Reforms May Be Path to Profitability.

London-based Lloyd's is working hard to regain its underwriting profitability after suffering significant losses in recent years, according to Commercial Director Roger Sellek.

The Lloyd's market embarked on a review of its capital position in 1992 and was subsequently taken to court by many of its private "Names" investors who are exposed to unlimited liability. Lloyd's believes it has unambiguously won the Names court case and is refocusing its attention on its evolution and on becoming profitable again.

Sellek said Lloyd's last turned in positive pure results in 1996. Excluding returns on funds at Lloyd's, the market lost more than $500 million in 1997 and almost $2 billion in 1998. Results for all of 1999 are not yet in, but Sellek said he expects they will be worse.

Among key initiatives, Lloyd's has raised its standards for accepting members, is expanding its distribution reach and is creating a Web site (www.lloyds.com) to do business on the Internet. It is trying to modernize the London market, which Sellek said is unacceptably slow in collecting premiums and paying claims. It is opening an office in Singapore, securing licenses in the Czech Republic and Hungary and working to establish a presence in China.

Internally, the Lloyd's market is working to drive down its overhead costs from 3.1% of its $16.7 billion capacity of last year to 0.5% by the year 2003. It is moving toward annual accounting from its traditional three-year reporting period. And it has established a strategy subgroup to conduct a fundamental review of "what we want to be," Sellek said.

The market is growing rapidly in the United States, its largest overseas territory with 35% of Lloyd's business, and Sellek said he expects the United States to supplant the United Kingdom as its largest business territory.

Lloyd's

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Rating: A

Headquarters: London

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