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AON BENFIELD

Balance Sheet

As Lloyd’s is a partially mutualized market rather than an insurance company, it does not hold conventional equity. Instead, its capital base is comprised of members’ Funds at Lloyd’s (FAL), Members’ Balances and Central Reserves. This increased by 28% in 2009 to GBP18.2bn. The main drivers of the increase were a 24% increase in FAL and a 51% increase in Members’ Balances, reflecting the improved profit contribution from the syndicates during 2009. The Central Reserves represent the mutual assets of Lloyd’s and increased by 1% in 2009, to GBP1.1bn. Further details of the Lloyd’s capital base can be found in Appendix 4.

Syndicate premium assets comprise the largest proportion of invested assets for the Lloyd’s market. As the syndicates are required to maintain a high level of liquidity, the majority of the investments are held in cash and short-term fixed interest securities. Chart 3 illustrates the composition of Lloyd’s Market Invested Assets, which is generally unchanged from 2008. The breakdown of corporate bond ratings is also given in Chart 3. 70% of corporate bonds are rated AA or above, compared to 77% in 2008.

Chart 3 – Lloyd’s Market Invested Assets

FY 2009 Total: GBP46.3bn

FY 2009 Corporate Bonds GBP16.2bn

2% 2%

28%

9%

33%

45%

Cash and LOCs Corporate Bonds Government Bonds*

Equities Alternative Investments

21%

AAA AA A Below A

35%

25%

*Includes supra nationals and government agencies Source: Lloyd’s

Chart 4 shows the asset split for the Society of Lloyd’s (the Central Fund). This changed significantly during 2009, with corporate bonds increasing to 45% of the total, from 14% at the end of 2008. The shift in composition reflected the improvement in the corporate bond market during the year. There was a commensurate reduction in the level of government bonds within the portfolio, from 66% at December 31, 2008, to 35% at the end of 2009.

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