Lancashire CEO pleased with Q2 results

28-07-2017

Lancashire Holdings made a net operating profit of $30.9 million over the second quarter of 2017, up on the $25.6 million it made in the same period of 2016.

Despite this rise Lancashire saw its half-year operating profit slide slightly, falling from $58 million in the first six months of 2016 to $56.1 million in the first half of this year.

“In the current continuing soft market I am very pleased with the RoE for the second quarter of 3.2 percent and 5.9 percent for the half year,” said Alex Maloney, group CEO.

“Premium rating pressure continues in the current market. There is evidence from the insurance industry that many insurance classes are operating at marginal levels of profitability at best. The dynamics of the loss environment cannot be accurately predicted in the short term, but it is evident that so far in 2017 there has been a lower level of catastrophe losses than occurred in the first half of 2016, whilst there has continued to be an active run of risk losses in the market.

The company also reported a decline in gross written premiums, which went from $199.8 million in the second quarter of 2016 to $194.7 million in the second quarter of 2017. The half-year figures also declined, falling from $430.6 million in the first six months of 2016 to $381.2 million in the same period of this year.

Maloney added: “The insurance industry has experienced further rationalisation through the process of cost cutting and another flurry of M&A activity. Lancashire continues to respond to the pressures of the market by maintaining our underwriting excellence and discipline and keeping our overheads under control. Global headcount is around 200 people, and that gives us the size to retain some of the best underwriting talent whilst not having an infrastructure of such size and complexity as to require our business to "feed the beast" through imprudent top line growth. I believe that we are well positioned as we enter the wind season to provide solid risk-adjusted returns in what is a difficult market. Outwards reinsurance remains attractively priced and as a group we have purchased more reinsurance protection for hurricane risk than in previous years. We will review our capital needs following the wind season, whether that be to take advantage of underwriting opportunities or to return capital to our stakeholders.”

“Our investment portfolio again performed well through a further rate increase and we had another quarter with no significant losses,” commented Elaine Whelan, group CFO. “Our net loss ratio for the quarter was 12.1 percent, reflecting continuing favourable development on our prior year reserves. We therefore produced a strong result, with an RoE for the quarter of 3.2 percent bringing us to 5.9 percent for the year to date.

“Our results demonstrate our ability to manage the current stage of the cycle. We have protected both our insurance portfolio and our investment portfolio, and continue to carry a significant capital buffer as further protection in the current market. With our risk levels at historic lows, if there are no major events over the coming wind season, and no change in market conditions, we anticipate returning earnings to our shareholders later in the year. As ever, the balance of capital we hold will match the underwriting opportunities we see.”

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Lancashire Holdings, Insurance, Second quarter 2017 results, Alex Maloney, Bermuda, London

Bermuda Re