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Speaker 1: Bloomberg Audio Studios, podcasts, radio news.

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Speaker 2: Now to some breaking earnings. We have had Lloyds of

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Speaker 2: London reporting underwriting profits of five point nine billion pounds

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Speaker 2: in what it calls an outstanding performance for twenty twenty three.

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Speaker 2: By comparison in the full year for twenty twenty two

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Speaker 2: was two point six billion pounds, and the insurance and

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Speaker 2: reinsurance marketplace appears to have benefited from lower costs from

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Speaker 2: large risk and natural catastrophe claims. Or we can dig

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Speaker 2: into those earnings now with the Lloyds of London CEO

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Speaker 2: John Neil, who's with us in the studio. John, lovely

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Speaker 2: to have you with us, Great to be here. This

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Speaker 2: appears to be a strong performance, helped by investment returns

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Speaker 2: and eleven point six percent increase in written premiums with

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Speaker 2: a seven percent price increase.

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Speaker 3: Talk us through it please, It's great, isn't it. I

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Speaker 3: mean A to be reporting growth and B to be

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Speaker 3: reporting strong revenue earnings is just good news. I think

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Speaker 3: it's good news for UKPLC as well. You know eighty

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Speaker 3: percent of our flow comes from outside the UK, so

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Speaker 3: I just hope it reinforces the credentials of the UK

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Speaker 3: as of financial services markets. So good all round, and

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Speaker 3: dare I say it good for customers too, because you

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Speaker 3: want a profitable insurance industry to think about the different

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Speaker 3: products and services that they need, particularly in a riskier world.

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Speaker 1: John, when we met a couple of months ago, you

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Speaker 1: were very positive. You are looking to the United States

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Speaker 1: for growth, and you've delivered in these results. But how

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Speaker 1: unusual is it? How fragile is this performance in your view?

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Speaker 3: I don't think it's fragile. I mean I think you

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Speaker 3: know the story when we spoke last time. We've been

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Speaker 3: working for five years consistently to improve performance, reduced costs,

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Speaker 3: show leadership where we think we can show leadership. So,

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Speaker 3: as we said in the introduction, yes, for us we

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Speaker 3: had a lower frequency and severity cost of natural catastrophes

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Speaker 3: and large complex risk losses. But we assume that that

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Speaker 3: will happen, and we don't take it for granted when

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Speaker 3: it doesn't happen. So, yes, profits have been enhanced a

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Speaker 3: little bit by a lower frequency of natural catastrophes. But

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Speaker 3: I'm sure going to end up talking a little bit

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Speaker 3: about the Baltimore loss, and there you have a very

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Speaker 3: substantial risk loss which we would expect in the normal

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Speaker 3: course of events.

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Speaker 2: Well, indeed, let's compare that to previous marine losses. How

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Speaker 2: does it compare.

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Speaker 3: The good news is when I sit sometimes and talk

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Speaker 3: to you about natural catastrophes, what upsets me is how

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Speaker 3: many people are not insured. The good news with this

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Speaker 3: loss is the vessels insured, the bridge is insured, the

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Speaker 3: port authorities insured. So this is an insured loss. So

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Speaker 3: from a financial perspective, yes, the debates will rage as

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Speaker 3: to whose fault it was and who should pay what,

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Speaker 3: But it is insured, so the financial power is behind

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Speaker 3: the loss. But honestly, when you look at it from

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Speaker 3: a marine point of view, this could be one of

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Speaker 3: the largest marine losses in history.

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Speaker 2: Well, indeed, Janet yell And, the US Treasury Secretary, says

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Speaker 2: that she expects insurers to help cover the cost of

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Speaker 2: rebuilding the bridge. You've got analysts at Barclay saying that

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Speaker 2: smaller Lloyd's firms may be the most exposed to the claims.

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Speaker 2: Have you estimated the potential claims exposure?

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Speaker 3: So two answers to that. Really, So on the way

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Speaker 3: in which marine insurance happens in the world, you have

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Speaker 3: these protection in demity clubs. There are twelve of them

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Speaker 3: that pull together to pride insurance. Ninety percent of the

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Speaker 3: world shipping is with those twelve clubs. They pull together

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Speaker 3: to meet their resources and then they buy insurance, and

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Speaker 3: we're involved where they buy insurance. So Lloyd's has an involvement,

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Speaker 3: but it is not the main involvement. There are many,

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Speaker 3: many different insurers involved throughout. But I think I think, yes,

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Speaker 3: Yellen's right, this is an insured loss, so that there

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Speaker 3: is the financial muscle to deal with the issues that

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Speaker 3: we're talking about. And you know, we visibly see the

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Speaker 3: obvious damage, but it is the complexity you were talking

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Speaker 3: about earlier on. It's the supply chain issues that really

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Speaker 3: get quite complicated with these types of loss.

