Fitch affirms Lloyd’s A+ rating with stable outlook

Ratings agency Fitch has announced its reaffirmation of Lloyd’s ‘A+’ rating, with simultaneous announcements of affirming the Society of Lloyd’s ‘A’ and Lloyd’s Reinsurance Company (China) A+ evaluation.

Fitch also affirmed the rating of Lloyd’s subordinated debt issues at A- and categorised Lloyd’s it as the second largest reinsurer by net earned premium.

These affirmations reflect the consensus in business and analyst circles about the stable outlook for Lloyd’s, informed both by sound business results and steady performance of investments during a time of dramatic economic deterioration.

Ratings results

While acknowledging external factors, such as global economic instability, 2008 as the third worst year of catastrophe losses, and exchange rate fluctuations, Fitch’s affirmation reflects:

• Resilient performance during 2008, noting positive investment returns
• Underwriting performance in line with expectations
• Capital strength maintenance with marginal gains maintained and supportive of rating
• Recent completion of the Equitas Phase 2 deal Elimination of ongoing risk through completion of Equitas Phase 2
• Potential upward trend in premium rates
• Strong global franchise

However, Fitch’s stable outlook assessment was tempered by noting some limitations, including a potential reversal in exchange rate gains during 2009, near term decline in underwriting performance due to elimination of current benefits from reserve releases, and a reasonable expectation of reduced earnings levels below that of the record performance years of 2006 and 2007.

“We’re obviously very satisfied with Fitch’s assessments of the strength and stability of Lloyd’s,” says Luke Savage. “It’s gratifying to see that Lloyd’s conservative investment strategy has been regarded as a positive performance indicator and that underwriting discipline is seen as an essential factor in analysts’ considerations.”