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Financial Results

Wednesday 7 April, 2004

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Cautionary note on forward-looking statements

This presentation includes forward-looking statements. These statements are based on currently available information and consistent accounting policies as applied at 31 December 2003. They reflect Lloyd’s current expectations, projections and forecasts about future events and financial performance. All forward-looking statements address matters that involve risks, uncertainties and assumptions. Based on a number of factors, actual results could vary materially from those anticipated by the forward-looking statements. These factors include, but are not limited to, the following:

Rates and terms and conditions of policies may vary from those anticipated.

Actual claims paid and the timing of such payments may vary from estimated claims and estimated timings of payments, taking into account the preliminary nature of such estimates.

Claims and loss activity may be greater or more severe than anticipated, including as a result of natural or man-made catastrophic events.

Competition on the basis of pricing, capacity, coverage terms or other factors may be greater than anticipated.

Reinsurance placed with third parties may not be fully recoverable, or may not be paid on a timely basis, or such reinsurance from creditworthy reinsurers may not be available or may not be available on commercially attractive terms.

Developments in the financial and capital markets may adversely affect investments of capital and premiums, or the availability of equity capital or debt.

Changes in legal, regulatory, tax or accounting environments in relevant countries may adversely affect (i) Lloyd’s ability to offer its products or attract capital, (ii) claims experience, (iii) financial return, or (iv) competitiveness.

Economic contraction or other changes in general economic conditions could adversely affect (i) the market for insurance generally or for certain products offered by Lloyd’s, or (ii) other factors relevant to Lloyd’s performance.

The foregoing list of factors is not comprehensive, and should be read in conjunction with other cautionary statements that are included herein or elsewhere. Lloyd’s undertakes no obligation to update or revise any forward-looking statement, whether as a result of new information, future developments or otherwise.

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Agenda

Introduction Lord LeveneChairman

2003 Results Nick Prettejohn Chief Executive

Questions

4

2003 Results - highlights

Profit of £1,892m* for 2003 (£834m for 2002)

Further reduction in combined ratio to 90.7% (2002: 98.6%)

Initial profit projection of £1,780m for 2003 underwriting year (3 year accounting basis)

39% increase in central assets to £781m

Net resources up 35% to £10.1bn

*Pro-forma annual accounting basis

5

Annual accounting results

£m 2002 2003

Net earned premiums 10,669 11, 711 +10%

Net incurred claims (6,652) (6,697) +1%

Net operating expenses (3,586) (3,985) +11%

Loss on exchange (401) (30) -93%

Investment return 804 893 +11%

Profit on ordinary activities 834 1,892 +127%

*Pro-forma annual accounting basis

6

2003 Annual accounting results Premiums

1.4

2.5

9.8

11.0

0

2

4

6

8

10

12

Constant exchange rates

Gross written premium Net earned premium

% increase on 2002

*Pro-forma annual accounting basis

7

2003 Annual accounting results Outwards reinsurance premiums

31.1

25.4

0

5

10

15

20

25

30

35

2002 2003

% ceded

*Pro-forma annual accounting basis

8

2003 Annual accounting results Premiums: on-going businesses

8.7

26.2

0

5

10

15

20

25

30

Gross written premium Net earned premium

% increase on 2002

*Pro-forma annual accounting basis

9

Annual accounting results

£m 2002 2003

Net earned premiums 10,669 11, 711 +10%

Net incurred claims (6,652) (6,697) +1%

Net operating expenses (3,586) (3,985) +11%

Loss on exchange (401) (30) -93%

Investment return 804 893 +11%

Profit on ordinary activities 834 1,892 +127%

*Pro-forma annual accounting basis

10

2003 Annual accounting resultsNet catastrophe losses

Source: Syndicate quarterly returns

445272

17887

408

642

206

2,663

250142

0

500

1,000

1,500

2,000

2,500

3,000

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

£m

11

2003 Results – reserve strengthening

£m

Current accident year 2,437

Reserve strengthening (545)

