Lancashire swings to loss despite record written premiums

Lancashire Holdings reported a 50% increase in gross written premiums in its fourth quarter update on Friday, to a record $1.2bn.

The FTSE 250 Bermuda-domiciled insurer said its underwriting profit fell to $69m for the three months ended 31 December, however, from $77m, as its swung to a loss of $56.8m before tax from a profit of $5.9m.

Its comprehensive loss totalled $92.9m, compared to income of $24.3m at the end of 2020.

Lancashire said its group renewal price index was 109%, while its combined ratio came in at 107.3%, which it put down to “significant” weather and large loss events totalling $306.4m.

The company’s board declared a final dividend of 10 cents per share, making for total dividends of 15 cents per share for the year, in line with 2020’s distributions.

“2021 saw Lancashire successfully continue the long-term build-out of its franchise and expand into a number of new classes, with gross premiums written increasing by 50%,” said group chief executive officer Alex Maloney.

“Much of this premium will continue to earn through in 2022 and is expected to provide earnings resilience in future years.

“Delivery against this aspect of our strategy means we are well-positioned for profitable growth in the most attractive market conditions of recent years.”

Maloney said 2021, however, was also a poor year for returns, with winter storm Uri, hurricane Ida, European storms and floods, and Midwestern United States tornadoes putting industry-wide estimates for insured losses from natural catastrophes at between $105bn and $130bn - one of the costliest years on record.

“Financial losses are always disappointing but 2021 was only the second full financial year that Lancashire made an overall loss since its inception,” Alex Maloney said.

“Strong underlying profitability after nearly four years of rate increases, as illustrated by improvement in our attritional loss ratio, was offset by weather and large risk events during the year.

“Given the magnitude and frequency of industry losses in 2021, these insurance losses were in line with our expectations and risk tolerances.”

Lancashire followed its “usual conservative reserving philosophy”, Maloney explained, to estimate the impact, which had served the company well over time.

“Despite the disappointing returns of the past year, we are fully energised by the prospects for 2022 and profitable growth remains our main goal.

“Our strong capital position allows us to execute our ambitious business plans in which we expect further rate increases on our existing portfolio, with new underwriting teams delivering additional premiums and new business growth within both our catastrophe and non-catastrophe lines.”

At 1019 GMT, shares in Lancashire Holdings were down 0.23% at 538.25p.