Lloyd's makes £1.35bn profit, but seeks tax cut to compete with Bermuda

Lloyd's has pledged to keep up the pressure on the government to reduce the burden of tax on UK insurers.

Julian James, Lloyd's director of worldwide markets, said Lloyd's was still in discussions with the Treasury over the level of corporation tax.

He admitted that the recent announcements by Lloyd's insurers Hiscox and Omega of their intentions to redomicile to Bermuda to take advantage of a lower tax regime had added to the pressure for a more positive tax package.

"Clearly it is very difficult for the UK as a whole to compete with an effective 0% regime for corporation tax," James explained. "[Redomiciling] is a trend that we cannot ignore and that is why we are talking to the Treasury about what is being done about the issue."

The Treasury minister responsible for Lloyd's is understood to have emphasised the importance for the corporation and the market to show a united front. Lord Levene's appointment to a high-level committee, chaired by Gordon Brown, is also thought to be a positive move towards an improved tax regime for Lloyd's.

But Andrew Green, tax partner at financial adviser Mazars, warned that the government was unlikely to bow to industry pressure.

He said: "People are hoping things will happen, but I am not convinced it will come at the speed or in the form that they are looking for."

Meanwhile, Lloyd's has announced an interim profit before tax of £1.35bn for the first six months of 2006. A 20% improvement in underwriting profit was offset by a smaller contribution from investment income.

The market recorded a marginal improvement in its combined ratio to 86% from 87.3%

Kinnect cash burden
The financial fall-out from the failed electronic trading project, Kinnect, has continued to affect Lloyd's results in 2006.

The market paid £2.4m in costs for Kinnect in the first half of 2006, according to Lloyd's accounts. The project was eventually closed in January after an estimated £70m was spent on the project.

Julian James, director of worldwide markets at Lloyd's, insisted that it was simply a run-off cost and there would be no on-going charges going forward.