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Lloyd’S Of London Pulls Euro Bank Deposits

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http://www.bloomberg.com/news/2011-09-21/lloyd-s-of-london-posts-697-million-pound-loss-on-disasters-1-.html

Lloyd’s of London, the world’s oldest insurance market, has pulled deposits from some European banks on concerns governments may be unable to support lenders in a worsening debt crisis, Finance Director Luke Savage said.

“There are a lot of banks who, because of the uncertainty around Europe, the market has stopped using to place deposits with,” Savage said today in a telephone interview. “If you’re worried the government itself might be at risk, then you’re certainly worried the banks could be taken down with them.”

European banks are trying to reassure investors and customers they have enough capital to withstand a default by Greece and slowing economic growth caused by governments’ austerity measures. Siemens AG (SIE), European’s biggest engineering company, withdrew short-term deposits from Societe Generale SA, France’s second-largest bank, in July, a person with knowledge of the matter said yesterday.

Lloyd’s, which holds about a third of its 2.5 billion pounds ($3.9 billion) of central assets in cash, has stopped depositing money with some banks in Europe’s peripheral economies, Savage said, declining to name the countries or institutions.

“We have a very conservatively positioned balance sheet,” Savage said. Lloyd’s also holds about a third of its assets in mainly U.S. and U.K. government bonds and a third in corporate bonds, he said.

First-Half Loss

The insurance market, founded in a London coffee house in 1688, swung to a 697 million-pound pretax loss in the six months to June 30 after the most expensive first half for natural disasters on record. The market made a profit of 628 million pounds in the same period a year earlier, the London-based market said in a statement today.

“These are tough times for the insurance industry, but we are well positioned to handle them,” Chief Executive Officer Richard Ward said in the statement. “While interest rates are low and equity markets are volatile, we can’t rely on investment income to subsidize our underwriting. We must decline under- priced risks.”

Insurers’ profits have been hurt by natural catastrophes, including the earthquake and tsunami that struck Japan in March, causing record insured losses of $70 billion in the first half of the year, according to broker Guy Carpenter & Co. At the same time, record low interest rates are crimping investment returns.

The insurance markets made 548 million pounds on its investments in the period, 8.2 percent lower than in the first half of 2010 as interest rates in the U.K., U.S. and the euro zone neared record lows.

“I cannot see any reasonable prospect of making decent investment income in the medium term,” Savage said.

Lloyd’s had a combined ratio of 113.3 percent in the first half, meaning for every pound it took in premiums, it paid out 1.13 pounds in claims. That worsened from 98.7 percent in the first half of 2010.

The loss was “much better than our peer group exposed to the same catastrophes,” Savage said. Bermuda insurers’ combined ratio was 117 percent for the period and U.S. reinsurers posted a ratio of 116 percent, Lloyd’s said.

So who next will come out and say they have pulled large amounts of cash out of European Banks?

could this spark a bank run across Europe?

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Sounds like the bank run is picking up steam. If you hold large deposits your not going to risk losing it, far better to panic first and put it somewhere safer.

It seems that we are probably weeks away from a major bank run somewhere, surely other companies are starting to panic as well over losing there cash.

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I am very confident there is one in progress right now.

Yes, clearly under way.

Siemens and now Lloyds are public but how many corporates, rich people, etc, have been pulling deposits totally unknown to everyone apart from themselves and the bank.

Banks aren't going to go out and make it public that they are losing such vast sums.

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Sounds like the bank run is picking up steam. If you hold large deposits your not going to risk losing it, far better to panic first and put it somewhere safer.

...but if you've got small deposits (25k, 50k or 100k) you don't need to worry?

I think you do.

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...but if you've got small deposits (25k, 50k or 100k) you don't need to worry?

I think you do.

Ask how long it took everyone to get their money from the icelandic banks after the FCSC got involved :)

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Standard Chartered bank stated that they were pulling their money from European banks some time ago. So you can add them to the list.

I am not too sure how these banks are standing up. Presumably there is massive help from the ECB.

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I am very confident there is one in progress right now.

I get the feeling the banks (and certain others i.e. Lloyd's Of London, Siemens, ...) know exactly who is vulnerable this time round (the ones who had a close escape in '08? as well as others) as they have had the time to workout who has exposure in certain countries and to whom unlike in '08 when it was changing too quickly to know what "assets" they were holding on to and how to value those "assets". There has been plenty of time to do some decent modelling work this time round.

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Any bank (s) in particular or just a gut feeling.?

Not a gut feeling, I'm reluctant to mention names. France is the epicenter of the current crisis.

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I get the feeling the banks (and certain others i.e. Lloyd's Of London, Siemens, ...) know exactly who is vulnerable this time round (the ones who had a close escape in '08? as well as others) as they have had the time to workout who has exposure in certain countries and to whom unlike in '08 when it was changing too quickly to know what "assets" they were holding on to and how to value those "assets". There has been plenty of time to do some decent modelling work this time round.

They ALL had a close escape in '08, biggest ones included.

Edited by _w_

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As a reminder the run on NR started 2-3 months before Peston started the public run by the man in the street, the big boy had been taking the cash out well before that. NR was already awaiting the hearse before he went public. This time round the big boys have at least disclosed they are taking the deposits out.

1 big commercial depositor leaving could easily equal the effect of 10-20,000 members of the public with large savings deposits (i.e. well above average deposits leaving).

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Standard Chartered bank stated that they were pulling their money from European banks some time ago. So you can add them to the list.

