Lancashire profits down 7%

Lancashire has reported a net operating profit of $62.9m (£37.2m) for the first quarter of 2014, compared with $67.3m for the same period last year.

This drop in profits was despite a 47% increase in gross written premium over the quarter to $316.7m, up from $214.9m for the first three months of 2013.

Group chief executive Alex Maloney said Lancashire had been able to maintain business volumes despite downward pressure on rates.

“Thanks to our strong value-added proposition with our brokers and clients as a leader for much of our business, we have been able to protect the core business lines at Lancashire Companies and Cathedral from the weakening rate environment,” he said. “We have maintained our position and in spite of the pressure on signings, we continue to see strong submission levels for both new and renewal business.”

The insurer’s combined operating ratio, however, increased 15.4 percentage points to 66.4% up from 51.2%.

This increase was largely driven by adverse prior year reserve developments that added 5.7 percentage points to the loss ratio.

Group chief financial officer Elaine Whelan said: “While we experienced some adverse development on the 2013 accident year as a result of a late reported energy claim, there were no major losses in the first quarter and the group produced a return of equity (RoE) of 3.9% with a combined ratio of 66.4%.”

Lancashire paid dividends of $63.2m for 2013 during the quarter, equivalent to a final dividend of six pence per common share and an additional special dividend of 12 pence per common share.

The group also made provisions for raising further capital should it be required.

Whelan said: “While we do not currently anticipate any need to raise additional capital, we are ready to do so if the circumstances merit. I would therefore like to thank our shareholders for their continued support and understanding of our capital management approach with their approval of the authority to allot and issue up to 15% of our share capital on a non-pre-emptive basis at yesterday’s AGM.”