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UPDATE 2-Lloyd's of London warns of waning market surge

Published 10/27/2009, 04:31 AM
Updated 10/27/2009, 04:33 AM
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* Says scope for further investment gains "limited"

* No events leading to change in full-year expectations. (Adds detail, background)

LONDON, Oct 27 (Reuters) - The Lloyd's of London insurance market cautioned that a strong investment performance from surging share and bond markets would not be sustained and said its full-year expectations were unchanged.

"There have been no events that have resulted in any material changes to our expectations for the full year," Lloyd's said in a trading statement on Tuesday.

Lloyd's, which traces its origins back 321 years to a London coffee house where merchants met to insure ships, said its investment returns were better than expected thanks to a dramatic recovery in stock and bond markets from lows reached in the wake of last year's financial crisis.

It said the scope for keeping up this investment performance in the months ahead was "increasingly limited" as the financial market recovery runs its course.

"We expect that current market levels will make it difficult to achieve significant returns in the balance of the year," Lloyd's said.

Lloyd's said it remained financially strong, with total assets exceeding solvency shortfalls by its members by 2.55 billion pounds ($4.17 billion) at Sept. 30, little changed from 2.5 billion pounds three months earlier.

Insurers' finances look set to get a boost this year thanks to a quiet U.S. hurricane season.

In 2008, Lloyd's of London's profit halved after hurricanes Ike and Gustav contributed to total castastrophe-related losses of about $50 billion, making it the industry's second-costliest year on record.

(reporting by Myles Neligan)

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