Insurers in clover under IFRS

Quoted Lloyd’s insurers are set to ramp up profits over the next month when
they release their first interim accounts under IFRS.

Over the past fortnight, leading insurers Amlin, Beazley and SVB all
indicated that their interim results, which will be released through September,
would be significantly ahead of market expectations as a result of IFRS.

The share prices of all three groups shot up after their announcements. The
bulk of the income earned by these companies is dollar-denominated. The
companies said they were benefiting from profits on exchange rate adjustments,
which were taken through the income statement under IFRS.

Richard Gradidge, insurance analyst at Numis, said the new accounting would
have a ‘material’ impact on insurance company accounts, although he admitted
that the changes were making profit forecasts difficult to calculate due to
increased volatility.

‘The new accounting has made it very difficult to make profit forecasts. It
may just be a timing issue, but we are not making any decisions yet and will be
watching what happens when the interims come out,’ Gradidge said.

Although confident that IFRS will boost interim figures, some of the insurers
have warned that the short-term benefits of the international standards may not
be sustainable.

Amlin warned that it was ‘unlikely’ to repeat its first-half performance over
the rest of the financial year, while Beazley chief executive Andrew Beazley
said the ‘potential additional volatility’ when reporting under IFRS would make
any assumptions about the group’s future performance premature.

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Fiona Westwood of Smith and Williamson.