unaudited figures based on country of origin and processing by calendar year; please refer to Appendix for detailed summary of Lloyd’s Data Limitations. !

TOTAL AUD 1,023m AUD 1,120m AUD 1,221.8m

2009 LLOYD’S PREMIUM GROWTH: BY DISTRIBUTION

Binding Authorities Direct Reinsurance

AUD m+9.1%

Gross Signed Premiums in: million AUD

+9.5%

3Lloyd’s premiums continue to grow in Australia, dominated by Binding Authorities and Direct lines.Reinsurance experienced the strongest year-on-year growth of 33% (AUD 74.8m) whilst Binding Authority business increased by 5% (AUD 21.89m)

LLOYD’S Business >Distribution Overview

Source: Market intelligence based on Xchanging; Country Manager soft intelligence, (March 2010): Rate of Exchange used : 1 USD = 1.1 AUD

179 216290

428459

464

416

444

466

-

200

400

600

800

1,000

1,200

2007 2008 2009

74.8

5.5

22.0

-

20

40

60

80

© Lloyd’s

Lloyd’s premiums are dominated by Property and Liability classes.Liability experienced the most significant growth during 2009 at 12.9% (AUD 66m).

2007 – 2009 LLOYD’S PREMIUMS: BY CLASS

Lloyd’s data is based on Xchanging “REG 258”, (2010); unaudited figures based on country of origin and processing by calendar year; please refer to Appendix for detailed summary of Lloyd’s Data Limitations. !

2009 LLOYD’S PREMIUM GROWTH: BY CLASS

Miscellaneous Motor PA & Health

Marine Aviation Transit

Property

Liability

AUD m

Gross Signed Premiums in: million AUD

TOTAL AUD1,023m AUD 1,119.8m AUD 1,222.1m +9.1%+9.5%

3LLOYD’S Business >Business Profile

Source: Market intelligence based on Xchanging; Country Manager soft intelligence, (March 2010): Rate of Exchange used : 1 USD = 1.1 AUD

343 386 415

508513

579

5567

78

5681

57

-

200

400

600

800

1,000

1,200

2007 2008 2009

28.6

11.0

(24.2)

2.2 4.411.0

4.4

66.0

(25)

(15)

(5)

5

15

25

35

45

55

65

75

© Lloyd’s24

Promote and protect the Lloyd’s brand in Australia and facilitate the development of new relationships.Gateway to Australian market with broad expertise available to assist in business development activities.

Australian Team:

General Rep: Adrian HumphreysCompliance Manager: Peter FryerGeneral Office: Martina Lee

OFFICE FACILITIES

RELATIONSHIP FACILITATOR >Work with local market and provide input into coverholder and broker initiatives> Assistance with local market intelligence;> Networking events/promotional & sponsorship activities;> Facilitate introductions for new business;> Point of contact and primary Lloyd’s market resource.

BRAND PROMOTION & PROTECTION > Promote the profile of the Lloyd’s brand;> Ensure general interests of Lloyd’s are served; Legislative and regulatory compliance with the law.

Meeting Room available

Teleconferencing system

SEE ALSO: www.lloyds.com/AUSTRALIA www.lloyds.com/MARKETINTELLIGENCE

View from Lloyd’s Australia Office window – May 2010

LLOYD’S AUSTRALIA >Purpose 3

market presentation: australia august 2010 adrian humphreys country manager >

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