Lancashire GWP rises but profits take a dive

London re/insurer Lancashire posted healthy growth in the first quarter results but reported a vastly depleted pre-tax profit.

Profit before tax fell 27 percent to $57.4 million this quarter, compared with $78.9 million in the first quarter of the previous year.

However, gross premiums written grew 47 percent to $316.7 million, compared with $214.9 million in the first quarter of 2013. Net premiums written also increased to $204.4 million this quarter, compared with $118.6 million in the prior year quarter.

Combined ratio rose 15 percentage points to 66.4 percent, compared with 51.2 percent in the prior year quarter.

Alex Maloney, chief executive officer of Lancashire, remained hopeful that the core business lines can be protected from the weakening environment.

Maloney said: "The first quarter has been a busy one on many fronts. There has been the successful launch of the initial Kinesis product, the development and Lloyd's approval of the business plan for the expansion of Cathedral's Syndicate 3010 and the realignment of the Lancashire Companies' catastrophe exposures into the property catastrophe excess of loss line.

“Thanks to our strong value-added proposition with our brokers and clients as a leader for much of our business, we have been able to protect the core business lines at Lancashire Companies and Cathedral from the weakening rate environment. We have maintained our position and in spite of the pressure on signings, we continue to see strong submission levels for both new and renewal business.

“For our finance and actuarial teams it has also been busy as the Lancashire Companies and Cathedral work together to harmonise reporting and align practice across the Group.  Operations and IT have also been working hard during the transition, particularly with preparations for the move to a new building, which will bring all the London operations of the Group under one roof later in the year.

Elaine Whelan, group chief financial officer, added that the January and April renewals were in line with expectations and Lancashire does not anticipate any need to raise additional capital but will continue to monitor market developments.

“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,” said Whelan.

She added: "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 RoE of 3.9 percent with a combined ratio of 66.4 percent. RoE for the Lancashire Companies was 3.5 percent, with Cathedral adding 0.5 percent and acquisition adjustments now only detracting by 0.1 percent.”