Lloyd's warns that profits will dwindle

LLOYD'S of London, the insurance market, yesterday issued a three- year profit warning and said members would struggle to make a profit at all on business written in 1998.

Despite record profits of pounds 1.15bn for 1995, profits would halve next year as results fed through from 1996. Profits for 1997 would be just pounds 366m, a quarter of their present level.

Max Taylor, the chairman of Lloyd's, said: "Projections for 1996 and 1997 show a reduction in profitability, reflecting lower rating conditions. Regrettably, in 1998, conditions are tougher still.

"Underwriters will need to use all their skill and ingenuity to produce profits at the current time and we must prepare for the likelihood that some will not be able to achieve this."

The warning is likely to strain relations between Lloyd's and its remaining 6,825 names. Names are wealthy individuals who fund Lloyd's on the basis of unlimited liability.

Ron Sandler, chief executive of Lloyd's, ignited fears that names would be driven out of the market three weeks ago when he said the status quo would lead to "oblivion".

Mr Sandler wants reform of the way Lloyd's is capitalised. The present system allows names to switch between syndicates and adjust their exposure to risks every year, a process known as the annual venture. Mr Sandler claims this imposes a burdensome cost of pounds 200m - or 2 per cent of Lloyd's net premium income.