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Market Presentation: AUSTRALIA. Adrian Humphreys COUNTRY MANAGER. August 2010. . > www.lloyds.com/MARKETPRESENTATIONS. 1. What is Lloyd's?. 2. ACCESSING LLOYD ’ S. Content. 3. FOCUS ON DISTRIBUTION. 4. LLOYD ’ S AUSTRALIA. 5. Conclusions. 1. What is LLOYD’S?.

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Market presentation australia

Market Presentation:AUSTRALIA

Adrian Humphreys COUNTRY MANAGER

August 2010

>www.lloyds.com/MARKETPRESENTATIONS


1

What is Lloyd's?

2

ACCESSING LLOYD’S

Content

3

FOCUS ON DISTRIBUTION

4

LLOYD’S AUSTRALIA

5

Conclusions


1

What is LLOYD’S?

> History> Strong Results > Good Performance

> Strength and Stability

> Lloyd’s Overview

LLOYD’S ENVIRONMENT

3


LLOYD’S Business> History

1

From Coffee House……to Lloyd’s Members

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

Historical Context

1712 First steam engine

1750s Beginning of the Industrial Revolution

1805 Battle of Trafalgar

1876 Telephone invented


Core strength> Strong Result

1

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

2006

2009

2005

2007

2008

AUD 32,828m

AUD 43,946m

Gross written premiums

AUD 29,964m

AUD 32,732m

AUD 35,970m

83.1%

86.1%

Combined ratio

111.8%

84.0%

91.3%

AUD 3,322m

AUD 3,538m

Investment return

AUD 2,872m

AUD 4,014m

AUD 1,914m

AUD 7,324m

AUD7,736m

Profit before tax

(AUD 206m)

AUD 7,692m

AUD 3,778m

31.4%

23.9%

Return on capital (pre-tax)

(0.9%)

29.3%

13.7%

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


Core strength> Good Performance

1

Lloyd’s continues to do well against its PEERS.

COMBINED RATIO

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


Core strength> Good Performance

1

Lloyd’s strengthened position is recognised by the rating agencies

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

Upgraded

Unchanged

Downgraded

Negative outlook

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


Core strength> Good Performance

1

Lloyd’s strengthened position is recognised by the rating agencies

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

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


Core strength> Strength and Stability

1

Syndicate Level Assets

1

st

Link

AUD 74,800m

Several

Assets

Members

Funds at Lloyd

s

2

nd

Link

AUD 26,318m

Central Fund

AUD 1,996m

Corporation Assets

AUD 286m

Mutual

AUD 1,366m

3

rd

Link

Callable Layer

Assets

Subordinated Debt / Securities

AUD 1916m

Chain of Security provides excellent security and Capital Efficiency

AUD 1.1bn

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


ACCESSING LLOYD’S> 2010 Lloyd’s Overview

1

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

and a robust cycle management is necessary

  • 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

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


2

ACCESSING LLOYD’S?

> Priorities> Coverholders> Initiatives

> Brokers

> Claims

LLOYD’S ENVIRONMENT

11


ACCESSING LLOYD’S> 2010 Lloyd’s Priorities

2

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

  • 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

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


ACCESSING LLOYD’S> Lloyd’s and Coverholders

2

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

  • 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

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


ACCESSING LLOYD’S> Lloyd’s and Coverholders

2

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


ACCESSING LLOYD’S> Lloyd’s and Coverholders

2

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

Source: Lloyd’s US MGA Survey


ACCESSING LLOYD’S> Coverholder Initiative

2

“..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)

  • 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.

Source: Lloyd’s US MGA Survey


ACCESSING LLOYD’S> Coverholder Initiative

2

Distribution findings – Lloyd’s will remain a broker market

  • 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

Source: xx


ACCESSING LLOYD’S> Brokers

2

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

  • 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

Source: Lloyd’s Strategy 2010-2012


australia > Claims services vs Competitors

2

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

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

19


3

Lloyd’s Australia Ltd

> Global Context> Profile> Purpose

Lloyd’s Australia

20


LLOYD’S Business>Global Context

3

Australia is Lloyd’s 4th largest market…

Growth has been steady over the past 10 years

Lloyd’s Top 7 territories

Lloyd

s premiums

(AUD)

14.3bn

56%

44%

US

5.61bn

56%

44%

UK

1.76bn

87%

13%

Canada

1.21bn

76%

24%

Australia

0.99bn

13%

87%

Bermuda

53%

47%

0.77bn

France

53%

47%

Germany

0.55bn

2009 Reinsurance

2009 Direct

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


LLOYD’S Business>Distribution Overview

3

AUD 1,023m

AUD 1,120m

AUD 1,221.8m

+9.5%

+9.1%

TOTAL

Reinsurance

Binding Authorities

Direct

Lloyd’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)

2007 – 2009 LLOYD’S PREMIUMS:BY DISTRIBUTION

2009 LLOYD’S PREMIUM GROWTH:BY DISTRIBUTION

AUD m

Gross Signed Premiums in:million AUD

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

!

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.


LLOYD’S Business>Business Profile

3

AUD 1,222.1m

AUD 1,119.8m

AUD1,023m

+9.5%

+9.1%

TOTAL

Liability

Transit

Aviation

Marine

PA & Health

Motor

Miscellaneous

Property

Lloyd’s premiums are dominated by Property and Liability classes.

Liability experienced the most significant growthduring 2009 at 12.9% (AUD66m).

2007 – 2009 LLOYD’S PREMIUMS:BY CLASS

2009 LLOYD’S PREMIUM GROWTH:BY CLASS

AUD m

Gross Signed Premiums in:million AUD

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

!

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.


LLOYD’S AUSTRALIA>Purpose

3

Promoteand protectthe Lloyd’s brand in Australia and facilitate thedevelopment of new relationships.Gateway to Australian marketwithbroad expertise availableto assist inbusiness development activities.

OFFICE FACILITIES

Australian Team:

General Rep: Adrian HumphreysCompliance Manager:Peter Fryer

General Office: Martina Lee

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 fornew business;

  • Point of contactand primary Lloyd’s market resource.BRAND PROMOTION & PROTECTION

  • Promote the profileof the Lloyd’s brand;

  • Ensure general interests of Lloyd’s are served;Legislative and regulatory compliancewith the law.

View from Lloyd’s Australia Office window – May 2010

  • Meeting Room available

  • Teleconferencing system

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

24


4

Conclusions

25


Conclusion > Relationships

4

Maintaining relationships through delivery

Source: Lloyd’s Strategy 2010-2012



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