Lloyd's CEO John Neal on ambition: Is $100bn growth target enough?

John Neal’s confidence in the Corporation’s ability to achieve its $100bn GWP target by 2026 is so resolute that he’s called this amount into question, suggesting that it might not be ambitious enough.

Speaking to The Insurer TV after the release of the market’s stellar H1 2024 results – the best first-half performance in its history – Lloyd’s CEO Neal indicated that the sector is on the cusp of a "supercycle" that could see even greater growth.

The supercycle, as Neal describes it, represents a prolonged period of sustainable growth, rather than the temporary pricing peaks often seen in the past.

“We’re performing as well as growing, which means we’re doing right by our investors and customers,” said Neal.

He emphasised that insurance is currently growing at twice the rate of global GDP, with the sector uniquely positioned to thrive in an increasingly risky world.

“I don’t think this is the end,” Neal added. “We think this period can and should be protracted.”

The Lloyd’s CEO offered this bullish outlook just days before the industry gathered in Monte Carlo for the annual Rendez-Vous de Septembre.

Neal hoped his comments would set the tone for what was likely to be an optimistic meeting for Lloyd’s, on the back of the market’s record-breaking half-year underwriting profit of £3.1bn and an investment return of £2.1bn.

Record-breaking results, confidence for the future

Other key highlights from the market’s H1 performance included an 83.7 percent aggregate combined ratio and nearly £5bn in total returns.

Speaking alongside Neal, CFO Burkhard Keese noted that the impressive investment return was in line with the market's projections for the full year.

“What’s important for investors to understand is that our investment results can help compensate for large losses,” said Keese.

At £4bn, the full-year forecast for investment returns could offset 10 percent of the large losses typically seen over the last decade. This combination of solid underwriting performance and strong investment returns positions Lloyd’s as an attractive option for current and future investors alike.

The market has now delivered profitable growth for 16 consecutive quarters, and Keese highlighted that Lloyd’s has maintained an underlying combined ratio (excluding large losses) of 80 percent for the past 12 quarters.

This stability is key, Keese said, as investors look for consistent returns, especially after the lean years from 2017 to 2023.

Capital confidence and investor sentiment

Looking ahead, Neal and Keese believe Lloyd’s is well-positioned to attract more capital.

With an upgrade to A+ from AM Best on the back of its consistent performance, the market is sending strong signals to investors.

Neal was quick to point out that hesitation among investors has less to do with market volatility and more to do with ensuring that Lloyd’s can deliver sustainable returns.

“People understand the volatility,” Neal said. “What they want to know is whether we can provide the right level of return consistently.”

As the market aims for its $100bn top-line target, Neal said steady, conservative growth could be enough to reach $90bn within five years.

However, he hinted that with further participation from recent entrants such as Aviva and Fidelis, as well as prospective new entrants, Lloyd’s could surpass that goal.

“You could almost argue the reverse – ‘Why did you say $100bn? Is that ambitious enough?’” he continued.

Casualty concerns and specialty lines

Discussing more challenging areas of the market, Neal highlighted the US casualty space.

With rising litigation and social inflation pressures, he acknowledged that pricing needs to increase.

Lloyd’s exposure to US casualty has historically been limited, but Neal emphasised that the market is acutely aware of the risks. “Casualty pricing has to go up,” he stated. “You cannot operate without tort reform.”

In specialty lines, where Lloyd’s has long been a leader, Neal pointed to ongoing complexities in areas such as aviation and marine insurance. While the market has responded to Ukraine-related aviation losses and marine challenges, there is more to be done in pricing these risks appropriately.

Streamlining and Blueprint Two

As Lloyd’s continues to strengthen its market position, Neal and Keese are focused on streamlining processes and enhancing Lloyd’s value proposition.

Simplifying regulatory hurdles and improving speed to market are top priorities. The introduction of a net promoter score for commercial business in 2024 is another step towards improving the customer experience and ensuring sustainable growth.

“I think everybody is by now convinced that the Lloyd's model is not broken, the Lloyd's model works,” said Keese.

“In 2019, everybody said that's an old model that won't work. It works. It's clear, but it's not so easy to deal with Lloyd's, in all fairness. And that's basically where a central part of our strategy for the next few years is focused on, to make the life for people trading at Lloyd's easier and frictionless,” Keese added.

On the subject of efficiencies, the March announcement of further delays to phase one of the Blueprint Two modernisation programme has arguably cast a shadow on Lloyd’s strong results. Neal acknowledged and appreciated the market’s patience.

“I'm hugely grateful for the market's support, because the market, even today, continues to support. It's been really hard,” he said.

“Looking at the infrastructure and trying to imagine what a modern version of that infrastructure looks like, for all the reasons everyone understands, has been a lot harder than we could have imagined, and for that reason, it's taken longer. The market’s patience in leaning into the conversations is hugely appreciated and not taken for granted.”