Lloyd’s sank into a pre-tax loss of £438 million ($771 million) for the six months to June, as £2.4 billion ($4.2 billion) in pandemic claims after reinsurance recoveries took a toll on earnings.

The business has predicted it could eventually pay out up to £5 billion ($9 billion) in pandemic-related cases, with about £2 billion ($3.5 billion) of it ceded to reinsurers.

Lloyd’s CEO John Neal says the business is on the right track despite the first-half loss, which reversed the previous financial year pre-tax profit of £2.3 billion ($4 billion).

The market remains well capitalised to withstand COVID-19 impacts, he says, citing two recent successful market-wide capital collections to fund a projected £3 billion ($5.3 billion) in ultimate loss by the end of the year.

“Our half-year results demonstrate that our robust approach to performance management and remediation has begun to take effect, evidenced by a significant turnaround in the underlying performance metrics, which give the truest indication of our market’s profitability,” Mr Neal said.

“We have made excellent progress through the first half of 2020, in some of the best underwriting conditions we have seen in a decade.

“But although the indications suggest we are returning to profitability, our focus on performance must remain unerring.”

The virus losses contributed 18.7% to Lloyd’s combined ratio of 110.4%, a marked deterioration from 98.8% a year earlier, and drove the business to an underwriting loss of £1.3 billion ($2.3 billion). In the first half of last year, it made a £148 million ($261 million) underwriting profit.

Excluding COVID-19 impacts, the market made an underwriting profit of £1 billion ($1.8 billion) and the combined ratio improved to 91.7%

About 58% of virus losses came from the US and customers with global risk programs, followed by the UK on 16% and 10% from Australia, Canada and Asia combined.

Event cancellation made up 41% of the losses, with property classes accounting for the second-largest portion at 25%. The remaining losses comprised casualty (18%), credit lines (10%), marine (4%) and specialty (3%).