Q2 GWP dip at Lancashire but CEO bullish on outlook

Profits and gross written premiums dipped at Lancashire Holdings in the second quarter of 2018. But the company said it has taken advantage of rate increases and remained positive as its chief executive suggested more wind losses this year could begin to dampen appetites in the market, reducing capacity.

The company’s GWP reached $176.7 million in the second quarter, a decrease on the $184.7 million it posted in the same period a year earlier. Its pre-tax profit was $32.5 million, compared with $38 million the year before. Its net operating profit, however, increased to $37.8 million, up from the $30.9 million it posted a year earlier. Its combined ratio was almost stable at 69.2 percent.

Alex Maloney, group chief executive officer, said that the company’s reduction in gross written premiums was because of the timing of several multi-year deals and some one of deals that appeared in the second quarter of 2017 but not this year.

Maloney said: "With a strong underwriting result and a decent investment performance, despite the volatility in the investment market, the group has delivered a solid set of results for the year to date with an RoE of 5.9 percent. Our earlier predictions of how the insurance market would respond following the 2017 loss events are proving to be accurate. Pricing peaked at the January renewals and we are now experiencing a decline from those levels, although we remain in positive territory for the year to date. We have still been able to take advantage of rate increases across most of our lines of business.

“While it may appear that our second quarter premiums don't support that statement, with a year on year reduction of 4.3%, the rate increases and growth we saw in the quarter are masked by the impact of the timing of renewal of some multi-year deals and some prior underwriting year premium that came through in the second quarter of 2017. We are pleased with the new business we have been able to add, in particular across our property book, and our new energy onshore and power underwriters are steadily building their books.

“We will watch this year's wind season with interest. While we believe that there is still too much capital in the market, another year of losses may serve to dampen appetites. We are witnessing some of our competitors exiting unprofitable lines of business and Lloyd's is also beginning to take action on under-performing syndicates and lines of business. Time will tell what impact this will have on the market. In the meantime we will continue to execute our strategy - supporting our core clients and building out some new lines of business where the pricing and margins achievable make sense to do so. We expect our risk levels to therefore stay materially the same."

Elaine Whelan, group chief financial officer, added: "We have produced a strong result for the quarter with a return on equity of 2.9 percent. Our investment portfolio performed well through another rate increase and on-going volatility in the market. On the underwriting side we continued to grow our book modestly and we also had the benefit of further favourable development on our prior year reserves. Our net loss ratio was 18.5 percent and our combined ratio was 69.2 percent in the second quarter.

“The majority of our book renews in the first half of the year so we have been able to lock in the peak post loss pricing at the beginning of the year. Our outlook for the rest of the year is a continuation of current trends. However, we expect to maintain our core book and add new business where there is the opportunity to do so. We will continue to match our capital to those underwriting opportunities."

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