Lloyd's £1.4bn profit forecast

Lloyd's is expected to report a 2002 profit of more than £1.4bn. Analysts said the strong premium rate rises, bolstered by the terrorist attacks of 11 September last year, will push the 314-year-old market into profit.

This will be the market's first year of profit since 1996, when it recorded a profit of £359m.

International credit ratings agency Standard & Poor's (S&P) said it expected "strong profitability" for Lloyd's in a research note. It also affirmed Lloyd's A-rating in insurer financial strength and removed the rating from CreditWatch.

However, S&P analyst Stephen Searby said the estimate could be verified only at the end of 2004, when the 2002 year of account closes, because of the Lloyd's practise of three-year accounting.

He said the estimate would rely on no huge WTC-type losses this year, and conceded the US hurricane season was still to come. The season lasts from July to November.

"The estimate does include a series of events that you would find in a normal catastrophe year," he said.

Searby said between 1996 and the 2001 renewal period, when rates started to improve, Lloyd's poor results had been driven primarily by soft rates, although a series of big losses, such as the European storms, had also had a negative impact.

S&P's outlook for Lloyd's in 2002 was echoed by Fitch Ratings director of insurance David Wharrier, who said Fitch expected the rate upturn to continue this year and into next year.

"With the significant rate increases they've had, and the major classes of business they underwrite, the market itself would be disappointed if they can't take advantage of this," he said. "This has got to be their best chance for a number of years."