(Re)insurer’s 1H profit drops 37%

UK-listed (re)insurer Lancashire Holdings has cut back on property catastrophe business amid unfavourable market conditions.

In a statement issued with the company’s first-half results, Lancashire’s chief executive Richard Brindle said that the firm’s property/catastrophe book, particularly in Florida, had come under pressure. As a result, the company reduced its property-catastrophe exposure in the south-east and Gulf regions of the US at both the June and July renewals.

Brindle added that pricing pressure had also prompted the firm to either decline or reduce its participation in several of its retrocessional accounts, and that it had also scaled back its direct and facultative account exposures.

Accordingly, Lancashire’s second quarter 2010 property gross written premiums were down $40.1m or 35.4% to $73.2m. By comparison, marine gross written premiums were down $1.1m or 1.3%, and aviation premiums were $2.5m, or 16.7%, lower than in the second quarter of 2009.

However, as a result of the Deepwater Horizon oil rig disaster, Brindle said energy business had become a “bright spot”. Worldwide energy rates have increased by between 10% and 30% as a result of the loss. Lancashire’s gross written premium in energy increased £33.9m, or 38.4% in the second quarter of 2010 to $122.1m from $88.2m.

Lancashire made a net profit after tax of $93m for the first half of 2010, down 37% on the $147.1m it made in last year’s first half. Second quarter profits were also down, falling 20% to $84.8m from $106.4m.

Lancashire’s first-half combine ratio increased to 77.4% from 57.9%, while the second quarter combined ratio increased to 51.5% from 35.4%. Brindle said the second-quarter combined ratio demonstrated “a resilient underwriting performance during an adverse claims period”. He described Lancashire’s exposure to the Deepwater Horizon loss as “modest”.