Lloyds of London

Lloyds of London
Lloyds is not a company. Lloyds is a society of individual and corporate members, each of whom accepts insurance risks as members of one or more underwriting syndicates. Individual members are liable to the full extent of their private wealth to meet their insurance commitments, while the corporate entities trade with limited liability

Early Days
Lloyds began as Edward Lloyds side coffee house, located on Tower Street of London The exact date of establishment is unknown, yet evidence exists that Lloyds coffee house was well known by London business circles in 1688

Edwards Coffee House

These types of houses became commercial meeting points, where not only underwriters met, but also a variety of other different businessmen Edward himself was not involved in insurance He provided premises, reliable shipping news and a variety of services to enable ships captains, merchants and other rich men to carry on their business of insuring ships and their cargoes

Initial Underwriting
Lloyds early underwriters were wealthy individuals in the coffee house who agreed to take a share of a risk by signing their names on the policy They would set the amount they were willing to cover In 1691, he moved his business from Tower Street to Lombard Street

Edwards Accomplishments
In the late 1690s, he published his first paper called Lloyds News Shortly after that, Lloyds Weekly London Newspaper became his second Unfortunately he died before his most famous collection, the Lloyds List, was published The first editions were shipped in 1734 Lloyd died in 1713, yet his coffee house continued to prosper as a center for marine insurance

The Bubble Act of 1720

Gave two newly formed corporations the exclusive right to transact marine insurance as corporations: The London Assurance The Royal Exchange

176os
Some underwriters who disapproved gambling insurance broke away They persuaded Thomas Fielding, a Lloyds waiter, to open a New Lloyds Coffee House In 5 years it drove the old Lloyds out of business

1770s
In 1771, nine merchants, underwriters, and brokers formed a committee which took over the premises and appointed two masters to run them Lloyds moved into the Royal Exchange in 1773 By 1774, the Life Assurance Act finally prohibited gambling insurance The decision was successful and prosperous for the insurance business

The Society of Underwriters

In 1769, a number of Lloyds more reputable customers decided to break away and set up a rival establishment that would be devoted strictly to marine insurance Because of the competition, Lloyds was forced to increase their underwriting standards Now, only members of Lloyds of London are allowed to accept insurance business The marine insurance industry was getting a new format, not everyone was allowed to underwrite, but only does accepted by the committee

Lloyds Act of 1871

The Society of Lloyds was incorporated by the Lloyds Act of 1871, which provided the business with a legal basis and laid the foundations of todays market Lloyds has become an international market for insurance risks of almost any type In 1906, Lloyds underwriters met claims from the San Francisco earthquake

Lloyds List
In 1734, Lloyds List was established as a regular weekly publication Lloyd's List is a British publication that gives details of vessel movements, marine casualties, and other information of interest to the merchant shipping community

Present Day
Today, Lloyds has drastically changed from the one in the past Now, insurance can only by written by approved insurance brokers, known as Lloyds brokers There are nearly 29,000 individual underwriting members, or Names, grouped in some 400 underwriting syndicates It is important to know each syndicate is not a partnership Each member is liable only for a personal fraction of any risk.

Risks of Lloyds

Dustin Williams

Marine Insurance

Marine insurance is oldest form of insurance Largest marine insurer in the world

Marine Insurance
Marine rates after 9/11 War-risk charges vs. Pakistan

SPACEHAB laboratory U.S. - $8 million Lloyds - $17.7 million

Aviation Insurance
40% of world aviation insurance is in London Covers losses occurring from manufacturing, use, or operation of aircraft.

