3-Year Loss at Lloyds Forecast at £1 Billion
N.Y. Times, Jan 14, 2000, at C18
LONDON, Jan. 13 (Bloomberg News) -- As the result of incurring high claims, Lloyds of London, the world's largest insurance market, will post losses of £1 billion, or $1.6 billion, in its next three reporting years, according to Chatset Ltd., and insurance market analyst.
The insurance market, also affected by falling rates, is not expected to post a profit until at least 2002.
Under the Lloyds accounting system, earnings are reported three years in arrears to let its syndicates settle claims. Estimates of profit and loss are given in the interim.
"The downward spiral in rates and high claims haven't slackened, and it was underestimated how much this would affect the market," said Charles Sturge, editor at Chatset. "Lloyds won't be in the black for at least two, possibly three years."
Lloyds won't predict 1999 losses until later this year. "We anticipate the results for 1997 to 1999 to be poor due to the turn in market conditions," said Max Taylor, Chairman of Lloyds of London. "The 1998 result will continue to decline."
Intense competition, particularly in the aviation and motor industries, led to a drop in insurance rates in the last couple of years. Weather-related claims have increased, driving down profits at Lloyds.
Chatset said that Lloyds would post a loss of £68 million for 1997, because of falling rates and lower investment returns, Chatset said. Lloyds predicted in May that it would have a profit of £70 million for 1997, then by November had revised this to a loss of £94 million.
Losses of £479 million are expected for 1998 as natural disasters like Hurricane Georges (sic) drove up costs, Chatset said.
The insurance market was also hit by natural disasters in 1999, and total losses are forecast to reach £500 million after the December storms in Europe are added in, Mr. Sturge said.