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Market Presentation:AUSTRALIA
August 2010
Adrian Humphreys COUNTRY MANAGER
> 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
1Core strength > Good Performance
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
1Core strength > Good Performance
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
Source: Market Review Report, 22nd June 2010, Lloyd’s Analysis Team
• 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
Source: Market Review Report, 22nd June 2010, Lloyd’s Analysis Team
• 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
2ACCESSING LLOYD’S > Lloyd’s and Coverholders
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
2ACCESSING LLOYD’S > Lloyd’s and Coverholders
Source: Lloyd’s US MGA Survey
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
Source: Lloyd’s US MGA Survey
• 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’s20
3Lloyd’s Australia Ltd
Lloyd’s Australia > Global Context> Profile> Purpose
© 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
© Lloyd’s25
4Conclusions
© Lloyd’s
Maintaining relationships through delivery
Conclusion > Relationships
Source: Lloyd’s Strategy 2010-2012
4
© Lloyd’s27