Lancashire Holdings Limited has announced an almost 35% rise in gross premiums written (GPW) for the first half of 2022 to $938.1 million, as the company’s underwriting performance strengthened with a lower combined ratio of 78.2%.
Alongside the growth in GPW, Lancashire has reported net premiums written (NPW) growth to over $622 million for H1 2022, compared with $428 million in H1 2021.
Apart from aviation, which saw a slight year-on-year decline in GPW in the period, Lancashire has recorded premium growth across the business. This includes growth of over 45% in property and casualty reinsurance to $548 million, growth of 41% to $149.6 million in property and casualty insurance, growth of over 7% in energy to GPW of $115.4 million, and premium expansion of 40% in Marine to $66.8 million.
In terms of outwards reinsurance premiums, the carrier notes that while the proportion to GPW has declined, year-on-year, in dollar terms the cost increased by $46.2 million, or more than 17% when compared with H1 2021.
On the underwriting side of the balance sheet, Lancashire saw its loss ratio for H1 2022 come down slightly to 37.9%, as the company experienced net losses from the ongoing events in Ukraine and the floods in Australia, alongside numerous other smaller weather and risk losses. However, none of these events “was individually material for the Group.”
Previously, Lancashire provided a range of $20 million to $30 million for potential incurred losses within Ukraine. Today, the firm has reported that its ultimate net losses incurred within the country since the start of the war are towards the lower end of that range at $22 million, excluding the impact of reinstatement premiums.
“We continue to closely monitor our exposure with regards to Russia, which remains a complex and fluid situation. We believe that any potential losses would be within our risk tolerances, and would not impact our strategy or our ability to deliver on our ambitious growth plans,” said Alex Maloney, Group Chief Executive Officer (CEO).
The H1 2022 underwriting result also includes prior year favourable development of $64.4 million, versus favourable development of $53.6 million for the same period last year.
Overall, Lancashire has produced a combined ratio of 78.2% for H1 2022 compared with 80.7% for H1 2021. Further, the company’s profit before tax increased from $54.1 million in H1 2021 to $78 million in H1 2022. However, the firm has reported a comprehensive loss of $7.1 million against a gain of $33.6 million last year, which are attributable to Lancashire and exclude non-controlling interests.
But while underwriting has improved so far in 2022, on the asset side of the balance sheet, Lancashire has revealed that its investment portfolio, including unrealised gains and losses, returned a negative investment performance of 3.8%, or an investment loss of $85.8 million.
According to Lancashire, this includes $83 million of unrealised losses on its fixed maturity AFS portfolio for H1 2022, primarily driven by the Federal Reserve’s response to inflation and volatile financial markets.
“The Group delivered strong premium growth in the first half of the year with a 34.6% increase in gross premiums written year-on-year to $938.1 million. We continue to see attractive rate increases across a number of business lines with a renewal price index for the first six months of 106%,” said Maloney. “Over the past few years, we have successfully diversified our underwriting portfolio. I am pleased that we are seeing a strong performance from a number of these newer classes of business while we are also continuing to benefit from those products where we have longer-standing expertise. This has resulted in an excellent underwriting performance for the first half of 2022 with a combined ratio of 78.2% and profit before tax of $78.0 million.”
“While broader macro-economic issues are impacting the outlook for the global economy, we believe that the strong rate environment for many of our products is the best we have seen for more than a decade and that it will continue through the second half of 2022 and into 2023. This includes risk- adjusted rate rises and attractive opportunities across lines impacted by the conflict in Ukraine,” he added.
“We continue to be strongly capitalised giving us the firepower to execute our long-term strategy to
grow premiums where we believe there are attractive returns while retaining our strict focus on underwriting discipline.
“In June we were pleased to announce a number of senior underwriting appointments, all of which were promotions from within our existing teams. Ensuring we have the right talent in the right roles is critical to our success as we look to maximise the Group’s underwriting prospects. Lancashire has always attracted some of the best people in the industry and we continue to develop our employees, wherever they work in the business, and give them opportunities to thrive in our positive and vibrant corporate culture.
“As always, I would like to thank all our colleagues for their hard work and commitment and our brokers, clients and shareholders for their continued support,” concluded Maloney.
