1st May 2014 07:55
LONDON (Alliance News) - Specialty reinsurer and insurer Lancashire Holdings Ltd Thursday reported lower first-quarter pretax profit, but Chief Financial Officer Elaine Whelan said the company is likely to return a "substantial" amount of earnings to shareholders later in the year.
In a statement covering the three months ended March 31, Lancashire said pretax profit fell to USD57.4 million from USD78.9 million. Net revenue rose by USD28.4 million to USD182.5 after an increase in net premiums earned, but expenses were up by USD46.7 million at USD118.7 million. Investment return increased to 0.3% from 0.1%.
"While we experienced some adverse development on the 2013 accident year due to a late reported energy claim, there were no major losses in the first quarter and the group produced a return on equity of 3.9% with a combined ratio of 66.4%. Return on equity for the Lancashire Companies was 3.5%, with Cathedral adding 0.5% and acquisition adjustments now only detracting by 0.1%," Whelan said in a statement, adding that Lancashire's January and April renewals went "well" and were in line with expectations.
"We will continue to monitor market developments over the rest of the year but, with no indication of any change in trading conditions, it is likely that we will return a substantial portion of our earnings later in the year. Should conditions change we will clearly put any excess capital to work. While we do not currently anticipate any need to raise additional capital, we are ready to do so if the circumstances merit," Whelan said.
Berenberg analyst Tom Carstairs, who has a Hold rating on the shares along with a 786 pence price target, said the earnings were "a slight miss" versus consensus expectations at the pretax profit level but also said the language used around the returns to shareholders may be an issue.
"While we await clarification of this from the analyst presentation later today, we believe that this may represent a disappointment for investors expecting 100% of full-year earnings to be returned given the competitive pricing environment," Carstairs said in a note.
Lancashire is holding an analyst and investor conference call at 1300 BST Thursday.
Lancashire shares were Thursday quoted at 693.50 pence, down 0.9%.
By Samuel Agini; [email protected]; @samuelagini
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