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Speaker 1: No, we understand that the marine insurers, of course will

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Speaker 1: cover a portion of the losses, but how material do

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Speaker 1: you think it's going to be to Lloyd's of London

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Speaker 1: as the kind of backstop after that? And just in

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Speaker 1: terms of length of time, I think our audience would

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Speaker 1: be very interested to understand how long something like this

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Speaker 1: is going to take to unravel in terms.

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Speaker 3: Of so I think from our point of view, honestly,

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Speaker 3: we would assume that these types of losses will occur

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Speaker 3: every year. So in that respect, every loss is individual,

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Speaker 3: but in the aggregate, yes, we assume these types of

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Speaker 3: losses to occur, so we model for them, we scenario

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Speaker 3: build against them. So this is within the levels of

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Speaker 3: expectations that we would think could happen for this type

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Speaker 3: of loss inevitably. And you said it in your bulletin

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Speaker 3: earlier on, these things do take longer than people think.

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Speaker 3: You know, constructing a bridge is a four or five

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Speaker 3: year program, So I think the supply chain issues will

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Speaker 3: reconcile quite quickly, and we're seeing that happen as quickly

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Speaker 3: as we can. But some of the rebuild issues just

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Speaker 3: take a little bit of time. So it's not the

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Speaker 3: financial preparedness to pay for the loss. Clearly, as money

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Speaker 3: is needed, then money will be available, but yeah, it

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Speaker 3: just does take a little bit of time to repare

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Speaker 3: and reinstate.

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Speaker 2: Just staying on shipping, we've also had the attacks on

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Speaker 2: shippers in the Red Sea for three months now. How

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Speaker 2: do you see that playing out? How do you think

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Speaker 2: about the shipping risks and the insurance costs.

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Speaker 3: So from our point of view, as you know, it's

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Speaker 3: that the Red Sea not uninsurable, Number one, it's not uninsurable,

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Speaker 3: and you've seen US also deal with the Black Sea

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Speaker 3: Corridor with the transportation of grain and fertilizer. So for US,

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Speaker 3: it's more about the politics and the government requirements as

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Speaker 3: to what you can and what you can't do. So

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Speaker 3: provided the agreements are in place at a government based level,

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Speaker 3: than insurers can step in and provide cover.

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Speaker 2: But actually you differentiate between the Black Sea and the

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Speaker 2: risks in different places, so you've pulled back from insurance

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Speaker 2: around Taiwan. You've been supportive of providing insurance to Ukraine,

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Speaker 2: both for shipping grain or the produce out of the

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Speaker 2: Black Sea. Why those differences.

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Speaker 3: I think it's just trying to understand whether there is

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Speaker 3: the appropriate intervention to give protection around the passage and

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Speaker 3: transportation of people or goods. You just need the certainty

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Speaker 3: that there is security in place and that transportation can

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Speaker 3: be undertaken sensibly and safely. I mean, that's the one

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Speaker 3: issue that we're looking for.

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Speaker 1: Okay, let's talk a bit about climate change, specially Sigma

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Speaker 1: reporting this week that for twenty twenty three ensured catastrophe

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Speaker 1: losses they'll be again above one hundred billion dollars for

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Speaker 1: the year and that's the fourth year in a right.

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Speaker 1: That's a huge sum. I mean, I know that Lloyd

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Speaker 1: has managed to avoid actually this year some of the

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Speaker 1: major climate risks, but you can't really avoid the climate

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Speaker 1: change impact.

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Speaker 3: No, So you know, the good news for us is

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Speaker 3: we've got you won't get an insurer. We'll ever sit

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Speaker 3: in front of you and deny climate change. You know,

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Speaker 3: we'll be looking at the data for thirty years and

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Speaker 3: a normal year, A normal year costs about one hundred

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Speaker 3: and twenty five billion for natural catastrophes. That is almost

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Speaker 3: twice what it was a decade ago. So we know

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Speaker 3: those numbers will grow and grow, and they'll get nearer

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Speaker 3: to two hundred billion or more as we recognize and

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Speaker 3: realize the impacts of climate change. Do we feel comfortable

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Speaker 3: providing insurance and protection. The answer is yes, yes we do.

