Lancashire Holdings profit drops in 'more cautious' underwriting environment

First-half profit at Lancashire Holdings fell, the insurer said on Thursday, amid a "more cautious" underwriting environment.

In the six months to the end of June, pre-tax profit dropped to $40.5m from $74.9m in the first half of last year due to lower reserve releases and higher claims activity.

RBC Capital Markets said pre-tax profit was 37.5% below consensus expectations, largely driven by the underwriting result, with Lancashire reporting a combined ratio of 86.8% compared to 67.1% the year before and versus consensus of 82.5%.

Gross premiums written were up 9.5% during the half to $429.6m.

Chief executive officer Alex Maloney said: "I am pleased with our performance in the first half of 2019. 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% for the half year."

At 1045 BST, the shares were up 2.9% at 717.50p.