Lancashire's profits damaged by energy losses

18-02-2016

Insurance company Lancashire Holdings has posted a fall in its 2015 profits, harmed by high losses in its energy sector.

The firm posted a profit after tax of $181.1 million last year, compared with $229.3 million in 2014. Lancashire’s gross written premiums (GWP) also fell to $641.1 million in 2015, compared with $907.6 million in the previous year.

GWP fell in a number of sectors of the firm’s portfolio, with energy GWP falling the most, with a 53.2 percent decline to $112 million last year, compared with $239.4 million in 2014.

The company’s combined ratio also increased to 72.1 percent in 2015, compared with 68.7 percent in 2014.

Martin Thomas, chairman of Lancashire, said: “It is a great pleasure to see the Group deliver another set of strong financial results for 2015 as I come towards the end of my tenure and I look forward to working with [my] colleagues until I step down.”

Alex Maloney, group chief executive officer, added: “Within the context of one of the most difficult trading environments during the last twenty years, I am pleased to be able to announce what is an excellent set of results.

“The return on equity is 3.5 percent for the fourth quarter and 13.5 percent for the full year, on a warrant adjusted basis. As a business, we pride ourselves on our underwriting expertise and our ability to react nimbly to the challenges of the market so as to moderate our risk appetite and adjust our capital base to provide a good risk-adjusted return to our shareholders.

“The last year has witnessed a dramatic fall in the oil price, which severely shocked the whole energy sector, as well as volatility in the investment markets. Neither of these aspects of the world economy seems likely to stabilise in the near future.

“Furthermore, the over-accumulation of capital has continued to generate downwards pressure on the pricing of insurance and reinsurance risk over an extended period. Against this background, our industry witnessed a wave of mergers and acquisitions which we view as an attempt by some of the larger and more complex businesses in our sector to rationalise back office costs and achieve capital efficiencies.

Elaine Whelan, group chief financial officer, said that Lancashire’s outlook for 2016 remains to be a continuation of current market trends, with more pricing pressure, albeit at a slower rate. She also said the firm has been able to further reduce its exposure levels with additional reinsurance purchases, meaning the firm is well positioned for the current phase of the cycle.

“We are comfortable that at our current capital level we are able to write the business we want to and be ready for any opportunities that may materialise,” she said.

Lancashire Holdings, Full Year 2015 Results, Martin Thomas, Alex Maloney, Elaine Whelan, Bermuda

Bermuda Re