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Jul 29, 2020

Lancashire half year statement of results and trading conditions

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Lancashire Holdings reported to the market its half year position with financial highlights as follows and excerpts from the announcement below:

  • Resilient business model and operational capabilities despite COVID-19 global disruption; high productivity maintained.
  • Gross premiums written increased by 15.3% year on year to $495.5 million, ahead of rate, with the Group Renewal Price Index of 111%.
  • Strong underlying underwriting performance, with a combined ratio of 88.9% absent the COVID-19 loss estimate (106.9% including COVID-19).
  • Investments rebounded in Q2, resulting in total net investment return of 1.3% for the six months ended 30 June 2020.
  • Interim dividend of $0.05 per common share.


Extracts from the announcement:

Comments on Covid impact

The effects of COVID-19 as a loss event to the insurance and reinsurance markets remain both ongoing and uncertain. For Lancashire, the current estimated impact of the COVID-19 loss event has been assessed consistent with our usual internal processes for deriving ultimate loss estimates, albeit that there is higher uncertainty with this event. During the second quarter of 2020, we increased our COVID-19 loss estimate to approximately $42 million, from approximately $35 million, net of reinsurance and reinstatement premiums.

As at 30 June 2020, the Group’s COVID-19 ultimate loss estimate, net of reinsurance and reinstatement premiums, amounted to approximately $42 million. This arose primarily from exposures within our property segment. Given the ongoing nature of the COVID-19 pandemic and the uncertain impact on the insurance industry, the Group’s actual ultimate loss may vary, perhaps materially, from the current estimate. The final settlement of all of these claims is likely to take place over a considerable period of time.

As noted in the our Q1 trading statement, Lancashire does not write the following lines of business: travel insurance; trade credit; accident and health; Directors’ and Officers’ liability; medical malpractice; and long-term life. The Group also has minimal exposure to mortgage business and is exposed to a small number of event cancellation contracts.

Rates and outlook

In the year to 30 June 2020, we have witnessed double-digit percentage rate increases in many of our lines of business and accelerated rating dislocation in the catastrophe exposed reinsurance lines, resulting in rises in the range of 20%-30% for 1 June renewals in Florida. I believe that the economic fundamentals now dictate that this pricing trend is likely to strengthen throughout 2020 and into 2021 across a number of our business lines, and that current market conditions present an attractive opportunity for growth consistent with our strategy of deploying capital in line with the insurance market cycle.

In a rapidly changing market, we are seeing attractive opportunities to develop many of our existing lines of business and to establish new ones. Our business is well positioned to grow our underwriting portfolio and to develop opportunities to improve the risk adjusted returns for our business and our investors.”

Premium and Renewal Price Index

Six months ended

Gross premiums written

2020

2019

Change

Change

RPI

$m

$m

$m

%

%

Property

300.1

268.5

31.6

11.8

107

Energy

91.7

76.4

15.3

20.0

110

Marine

53.5

45.4

8.1

17.8

113

Aviation

50.2

39.3

10.9

27.7

121

Total

495.5

429.6

65.9

15.3

111


Lancashire's share price was down nearly 5% on 29 July.

For more detail in the full announcement please click here