6th Nov 2013 10:04
LONDON (Alliance News) - Lancashire Holdings Limited Wednesday reported a 67% decline in its third quarter profits, mainly because of European hail storms and floods.
But the specialty insurer operating in Bermuda and London said market conditions in 2014 look stable for its portfolio overall.
Lancashire said it made a USD58.3 million pretax profit for the three months ended June 30, down from USD78.0 million for the corresponding period last year.
The 67% quarterly decline pulled down the insurer's pretax profit for the first nine months by 12% to USD162.9 million. At the half year, Lancashire's USD137.2 million pretax profit had been comfortably ahead of the half year 2012 figure of USD107.1 million.
Although third quarter gross written premiums came in 10% higher than those reported for the same period last year, the increase wasn't enough to lift gross written premiums for the first nine months above the USD628.3 million written for the first nine months of 2012. They came in at USD548.9 million in the 2013 period.
Meanwhile, Lancashire's combined ratio, a measure of underwriting profitability, of 90.8% in the third quarter was substantially higher than the 48.9% reported in the third quarter of 2012, and markedly higher than the 69.7% that the insurer recorded in the year to date.
The nearer the combined ratio is to 100%, the smaller an insurer's underwriting profit, while a combined ratio exceeding that level would represent an underwriting loss, a situation in which the insurer is paying out more in claims than it received from premiums.
Lancashire said it made a USD19.7 million net loss, after reinstatement premium, which allows a previously terminated policy to resume active coverage, from European hail and flood events in the third quarter.
Net investment income, excluding realised and unrealised gains and losses, was USD6.1 million for the third quarter, a decrease of 18% from the third quarter of 2012.
Lancashire said that, due to the recent decline in the pound against the dollar, it made a foreign exchange gain of USD17.5 million on forward currency contracts that it purchased to hedge its GBP266 million acquisition of Cathedral, a Lloyd's insurer, in August. Lancashire issued shares to finance the purchase and held the proceeds in sterling as it waited to complete the transaction.
Lancashire said a special dividend of USD0.45 per common share will be paid for 2013, representing a total payment of about USD81.3 million. It will be paid in sterling on December 20 to shareholders of record on November 29.
Lancashire's shares were Wednesday quoted down 2.6% at 797.50 pence.
By Samuel Agini; [email protected]; @samuelagini
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