Lancashire to return ‘majority’ of 2023 profit to shareholders
Bermuda-based re/insurer Lancashire Holdings has increased its dividend by 50% and issued a further special dividend, meaning its shareholders will receive the majority of its 2023 profit.
The specialty re/insurer said it recorded a $321.5 million profit for the year, compared to a loss of $15.5 million in 2022 as the company took advantage of “the best market conditions” in a decade. This resulted in resulting in diluted book value per share of 24.7%.
The profit was driven by a 16.8% increase in gross written premium to $1.93 billion while insurance income increased 23.9% to $1.52 billion.
The company’s underwriting profit, termed as its insurance service result, increased 169% to $382.1 million while its discounted combined ratio improved to 74.9% from 90.2%.
The company also more than doubled its investment income from $76.7 million to $160 million.
“Lancashire delivered an outstanding performance in 2023,” said Alex Maloney, Lancashire Chief executive officer. “We continued to focus on writing profitable business in the best market conditions we have seen for a decade.”
He said the company had built a more balanced and diverse underwriting portfolio over the past five years, adding: “Lancashire is always led by the underwriting opportunity. We believe there are significant opportunities going into 2024 and we are well capitalised to be able to fund these through existing resources and internal earnings growth.”
As a result, Maloney said the company was returning the majority of its earnings to shareholders, adding: “While we did not complete the share buyback of up to $50 million announced in the third quarter of 2023, we are today announcing a special dividend of $0.50 per common share in part to reflect this as well as the strong operating performance and supportive outlook. This dividend follows the special dividend of $0.50 per common share paid in December 2023.
“Additionally, given the increased resilience of our business model, we are announcing a change to our regular final and interim dividend policy. Our Board has declared a final dividend of $0.15 per common share, an increase of 50% from last year (and which is subject to shareholder approval at our AGM in May).
“It is also our current intention to increase the Group’s ordinary interim dividend to $0.075 per common share. Our interim dividends are usually paid after the announcement of our results for the first six months of the year.”
The company said the January 1 renewals saw continued discipline and it said it had “seen no significant new entrants coming into the market”.
“We are continuing to see growth in demand from clients due to inflationary pressures, helping mitigate some of the increased supply. Importantly, for catastrophe exposed reinsurance, attachment levels have remained a focus for the market, with sustained reluctance for low attaching layers.
“Within our non-catastrophe exposed products, almost all product lines remain in a very strong position from a rating adequacy perspective. Overall, for 2024 the market appears to be more stable, at healthier levels of profitability.”
Lancashire said it does not expect to be affected by the Bermuda Corporate Income Tax until 2030, explaining it “it expects to fall within the exclusion within the Bermuda corporate income tax rules that means groups with a limited international presence are excluded from scope for a period of up to five years”.
Lancashire’s reinsurance operations outperformed the insurance segment during the year. Both segments had gross written premiums of about $965 million, with reinsurance produced an underwriting profit of $207 million while the insurance segment produced a profit of $174.2 million.
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