Company “well positioned” to weather soft market

Bermuda-based (re)insurance group Lancashire Holdings made a net profit after tax of $330.8m, down 14% on the $385.4m it made in 2009.

The company’s combined ratio increased to 54.4% in 2010 from 44.6% in 2009, and return on equity dipped to 23.3% from 26.5%.

Lancashire CEO Richard Brindle said the firm had moderate exposure to last year’s earthquake in Chile and the Deepwater Horizon oil rig explosion, but minimal losses to the New Zealand earthquake, Australian flooding and political unrest in Tunisia and Egypt.

While profits were lower, Brindle praised Lancashire's 2010 performance in a market where premium rates were falling. "I am therefore pleased to report another excellent set of financial results, and to note that Lancashire's performance has, for the third time in the last four years, enabled us to pay a special dividend to our shareholders," he said.

While premium rates have continued to weaken, Brindle said high spots included offshore energy and marine retrocessional business, where rates have improved following the Deepwater Horizon loss. The company has also increased its sovereign risk book.

“Companies often lose their discipline at this point in the cycle,” Brindle said. “Our daily underwriting call helps us stay focused on risk selection whilst protecting our core broker and client relationships. Lancashire is well positioned both for the soft market and to quickly take advantage of the next market moving event, whenever it might occur.”

Lancashire’s 2010 performance highlights:

  • Gross premiums written: $689.1m (2009: $627.8m)
  • Profit after tax: $330.8m (2009: $385.4m)
  • Combined ratio: 54.4% (2009: 44.6%)
  • Return on equity: 23.3% (2009: 26.3%)
  • Total investment return: 4.2% (2009: 3.9%)
  • Share repurchases: $136.4m (2009: $16.9m)