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Lloyd's of London back to profit
LONDON, England (Reuters) -- British insurance market Lloyd's of London returned to profit in 2002 for the first time in six years, having incurred a huge loss in 2001 after the September 11 attacks on the United States. Lloyd's, which insures 96 percent of the FTSE 100 blue-chip companies, said on Wednesday the profit of £834 million ($1.3 billion) in 2002 was in line with expectations and signalled favourable market conditions in the medium term. Last year, the cost of premiums soared and the number of claims fell by 36 percent -- creating a favourable environment for the specialist commercial insurers that make up the Lloyd's market. "These results demonstrate a very strong performance,'' Chief Executive Nick Prettejohn said in a statement. "The state of the capital market and the continuing actions by many insurers to increase their reserves for past underwriting means that the Lloyd's market should enjoy positive trading conditions in the medium term,'' Prettejohn added. The 315-year old institution, which almost collapsed in the early 1990s, posted a loss of £3.1 billion for 2001, largely due to September 11. That followed huge claims in the early 1990s for asbestos and a string of disasters including the Exxon Valdez crash and Hurricane Andrew, making insurers and their customers nervous that disasters could overwhelm the market again. Lloyd's said the profit figure for 2002 was on a pro forma annual accounting basis, adding that its initial 2002 projection for profit on a three-year accounting basis was £1.484 billion. Prettejohn told reporters the Lloyd's market has remained buoyant -- with high premiums and low claims -- so far in 2003. The market has enough capital to write policies that bring in £14.4 billion in premiums in 2003, and he expects all of that capacity to be used. Central fund insurance in disputeLloyd's also said it had started arbitration proceedings against six insurers involved in its central fund insurance policy that were withholding payment for some claims. It said it was confident of success in the proceedings. The central fund pays claims if the underwriters making up the Lloyd's market run out of money. Lloyd's of London comprises a collection of 71 syndicates -- effectively mini-insurance companies that underwrite risk in the market. Their collected results determine whether the market as a whole made a profit or loss. The central fund policy, which was taken out in 1999, will have cost Lloyd's £78 million in premiums by the time it expires at the end of this year. The insurers that wrote the policy are units of Swiss Re, GE Employers Reinsurance, Hannover Re, St Paul Cos, Chubb Corp. and XL Capital Ltd. Lloyd's dodges equity problemsLloyd's had been expected to report strong profits because the figures measure only the syndicates' underwriting performance and do not include investment returns. Nevertheless, Andrew Moss, director of finance for Lloyd's said that the market's investment return was up around one percent in 2002, largely because syndicates have held cash or bought bonds rather than risk stock markets. As a result, Lloyds has been spared the battering taken by many British and European insurers, whose balance sheets and earnings have been devastated in the past year by the tumbling value of their large equity investments. Lloyds of London is the world's only specialist insurance market, bringing together insurers and companies with a specific risk they want to cover. It does not offer mass-market retail insurance products.
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