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Speaker 3: I think what we've got to do sometimes is just

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Speaker 3: do a better job of trying to explain to the

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Speaker 3: end customer why insurance is valuable and it can genuinely

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Speaker 3: help when these difficult situations present, particularly that whether related

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Speaker 3: or climate related loss.

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Speaker 1: Look. I thought one of the things from that Swiss

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Speaker 1: Free report that sort of stood out is that there

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Speaker 1: needs to be sustainable and affordable property insurance, that there

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Speaker 1: needs to be a concerted effort by private industry, the

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Speaker 1: public sector and broader society to try to mitigate these

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Speaker 1: sorts of risks. Is there any country in the world

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Speaker 1: that's doing that?

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Speaker 3: So, I think there's lots of countries have got problems.

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Speaker 3: The US is difficult, Australia is difficult, particularly when you

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Speaker 3: look at places like Queensland. But I think what Swiss

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Speaker 3: Rea is saying is right. It does need all in fight.

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Speaker 3: It needs the banks, it needs the insurers, it needs

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Speaker 3: the regulators, and it needs the government to sit in

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Speaker 3: the same room and say how do we reconcile and

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Speaker 3: resolve the problem between us. I actually think we can.

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Speaker 3: It's not a lack of capacity or capital. We can

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Speaker 3: solve these problems while we're.

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Speaker 2: In the world of ESG. Lloyd is expected to issue

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Speaker 2: a report next month on the historic involvement in Transatlantic

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Speaker 2: slavery of Lloyds of London. Have you ruled out compensation?

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Speaker 3: We have in terms of compensation, and I think we've

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Speaker 3: been without hesitation in terms of apologizing for our past

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Speaker 3: association with you into Atlantic.

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Speaker 2: Some people money rather than were So what.

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Speaker 3: We've done is we've turned around. We've formed a coalition

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Speaker 3: of the willing around something we've called Inclusive Futures, which

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Speaker 3: basically is designed to take colleagues from black or ethnically

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Speaker 3: diverse backgrounds from the classroom to the boardroom. And we've

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Speaker 3: got a plan there to say, look, we want to

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Speaker 3: take hundreds, if not thousands of people on that journey.

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Speaker 3: So what can we do today and what can we

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Speaker 3: do tomorrow to represent those people?

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Speaker 2: How is the sea suite diversity?

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Speaker 3: Now, it's not too bad. So a sea suitet diversity

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Speaker 3: from a gender perspective fifty to fifty. You might recall

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Speaker 3: that for the market, we set a target for women

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Speaker 3: in leadership of thirty five percent. We've met that this year,

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Speaker 3: and we've said from colleagues from black and ethnically diverse backgrounds,

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Speaker 3: we want to hiring to be at one in three.

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Speaker 3: It's currently at one in five, which is a four

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Speaker 3: percent improvement on last year. So it's progress. Don't get

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Speaker 3: me wrong. Progress is not enough, but it is progress.

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Speaker 2: Okay.

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Speaker 1: Final thought on net zero. You've begun a consultation to

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Speaker 1: create a road map to ensure the net zero transition

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Speaker 1: Looyds of London frequently a target of campaigners. Sure who

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Speaker 1: want you know, because you're you're ensuring still carbon emitting industries.

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Speaker 1: How committed is Lloyds and its members actually to promote

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Speaker 1: in the transition to net zero, getting rid of coal

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Speaker 1: for example insurance?

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Speaker 3: So when I'd encourage the MDUS, I think they've got

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Speaker 3: a great voice, and their voice deserves to be heard.

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Speaker 3: And I'm absolutely fine with the protest and with the

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Speaker 3: voice that they've got. I think our responsibility is not

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Speaker 3: to set policy that sits with government. So what we

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Speaker 3: need to evidence is that there is a pathway to

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Speaker 3: net zero and our view is we should ensure that

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Speaker 3: pathway because we all need the harder to abate industries

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Speaker 3: to actually go on that journey. And we and we

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Speaker 3: sometimes get wedded on some of what we think the

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Speaker 3: difficult industries are. You know, we all talk about aviation,

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Speaker 3: but the reality is around steal and cement and those

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Speaker 3: bigger issues. So how do we lean into support those

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Speaker 3: companies as they look to make the right investment to

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Speaker 3: affect transition. So that's what we're trying to do. We're

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Speaker 3: trying to bridge the gap from where we are too net.

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Speaker 1: Zero John Neil, thank you so much for your time

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Speaker 1: join us here on Bloomberg Radio. The Lloyds of London

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Speaker 1: CEO really appreciate you coming in to see us of