Bermuda-based Lancashire Holdings' CEO Maloney ‘pleased’ with H1 2019 results despite drop in profits

Bermuda-based insurance company Lancashire Holdings’ group CEO Alex Maloney highlighted the firm’s “good new business momentum” in the first half of the year as his group reported its H1 2019 results.

The insurer’s gross written premiums increased to $429.6 million in the six months to 30 June 2019, up from $392.6 million in the same six months a year earlier.

However, its net operating profit fell to $42.9 million in the first half of 2019, from $78.3 million in H1 2018 and its combined ratio increased to 86.6 percent in H1 2019 up from a much healthier 67.1 percent for the same period a year earlier.

Despite the net profit and combined ratio figures, Maloney said he was “pleased with our performance in the first half of 2019”.
He added: “I am also encouraged by the emerging evidence that the re/insurance market is now experiencing the long anticipated improvements in discipline and pricing in many of the group’s core business lines. We have seen good new business momentum in the first half of 2019, as we were able to benefit from our longstanding disciplined underwriting approach.

“In the face of a more cautious underwriting environment and evidence of market retrenchment in the specialty lines in which we write, we were able to take advantage of improving terms and demand.

“While the market overall was characterised by a number of attritional losses in the first half of 2019 and substantial loss creep on prior year events, it is worth noting that our ultimate net loss estimates for the 2018 and 2017 catastrophe events have remained largely stable, allowing us to deliver a solid combined ratio of 86.6 percent for the half year.”

Looking ahead, he cautioned that the recent evidence of better market discipline and pricing will take time to feed through to the insurer’s bottom line.
“However, I believe that we have the talent and capability to capitalise on the next stage of the re/insurance cycle, and our strategy has positioned us well to maximise the improving underwriting opportunity.”

Highlighting the group’s return on equity of 6.9 percent with a combined ratio of 86.6 percent, Elaine Whelan, group chief financial officer, said: “While we experienced some adverse development on the 2018 accident year due to some late reported claims, we had overall net favourable development on prior accident years. In addition, there were no major losses in the first six months of the year. Our investment strategy remains relatively conservative and our investment portfolio performed well with a net return of 3.2 percent. With expectations of interest rate reductions going forward, we have removed some of our interest rate hedges and that has led to a natural increase in the duration of our investment portfolio.

“Our renewals went well and were in line with expectations. We have seen some growth across several lines of business, including the new lines that we added last year. We continue to remain well capitalised to take advantage of the opportunities we see for the remainder of the year.”

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