Lancashire swings to profit despite higher levels of loss activity
FTSE 250 insurer Lancashire Holdings said on Thursday that it swung to a profit in 2018 despite higher levels of loss activity related to natural catastrophes.
FTSE 250
19,799.72
16:59 23/04/24
FTSE 350
4,424.29
16:59 23/04/24
FTSE All-Share
4,378.75
17:14 23/04/24
Insurance (non-life)
3,711.26
16:59 23/04/24
Lancashire Holdings Limited
598.00p
16:40 23/04/24
In the year to the end of December 2018, the company swung to a pre-tax profit of $33.6m from a loss of $72.9m the year before as gross written premiums rose to $638.5m from $591.6m. Meanwhile, the combined ratio - a measure of underwriting profitability - improved to 92.2% from 124.9% in 2017.
Lancashire upped its dividend per share to $0.35 from $0.15 a year earlier.
Chief executive officer Alex Maloney said: "The fourth quarter of 2018 once again witnessed higher levels of loss activity than average, with the occurrence of hurricane Michael in October and a further series of catastrophic wildfires in California causing a tragic loss of life. When considered with the other major loss events during the year, 2018 ranks amongst the four largest loss years of the last couple of decades.
"Following 2017, this is the second year in succession of well above average global insured catastrophe losses. Against this backdrop, the group has generated a positive return on equity for the full year of 2.4%. Overall, I am pleased at the resilience of our portfolio and our reinsurance programme, given the loss environment."
Maloney said that while the trading environment remains challenging, there are now some signs of an improved rating environment in many of the group's specialty lines, which account for over half its business.
At 1105 GMT, the shares were up 5.1% to 625.50p.
RBC Capital Markets said the pre-tax profit of $33.6m was 45% ahead of consensus and its estimate of $23.1m.
"Lancashire reported stronger 2018 results than expected, with positive commentary on pricing and a healthy year-on-year improvement in underlying profitability, we believe that the company provides excellent value at the current 1.4x 2019E price to book value versus Lloyd's peers on more than 2x," it said.
Shore Capital analyst Paul De'Ath said: "Overall the results should be taken positively as the underlying underwriting result was slightly better than expected and the potential for growth into a hardening market is what Lancashire’s business model is set up for, in our view."