30th Apr 2015 07:34
LONDON (Alliance News) - Lancashire Holdings PLC Thursday said it is better equipped than many of its rivals to deal with pressure on insurance rates in many of its business lines, as the specialty insurer reported a lower first-quarter pretax profit.
In a statement, Lancashire said it made a USD51.5 million pretax profit in the three months ended March 31, compared with USD57.4 million in the corresponding quarter of the prior year.
Gross premium written fell to USD244.3 million from USD316.7 million, while expenses were cut to USD115.5 million from USD118.7 million.
Chief Executive Alex Maloney said pricing came under pressure across "almost all" business lines.
"Whilst there is some evidence of a floor being reached in catastrophe bond and ILW (insurance linked warranty) pricing, there continues to be a glut of capacity with significant over-supply in every area," Maloney said in a statement.
The chief executive said it's important for Lancashire to be guarded against complacency, even though he thinks the insurer is "better positioned" than many of its competitors.
Chief Financial Officer Elaine Whelan said she doesn't expect pricing pressure to reverse any time soon, meaning the group is "more likely" to return capital to shareholders than to retain it. The final decision on capital returns will be driven by "market outlook", Whelan said.
Whelan doesn't expect "any need" to raise capital in the current market but thanked shareholders for "continuing to appreciate our need for flexibility to manage the cycle" after they approved the group's authority to issue of up to 15% of its share capital on a pre-emptive basis at Wednesday's annual meeting.
Investment return, including net investment income, net other investment income, net realised gains and losses, impairments and net change in unrealised gains and losses, amounted to USD21.4 million in the quarter, compared with USD7.9 million in the corresponding period of the prior year. Net investment income, excluding realised and unrealised gains and losses, increased to USD7.6 million from USD7.1 million.
"Returns for the quarter were bolstered by strong returns in the hedge fund and bank loan portfolios, with our fixed income portfolio also benefiting from a decline in treasury yields driven by weaker US growth and continued low levels of inflation. A positive return was also generated in the corresponding period of 2014, although of a lesser magnitude with little movement in short maturity yields over that quarter," Lancashire said.
Lancashire shares were down 1.3% at 635.00 pence on Thursday morning.
By Samuel Agini; [email protected]; @samuelagini
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