Include the American banks as well and we can certainly say that the system is about to go.. boooom :ph34r:

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They ALL had a close escape in '08, biggest ones included.

There are degrees of closeness, there were a few that were next on my list (SG being top by coincidence) who some how escaped in '08, and I full expect them to need help for example.

France did a very good job of sweeping everything under the carpet in '08 for example, but did nothing about sorting things out quitely since. Their grey haired former finance minister was very anti certain parts of Basel 3 on capital levels and types because this would have pulled back the carpet and shown the several french banks naked under the carpet.

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Not a gut feeling, I'm reluctant to mention names. France is the epicenter of the current crisis.

3 French institutions are probably going to need assistance, the others have been a bit more sensible thankfully.

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http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/insurance/8778232/Lloyds-of-London-tumbles-to-697m-loss-in-costliest-six-months-on-record-for-catastrophes.html

The loss at the 323-year-old market due to "an unpredented level of natural catastrophes, including earthquakes in Japan and New Zealand, floods in Australia and tornadoes in the US, compares with a £628m first-half pre-tax profit last year.

Lloyd's said in a statement that the 2011 is "likely to be the second most expensive year ever for insurers".

Richard Ward, the Lloyd's chief executive, said: "These are tough times for the insurance industry, but we are well positioned to handle them. Despite incurring £6.7bn in claims from the costliest first half year on record, Lloyd's entered the second half of the year with £57bn in net assets to support our business and pay claims.

Or is it to pay out claims?

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not really. They match their assets and investments to the risks - dollar risk - dollar investment. Also - Lloyds is not one company - it is a market with members. That loss is spread over the syndicates (members).

LLOYD'S REPORTS INTERIM PRE-TAX LOSS OF £697M

Lloyd's has reported a first-half pre-tax loss of £697m ($1.09bn) for the first half of the year, down from a profit of £628m in the same period last year. The combined ratio rose to 113.3% from 98.7%, while the investment return declined to £548m from £597m. However, despite what Lloyd's called "an unprecedented level of natural catastrophes", central assets rose to a record level, reaching £2.47bn, from £2.33bn on June 30 2010. Lloyd's said that this left the market "well-capitalized despite the high level of claims". Lloyd's CEO Richard Ward said that "while interest rates are low and equity markets are volatile, we can't rely on investment income to subsidize our underwriting, we must decline under-priced risks". The Lloyd's performance is ahead of some predictions, with Mazars having guessed at a loss of about £1.5bn. Brokers will also have noted that Lloyd's capitalization has strengthened rather than weakened – further evidence that there is no shortage of capital in search of risks to underwrite.

Edit - news quote on Lloyds added.

Edited by SaintJay

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i would generally agree with you but the original article has a quote from Luke Savage the Financial Director of Lloyds of London

http://www.lloyds.com/Lloyds/About-us/What-is-lloyds/Lloyds-governance-structure/Executive-team/Luke-Savage

Quoted from the article

Lloyd’s of London, the world’s oldest insurance market, has pulled deposits from some European banks on concerns governments may be unable to support lenders in a worsening debt crisis, Finance Director Luke Savage said.

“There are a lot of banks who, because of the uncertainty around Europe, the market has stopped using to place deposits with,” Savage said today in a telephone interview. “If you’re worried the government itself might be at risk, then you’re certainly worried the banks could be taken down with them.”

so even the Financial Director, who, in normal circumstances would want to gloss over the fact that suck a large and prestigeous company is pulling money out of a "European Bank(s)" is stating and has been quoted as saying that they are worried that if a Government fails to honour their financial commitments and defaulted, the banks contained within that state could most probably go pop too. and that Llyods dont want ot be in the position of loosing potentially a couple of billion £ and going pp them selves.

the interesting thing is which governments is he talking about?

Greece? Yes

Italy, Ireland Portugal, Spain? most probably

France? Could be

Germany?

UK?

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ill tell you whos next to have their cheese taken apart from lloyds - YOU.

you own the freaking thing now...your responsible for its losses.

feeling good today ?

Different Lloyds.

Lloyds of London is not Lloyds TSB.

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Different Lloyds.

Lloyds of London is not Lloyds TSB.

i think if you dig deep enough down, the bill for any losses is ours.

any profits, theirs.

private fuel companies and national bank speculation is the way forward.

how did we ever get talked into that one ?

the eton rifles.

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i think if you dig deep enough down, the bill for any losses is ours.

any profits, theirs.

private fuel companies and national bank speculation is the way forward.

how did we ever get talked into that one ?

the eton rifles.

no. wrong again. Lloyds of London nearly did go bust, but what they did was put all the cr@p with a massive pot of money in a separate company to pay all the claims. It was very successful and was recently bought by Warren Buffet. Lloyds of London was then allowed to continue trading.

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no. wrong again. Lloyds of London nearly did go bust, but what they did was put all the cr@p with a massive pot of money in a separate company to pay all the claims. It was very successful and was recently bought by Warren Buffet. Lloyds of London was then allowed to continue trading.

probably like when i was wrong when someone in 06 said a 'bank could crash' and the same as 'property only ever goes up' and also, money printing doesnt lead to inflation. take your pick. its all the same lie.

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probably like when i was wrong when someone in 06 said a 'bank could crash' and the same as 'property only ever goes up' and also, money printing doesnt lead to inflation. take your pick. its all the same lie.

if you tell yourself the same lie again and again you will eventually believe it to be true.

I'm going to leave this - I'll get more sense out of Erranta. :blink:

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