Lancashire 2014 profit up to $231.9m

Lancashire 2014 profit up to $231.9m

UK-based Lancashire Holdings has booked a net operating profit of $231.9m for 2014, up from $184.2m in 2013. Gross written premiums rose to $907.6m, from $679.7m. The combined ratio improved to 68.7%, from 70.2%.

2014_Lancashire_Net_Profit

Group chief executive Alex Maloney said that "a solid return on equity and an excellent combined ratio have been achieved in difficult trading conditions".

Maloney went on to say that "the truth is that there is too much capacity in many of the reinsurance and specialty arenas". Lancashire's answer to this was to employ lead underwriters "with the ability to work with clients and brokers to design programmes and supply meaningful capacity", which protected Lancashire from the smaller following markets who cannot fulfil these requirements.

2014_Lancashire_GWP

"We did see some pressure on signings throughout the year, but on our core books we maintained, and even in some cases added to, our share of the risks we really like".

Lancashire said that it spent $164m in 2014 on outwards reinsurance, meaning that it was also a beneficiary of the decline in reinsurance and retrocession rates. Lancashire is entering 2015 with "historically low retained risk levels".

Ceded reinsurance premiums were up 35% ($42.7m) for 2014. The Accordion sidecar quota share contract was commuted in Q1 2014, but that reduction was more than offset by $64.9m of ceded premiums in relation to the Lloyd's segment ($284.3m of GWP in 2014).

2014_Lancashire_Combined_Ratio

The increase in premiums for 2014 when compared with 2013 is derived mainly from the Lloyd's segment, where Cathedral Underwriting was bought in late 2013. Lancashire had not previously had a Lloyd's underwriting book.

Property gross premiums fell 21.1% year on year to $263,0m, from $333.4m, driven primarily by reductions in the property retrocession book at the January 1 2014 renewals. There was an expansion of the property catastrophe excess of loss book. There was a reduction in both the terrorism and political and sovereign risk books.

Energy GWP was up 14.1% year on year, driven mainly by the division's Gulf of Mexico book, "where a number of both new and renewing deals were written on a multi-year basis".

Marine GWP was up 7.5% year on year, largely because of non-annual contract renewals in the marine hull subclass in Q2 2014.

Aviation GWP was up 8.8% year on year, "mainly due to new satellite business plus additional satellite launches on contracts written in previous years."

Net investment income for the year was $28.6m, up 12.6% year on year. This was mainly due to an increase in the total investment book as a result of the Cathedral acquisition.

A further special dividend was announced, continuing Lancashire's track record of returning profits to shareholders rather than growing into sectors that it considers insufficiently profitable.

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