S&P revises outlook on insurer Lloyds to stable from positive

S&P has revised its outlook on Lloyd’s of London from positive to stable.

“Surplus capacity, the inflow of new capital, and changing buyer demand mean that we anticipate continued negative pressures on profitability and revenues in Lloyd’s core business sectors: reinsurance and specialty lines,” S&P explained.

S&P added the Vision 2025 strategy that Lloyd’s announced was positive in terms of expanding the business into new markets and opening the doors to new capital providers, but it remained a work in progress for the time being.

S&P said it expected Lloyd’s to continue to exhibit strong earnings to sustain its capital adequacy and forecasted a combined loss and expense ratio of 88%-90% in 2014, rising to 98%-102% in 2015-2016, assuming average catastrophe loss levels.

"In our view, over 2014-2016, Lloyd’s should generate a return on capacity of 12% and a return on revenue of 10%-15%. We base these projected returns on strong net income of £2.8 billion in 2014 and £1.5 billion-£2.0 billion in 2015-2016," S&P said.