Profit on ordinary activities before tax 1,892

*Pro-forma annual accounting basis

12

Annual accounting results

£m 2002 2003

Net earned premiums 10,669 11, 711 +10%

Net incurred claims (6,652) (6,697) +1%

Net operating expenses (3,586) (3,985) +11%

Loss on exchange (401) (30) -93%

Investment return 804 893 +11%

Profit on ordinary activities 834 1,892 +127%

*Pro-forma annual accounting basis

13

Annual accounting results

£m 2002 2003

Net earned premiums 10,669 11, 711 +10%

Net incurred claims (6,652) (6,697) +1%

Net operating expenses (3,586) (3,985) +11%

Loss on exchange (401) (30) -93%

Investment return 804 893 +11%

Profit on ordinary activities 834 1,892 +127%

*Pro-forma annual accounting basis

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Annual accounting results

£m 2002 2003

Net earned premiums 10,669 11, 711 +10%

Net incurred claims (6,652) (6,697) +1%

Net operating expenses (3,586) (3,985) +11%

Loss on exchange (401) (30) -93%

Investment return 804 893 +11%

Profit on ordinary activities 834 1,892 +127%

*Pro-forma annual accounting basis

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Lloyd's combined ratio

*Pro-forma annual accounting basis

98.6

90.7

2002 2003

50

60

70

80

90

100

110

%

16

Lloyd's: performance by class of business2003 Calendar year combined ratios

*Pro-forma annual accounting basis at syndicate level

110.4

89.4 89.3

93.6

89.7

83.4

93.0

50

60

70

80

90

100

110

120

Casualty Property Reinsurance Motor Marine Energy Aviation

%

17

90.7

101.4 100.7 101.2

2003

Lloyd's vs Industry 2003 Combined Ratios

*Pro-forma annual accounting basis

Sources i) Company data, ii) Insurance Information Institute estimate, iii) Reinsurance Association of America

98.6

113.3

107.5

121.3

2002

50

60

70

80

90

100

110

120

130

Lloyd's* European P/C & R/IIndustry (i)

US P/C Industry (ii) US R/I Industry (iii)

%

18

Underwriting year result & projection

2001 account result (2,378)

2002 account projection 1,671

2003 account projection 1,780

* Three year accounting basis

£m

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Net incurred loss ratio development1998-2003

NB All ratio denominators are Q12 actual or estimated ultimate premiums for open years

Source: Lloyd’s audited annual accounts

0

10

20

30

40

50

60

70

80

90

100

0 1 2 3 4 5 6 7 8

Quarter

1998 1999 2000 2001 2002 2003

%

20

Net incurred loss ratio development1993-1997 vs 2002 & 2003

NB All ratio denominators are Q12 actual or estimated ultimate premiums for open years

Source: Lloyd’s audited annual accounts

0

10

20

30

40

50

60

70

80

0 1 2 3 4 5 6 7 8

Quarter

1993 1994 1995 1996 1997 2002 2003

%

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Balance Sheet

£m 2002 2003

Cash & investments 24,512 27, 893 +14%

Reinsurers’ share of technical provisions

13,693 11,180 -18%

Other assets 11,091 9,830 -11%

Total assets 49,296 48,903 -1%

Total liabilities (41,787) (38,758) -7%

Net resources 7,509 10,145 +35%

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Lloyd’s central assets

£m

Central Fund 711 +49%

Corporation of Lloyd’s 70 -20%

Total 781 +39%

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Lloyd’s central assets

363

563

781

0

200

400

600

800

1,000

2001 2002 2003

£m

24

2003 central assets – Central Fund arbitration

Net potential exposure same as last year

Arbitration due later this year

Lloyd’s position unchanged

781

491

290

0

200

400

600

800

1,000

2003 2003

£m

25

Central assets – post 9/11 target achieved

$1,398 @ USD 1.79$1,188 @ 2001 exchange

rates

363

563

781

0

200

400

600

800

1,000

2001 2002 2003

£m

26

No increase in capacity 2004 vs 2003

Source: 2003 final stamp capacity, 2004 first stamp capacity. QQS latest business plan estimates

0

2

4

6

8

10

12

14

16

18

2003 2004

Capacity Qualifying Quota Share

£bn

27

Market conditions remain attractive

9498100Aviation

96104100Energy

121115100Marine

106107100Motor

102104100Reinsurance

98103100Property

130121100Casualty

200420032002

Premium rating index

*Pro-forma annual accounting basis

93.0

83.4

89.7

93.6

89.3

89.4

110.4

Calendar year combined ratios

2003

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Industry fundamentals – the same one year on

Capital Markets

IndustryReserve

Strengthening

External Influences Lloyd’s Influences

Franchise Implementation

UNDERWRITINGPROFIT

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2003 – A year of continued progress

Implementation of the Franchise

Transition towards limited liability

Move to annual accounting

Progress on Business Process Reform

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Summary – Another year of progress and profit

A year of continued progress against strategic objectives

A year of strong financial results

£1.9 billion profit, helped by low catastrophe losses but after reserve strengthening

Combined ratio of 90.7%, outperforming our international peer group

Substantial increase in balance sheet resources (central assets up 39%, net resources up 35%)

Market conditions attractive and fundamentals unchanged

No room for complacency

*Pro-forma annual accounting basis

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Financial Results

Wednesday 7 April, 2004