High levels of catastrophe losses hit Lancashire’s operating performance in the fourth-quarter of 2018, but despite this, the firm’s resilient portfolio and reinsurance programme contributed to a positive performance for the full-year.
Lancashire has reported a net operating loss of $13.9 million for the fourth-quarter of 2018, compared with a loss of $3.1 million a year earlier. For the full-year 2018, the firm recorded a net operating profit of $39.8 million, compared with a loss of $86 million a year earlier.
Gross premiums written (GPW) and net premiums written (NPW) increased in both the fourth-quarter and the full-year. GPW reached $130.8 million in Q4 and $638.5 million for the full-year, while NPW increased to $97.4 million and $417.7 million, respectively.
Growth was evident across Lancashire’s business lines with the exception of marine, driven by a reduction in exposure. Property, energy, aviation and Lloyd’s business all increased for Lancashire in Q4, as did the firm’s ceded reinsurance premiums.
Ceded reinsurance premiums increased by $181.1 million, or 118.3% for the fourth-quarter of 2018, when compared with Q4 2017. Lancashire says that the increased spend for the quarter was mostly driven by the purchase of additional cover in respect of new lines of business added, plus higher reinstatement premiums.
Lancashire’s loss ratio improved to 60% in Q4 and to 40% for the full-year 2018, which is compared with 75.5% and 78.4% a year earlier.
The firm’s combined ratio totalled 107.4% for the quarter, which is an improvement on the 119.5% recorded a year earlier. And, for the full-year 2018, Lancashire’s combined ratio improved significantly from 124.9% to 92.2%.
Alex Maloney, Lancashire’s Group Chief Executive Officer (CEO), commented: “The fourth quarter of 2018 once again witnessed higher levels of loss activity than average, with the occurrence of hurricane Michael in October and a further series of catastrophic wildfires in California causing a tragic loss of life. When considered with the other major loss events during the year, 2018 ranks amongst the four largest loss years of the last couple of decades.
“Following 2017, this is the second year in succession of well above average global insured catastrophe losses. Against this backdrop, the Group has generated a positive RoE for the full year of 2.4%. Overall, I am pleased at the resilience of our portfolio and our reinsurance programme, given the loss environment.”
Looking forward, Lancashire’s Chief Financial Officer (CFO), Elaine Whelan, said: “We expect to see improved rates across many of our lines of business, and growth through new business where we have recently added new teams. We expect to put most of our capital to work, but we will continue to hold some capital for opportunities that may arise. In line with our stated dividend policy we are declaring our standard final ordinary dividend of $0.10 per share.”
Maloney added: “We pride ourselves not only on our underwriting expertise, which is key to the delivery of our strategy, but also on the dedication and professionalism of our people throughout the business. I would like to thank everyone across our Group for their contribution to what has been a positive result in another challenging year. We are well positioned to develop the opportunities which lie ahead.”
