Central assets drop to £2,446m

Lloyd’s of London’s interim management statement showed that its investments have suffered from volatile financial markets in the first quarter of this year.

Central assets dropped to £2,446m from the £2,475m it held at 31 December last year. Lloyd’s said that most investments were in fixed interest securities. Exposure to corporate bonds was limited and did not include subordinated debt instruments. “However the fund has significant government bond holdings and some of these experienced losses as yield rose in the first quarter, leading to an overall estimated loss of £10m . . . in that period,” it said in a report.

At the same time Lloyd’s announced it would buy back up to £100m of outstanding subordinated debt securities. But Fitch Ratings said this could only marginally improve Lloyd’s quality of capital and would have no rating impact. Its financial strength rating of A+ with stable outlook would not change.

Lloyd’s invited holders of £300m fixed and floating rate notes due to mature in 2024 to sell their debt securities.

It said the securities which were trading at significant discounts compared to their initial issue price would allow it to benefit without materially affecting its capital position.

A spokesman said: “This is a Dutch auction process whereby we ask people to come back to us with a price and from that we decide whether to take them up.

“As an insurer we have to have a lot of capital so we are not willing to jeopardise that. We will only buy back a certain amount, and when the central fund contributions come in from the syndicates our capital position won’t change much.”

The invitation to buy back closed yesterday at 4pm and deals will be settled on 6 May.