Lloyd’s of London Say A Brexit Would Make Business Less Appealing To Investors

Lloyd's of London Building

The company is in the process of establishing plans to relocate offices within the European Union in case of Brexit.

Chairman of Lloyd’s of London,  John Nelson stated that the company would be of less interest to shareholders outside Britain if the country casts its vote to make an exit from European Union. The comment came as the group reported that it had incurred a drop in profit last year.

Nelson also added that the company is in the process of establishing plans to relocate offices within the European Union in case of Brexit. Lloyd’s of London currently hold a group of 80 insurance companies in London.

Lloyd’s has received investments from the United States and Asia over the last few years. The company also specializes in marine, energy and aviation and develops insurance for businesses globally.

Nelson said:

“About 90 percent of our capital and business comes from outside the UK. It would diminish our attraction as a market to invest in if we were not part of the EU.”

On June 23, Britons will cast their vote in a referendum on EU membership and if having made the decision to exit the EU it would create hurdles to sell insurance into the EU without having any territorial presence.

He also said:

“We would have to restructure bits of our business, which would probably mean more representative offices to qualify within the EU, which would be expensive.”

Lloyd’s of London indicated a 30 per cent decline on profits before tax in 2015 to £2.1 billion, as affected by lower in investment returns and challenging prices.

Nelson added that investment on returns had shrunk to £400 million from £1 billion in 2014 and this trend is expected to continue:

“In the industry generally, you will see a new norm of low investment returns.”

Negative interest rates have meant that a few insurers have taken on risky investment gambles in the Euro zone, especially in sectors such as real estate and emerging marketing debt.

Nelson also stated that Lloyd’s is required to retain most of its assets in cash investments and has a very narrow scope to expand.
The market’s return on capital came down to 9.1 per cent from 14.1 per cent in the previous year and its combined ratio, a portion of underwriting profitability, slowed down to 90 per cent from 88.4 percent in 2014.

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