Bermuda-based re/insurer Lancashire Holdings has reported that its gross written premiums increased by 34.9% to $1,652 million over 2022, including premium growth of 50% for its reinsurance business.
The company also recorded underwriting profit of $150.8 million for the year, compared with $96.0 million in 2021, on a combined ratio of 97.7%.
This was despite net losses totalling $576.4 million for the period, versus $470.5 million previously, which resulted in a 58.3% loss ratio and an overall loss before tax of $2.8 million, an improvement on 2021’s loss of $57.8 million.
Lancashire explained that the significant growth in its reinsurance premiums, which finished the year at $1,652 million, were primarily due to new business in the casualty reinsurance class, and also benefited from new policies bound in 2021.
Strong growth was also seen in property reinsurance, where rates continued to harden with RPIs of 111%.
But aside from rate rises there was limited exposure growth in property as Lancashire maintained relatively stable risk levels, taking the increased margin through rate improvements, given it had already grown its footprint significantly during 2021.
In specialty reinsurance, all lines of business saw small increases in gross premiums written driven by new business growth and the company continued to build out its treaty account in energy, marine and political violence, adding to its already well-established sub-classes of aviation reinsurance and property retrocession.
Overall, for the reinsurance segment, reinstatement premiums were $45.1 million in 2022 compared to $42.8 million in the prior year.
Premium growth in the primary insurance segment was 22.0% for the year, accounting for slightly less than the reinsurance segment at $810.2, with Lancashire making significant increases in its property direct and facultative offering.
In terms of outwards reinsurance, Lancashire’s spend by $55.2 million or 13.5% compared to 2021, but the proportion of outwards reinsurance premiums to gross premiums written decreased year-on-year, owing partly to the growth of its inwards portfolio.
Net losses from catastrophe, weather and large loss events in 2022 were $308.8 million, including $163.3 million from hurricane Ian.
The company’s provision for large risk events for the year amounted to $90.4 million and includes $65.8 million related to the ongoing conflict in Ukraine and $24.6 million from an accumulation of four large losses in the energy upstream and power generation lines of business.
And on investments, net income was $43.7 million for 2022, although total investment return, including net investment income, net other investment income, net realised gains and losses, was a loss of $76.7 million in 2022 compared to a gain of $1.3 million for 2021.
“I’m very pleased to report that Lancashire continued its strong growth trajectory during 2022,” said Lancashire CEO Alex Maloney. “Our robust underwriting performance in 2022 came against a backdrop of high industry losses and a volatile macroeconomic environment.”
In line with our ‘underwriting comes first’ principle, we have continued to expand our footprint and take full advantage of the organic growth opportunities and rate increases being seen across the majority of our product lines,” he continued. “This growth has come from those lines where we have longer-term strength and expertise and from those we have added over the past few years as part of our actions to diversify and fortify our portfolio.”
“Traditionally, Lancashire has been seen as an established writer of natural catastrophe risk business meaning that when such events occur it is expected to impact our performance. However, during 2022 we have demonstrated that the growth and diversification of recent years now allows us to absorb significant catastrophe losses, such as hurricane Ian. While this event is estimated to be the second most costly hurricane on record, we have still produced a net underwriting profit,” Maloney explained. “This is a notable positive step-change for the business and testament to the clear long-term strategy we have set out.”
Looking ahead, he concluded: “Wider capacity constraints – due particularly to the increasing cost of capital and historic loss activity – are expected to give us considerable opportunities to further strengthen our franchise at a time in the cycle of expanding margins.”