Motor Insurance
Largest provider of private motor vehicle insurance in UK 15% of all policies written Least prominent nonlife line of insurance

International Property
Have insured US embassies in the past Created first terrorist attack policy Covers buildings on 10 US military bases Excludes loss of life and chemical/nuclear warfare Being purchased by highrisk areas in NY

Sports Insurance
Willis McGahee injured knee in Championship game Disability coverage began two weeks before injury $20,000 in premium, $2.5 million return (if unable to recover and play again) May collect Jan. 3, 2004

Horse Insurance

Lloyds is recognized as worlds largest thoroughbred horse insurer Support Equine Disease Quarterly, publication of equine disease occurrences

Hacker Insurance
Joined Counterpane Security Inc. to help monitor losses Covers loss of revenue or information assets Repayment and replacement costs Other cyber-damage

Musician/Celebrity Insurance
1920s movie star Bill Turpin insured $20,000 against his eyes uncrossing

Shortly after, Jimmy Durante insured his infamous schnozzola

Musician/Celebrity Insurance
Fred Astaire had $75,000 of insurance for each leg

A $28,000 policy was written against Betty Davis gaining weight

Musician/Celebrity Insurance
Christy Turlington And Claudia Schiffer insured their faces

$1 million

$5 million

Musician/Celebrity Insurance

Lord of the Dance Michael Flatley has 25 million ($39.24 million) of coverage on his legs.

Musician/Celebrity Insurance
Black Crowes vs. Lloyds of London
In Feb. 2001, the Black Crowes filed mulit-million lawsuit Claimed Lloyds demonstrated bad faith and breach of contract

Performance of Lloyds

Idriss Ould

2001 Annual Statement

Second Largest Commercial Insurer Seventh Largest Reinsurer 88 Syndicates 100+ countries Premiums totaled $18 billion

Assets
Bonds Common Stocks Cash Investments Aggregate Write-Ins for Invested Assets Subtotals, Cash, and Invested Assets Premiums and Agents Balances in Collection Interest, Dividends, and Real Estate Income $ 745,013,181 9,656,330 3,905,768 665,865,820 6,993,561,491 8,414,096,822 (646,280) 10,648,760 20,835,522,349

Total

Cash from Operations

Premiums Collected Net of Reinsurance Loss and Loss Adjustment Expenses Paid Underwriting Expenses Paid Cash from Underwriting Net Investment Income Net Cash from Operations
$ (22,748,581) 141,603,640 (3,439,249) (160,912,972) 96,891,754 (64,021,218)

Cash from Investments

$ Bonds Stocks Net Gains (Losses) on Cash and Short-Term Investments Misc. Proceeds Other Invested Assets Net Cash from Investments 1,959,880,238 918,706 8,759,376 (13,409,242) 1,582,567,298 373,581,780

Income Statement
Underwriting Income Investment Income Other Income Capital Surplus Gains (Losses) in Surplus

Underwriting Income
Premiums Earned Losses Incurred Other Underwriting Expenses Net Underwriting Gain (Loss) $ (18,691,571) (140,995,360) (3,439,249) 125,743,038

Investment Income
Net Investment Income Earned Net Realized Capital Gain (Loss) Net Investment Gain (Loss) $ 86,368,756 29,397,966 115,766,722

Sept. 11, 2001

9/11 - Single largest loss of any insurer

Market Share of Premiums

SPLIT OF 2001 PREMIUMS BY BUSINESS TYPE
(source: Lloyd's of London)
35%

30%

25%

20%

15%

10%

5%

0% Acciden oo Aviation arine oods roperty eneral Pecuniar Life

Market Share of Premiums

GE GRAPH C SPL
ou Lo d

PRE

o London

35%

30%

25%

20%

15%

10%

5%

0% USA UK EUROPE ASI/AFR OTHERS

Combined Ratio
INDUSTRY INED RATIOS
(sou ce L o d s o London
140 121.30% 120 108.3% 105.10% 98.6% 100 104% 101.7% 97% 122.4%

80

60

40

20

0 E LLOY 'S OPE S e ue S P/ I e S ISS e A E XL APITAL

en u e

Combined Ratio: 98.6% (2000) 140.3% (2001)

Method of Accounting
Lloyds operates under 3-yr. accounting system Results are not declared until closed Closed 3 years from beginning of year Being phased out to be comparable