Performance managementNavigating the way ahead

Jon Hancock, Performance Management Director at Lloyd’s17 September 2018

Houston Marine & Energy Insurance Conference

2Classification: Confidential

Contents―Market environment― Impacts on Marine class― Impacts on Energy class―Lloyd’s strategic initiatives:

― Performance Management― Innovation― Customers and distribution― Talent― Brexit

―Lloyd’s strengths for now and the future

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Market environment― Insurance market performance increasingly challenged in recent years

― Protectionism, low interest rates, urbanisation, new technology, the changing climate

― Combined ratios generally higher― Attritional loss ratios― Expenses

― 2017 losses are driven by natural catastrophe losses― but that is not the whole story

― We now know what happens ”post event”― Capital re-loads relatively quickly and seamlessly― Pricing reacts modestly

― The market remains competitive, despite heavy losses

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Marine – challenges and impacts

―Excess capacity

―Increasing competition

―Changing world trade patterns

―Larger Cargo losses

―US Marine decline in profit

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US Ocean Marine direct written premiums($

Bill

ions

)

Source: NAIC data, sourced from S&P Global Market Intelligence.Note: U.S. and territories

$3.2

$2.9$2.8 $2.8

$2.9

$3.1$3.1 $3.1

$3.0 $3.0

2008 2009 2010 2011 2012 2013 2014 2015 2016 20172.6

2.7

2.8

2.9

3.0

3.1

3.2

Ocean marine premium volume fell during the global financial crisis . . . but is falling again

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0.021%

0.023%

0.015%

0.015%

0.016%

0.017%

0.018%

0.019%

0.020%

0.021%

0.022%

0.023%

0.024%

1997

1999

2001

2003

2005

2007

2009

2011

2013

2015

2017

Has the market bottomed out?

Sources: Federal Reserve Economic Data; NAIC data, sourced from S&P Global Market Intelligence

Economy grows faster than premium – 30% decline since 2006 peak sign of soft market?

(US ocean marine DWP as % of GDP)

7Classification: Confidential

US marine results, 2007-2017

Com

bine

d ra

tio a

fter d

ivid

ends

Source: Ocean and Inland Marine combined. A.M. Best’s Aggregates and Averages, 2017

88.2

95.6

89.6 88.8

97.999.1

87.085.2 86.1 86.2

93.4

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 201780

85

90

95

100

105

Rate pressures create drag on results

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Energy – some challenges for insurers―Excess capacity

―No meaningful price correction

―Insurer and sector consolidation

―Low oil prices

―Greater self retention

―Changing risk landscape ―cyber attacks up 82% in 2017

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Offshore energy

Source: Willis Towers Watson

If capacity increases, how long can rate firming last?

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Lloyd’s strategic initiatives

Performance Management Innovation

Customers and

distributionTalent

Brexit

Ensuring the market is focused on the future

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Performance Management at Lloyd’s

Risk based oversight

Fit for the future

Sustainable and profitable syndicates and portfolios

Working with regulators

Profitable and innovative growth

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Innovation @ Lloyd’sNew risks such as

cyber and the sharing economy

Changing landscape

drives need for new products

Lloyd’s Lab is an

innovation pipeline

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Customers and distribution

Electronic

Placement Global Data

StandardsCoverholder

Matching

Portal

Regulator

engagement

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Talent at Lloyd’s

Need to compete in global labour pool

Apprentice and graduate schemes

New recruitment practices

Diversity

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Brexit – Lloyd’s Brussels

Licence approval received – May 2018

Lloyd’s insurance company in Brussels

Executive team and Board operational

Same financial ratings as Lloyd’s – June 2018

On track to open 1 January, 2019

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Lloyd’s strengthsUnrivalled specialist underwriting expertise

A well-earned reputation for innovation

An ability to adapt and change throughout our 300 year history

Global reach, with licences in some 200 countries and territories

An industry leading brand that is recognised around the world

Strong financial ratings and strong capital reserves

Potential and capability to grow in developed and emerging markets

Any questions?

Jon Hancock, Performance Management Director at Lloyd’s17 September 2018

Houston Marine & Energy Insurance Conference