Lancashire H1 profits beat City expectations

Lloyd’s catastrophe insurer Lancashire beat analyst profit expectations as after-tax profits edged up to $107.1m for the first six months of 2012 (2011:$99.4m).

Gross written premiums were $514.8m in 2012 (2011:$379.8m). Combined ratio improved to 67.2% (2011:69.5%). An interim dividend of 5 cent per common share was declared by the board.

Shore Capital analyst Eamonn Flanagan recommended a ‘buy’.

He said: “The group’s H1 2012 results were better than we and the market had expected with profits ahead of forecasts, net asset value slightly better and the interim dividend, a nominal 5c (H1 2011: 5c) as we had anticipated.”

Group chief executive Richard Brindle said it was with ‘some sadness’ that Lancashire had withdrawn from certain lines.

He said: “It is with some sadness that I have to report that Lancashire decided during the quarter to withdraw progressively from its property direct and facultative lines, as well as onshore energy. 

“The loss ratios in these classes were proving volatile, and the risk pricing was consistently depressed, making it inefficient for Lancashire to continue to deploy capital in supporting these lines, particularly in view of other more attractive underwriting opportunities.”

However, he said Lancashire had also been investing in attractive opportunities.

He added: “The premium rates across our core lines of business have broadly held up, and we have seen some attractive opportunities in particular in our energy offshore lines, as well as property catastrophe excess of loss reinsurance and property retrocession lines. 

“Our commitment to understanding and developing opportunities and relationships in the Japanese market resulted in increased commitments at the 1 April Japanese renewal season. 

“We are also pleased to have received a fresh commitment from the investors in our Accordion facility to continue supporting Lancashire’s property retrocession lines for a second underwriting year.”