Lancashire Holdings sees 2017 profits slump


Lancashire Holdings has announced that it made a loss of $3.1 million in the fourth quarter of 2017, down heavily on the $45.9 million profit it made in the same period of 2016.

The loss contributed to the company’s full year 2017 loss of $86 million, again down on the $144 million that it made in 2016.

The company also reported falls in its gross written premiums over these periods. Over the fourth quarter of 2017 it wrote $67.4 million of these, compared to the $95.1 million it saw in the same period of 2016. It wrote a total of $591.6 million over the course of 2017, again down on the $633.9 million it wrote over 2016.

“In November I reported on the series of damaging catastrophe losses which had occurred over the summer months in the Caribbean, the Gulf of Mexico and US coastal regions and the two sizeable earthquakes in Mexico,” said Alex Maloney, group chief executive officer. “Adding to what was already a significant loss year, the run of catastrophe losses continued in the fourth quarter with the occurrence of wildfires across California in essentially two separate sequences of loss activity. These events have unfortunately resulted in one of the most severe years for catastrophe losses to the industry, with the sum of such insured losses in excess of $100 billion, placing 2017 in the top three years for aggregate catastrophe losses in recent history. Such events are not unprecedented and, as a catastrophe (re)insurer, we plan our underwriting, reinsurance programme, capital and risk levels in anticipation of such scenarios. Insurance is a cyclical business, the purpose of which is to smooth out the effect of losses from unpredictable catastrophe events over the course of time. That is as much the case for our business as it is for our clients.”

According to Maloney the 2017 losses have provided a real time “stress test” for Lancashire's enterprise risk management function, and he said that it was pleasing that it has passed another important test of its model.

“Overall we feel that we had the right underwriting strategy, risk levels and capital headroom to absorb these events when balanced against the underwriting opportunity that presented itself during 2017,” Maloney said. “With the impairment of capital due to these catastrophe losses, and attrition across many specialty classes, the market has finally turned a corner and we are witnessing rate increases, or at least stability, across most of the classes of business we underwrite. We remain committed to our capital management strategy and will continue to deploy capital where attractive underwriting opportunities present themselves, but also remain committed to our strategy of returning excess capital if we conclude the underwriting risk and return balance is not sufficient to support our view of the opportunity. Underwriting expertise and discipline remains essential, but in the classes of business which we underwrite we are well positioned to take a lead in what may now prove to be a more interesting phase of the market cycle.

“I expect 2018 to be another challenging year for our industry, but I am confident that we have further demonstrated that the Lancashire Group has the appropriate business model, talent and access to capital to maximise underwriting opportunities to benefit our shareholders.”

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