Cathedral acquisition boosts Lancashire’s results
Re/insurer Lancashire’s gross written premiums increased by 33.5 percent to $907.6 million in 2014, compared with $679.7 million in 2013, primarily derived from the new Lloyd’s segment following the acquisition of Cathedral in the fourth quarter of 2013.
Its profits after tax increased slightly to $229.3 million compared with $222.5 million, while its combined ratio dropped to 68.7 percent in 2014, compared with 70.2 percent in 2013.
Alex Maloney, group chief executive officer, said: “I’m delighted to report another good quarter and year for Lancashire, with our key performance indicators demonstrating that our business model is built to provide strong results across the market cycle. A solid return on equity and an excellent combined ratio have been achieved in difficult trading conditions and allowed us to maintain our excellent dividend record, based on our continued commitment to focusing on our underwriting and capital management.
"With market-leading underwriters across all three of our business platforms we have defended our core portfolio, built out lines where we had true growth opportunities, reduced exposures where competition made returns unacceptable, and maintained our relevance to brokers and clients. We attracted quality new underwriting talent, and this helped us to grow the stamp capacity of Cathedral Syndicate 3010 from £30 million when we acquired it in November 2013 to £100 million for 2015, building out new specialist teams in energy, terrorism and aviation lines.”
Lancashire also took advantage of lower reinsurance rates to purchase some new non-marine retrocession aggregate cover and to restructure and increase limits for the marine, energy and terror programmes.
“The greatest pressures are in the reinsurance, and in particular, the retrocession markets where barriers to entry are comparatively low. But as a company that spent over $164 million in 2014 on outwards reinsurance premiums we are obviously a beneficiary of this as well. We enter 2015 with historically low retained risk levels, without having had to sacrifice any meaningful share of our inwards portfolio, except property retrocession which has been replaced with better margin, less volatile catastrophe business,” added Maloney.
The company continued with its focus on third party capital management, with its 10 percent equity interest in Kinesis Capital Management responsible for the majority of the $5.9 million share of profit of associates for 2014.
For the year ended December 31, 2014 other income includes $6.2 million for underwriting services to the Kinesis vehicle, $10.1 million of profit commission and managing agency fees relating to the Lloyd’s segment and $3 million of final profit commission from the Saltire vehicle.During the first quarter of 2014 final profit commission of $6.7 million was also received from the Accordion vehicle; this was recorded in net insurance acquisition costs.
Elaine Whelan, group chief financial officer, said: “Given our outlook for 2015, and further reductions in our exposure at January 1, 2015, which are largely due to the impact of expanded outwards reinsurance and retrocession purchases, we are topping up last quarter’s special dividend with a further 50 cents per share.
"Combined with dividend equivalent payments, that results in a capital return of $103 million. Together with the special dividend declared in November, plus the interim and final dividends for this financial year, we have returned 167.8 percent of comprehensive income for the year. Including all forms of capital returns, from inception we have returned 101.9 percent of comprehensive income.
