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Lancashire’s H1 combined ratio jumps to 106.9%

29th July 2020 - Author: Charlie Wood

Specialty re/insurer Lancashire Holdings saw its combined ratio for the first half of 2020 jump to 106.9%, up from 86.6% in H1 2019.

lancashire-logoThe group’s COVID-19 ultimate loss estimate, net of reinsurance and reinstatement premiums, amounted to approximately $42 million. This arose primarily from exposures within its property segment.

Prior year unfavourable development for 2020 was $5.1 million, compared to $15.9 million of favourable development for the same period in 2019.

The unfavourable development during the first six months of 2020 was primarily driven by a number of late reported losses from the 2019 accident year, reserve deterioration on a couple of marine claims in the 2017 and 2019 accident years, in addition to adverse development on the 2010 New Zealand earthquake in the property segment.

Net investment income, excluding realised and unrealised gains and losses, was $14.9 million for H1 2020, a decrease of 24.0% from the same period in 2019.

Total investment return was a gain of $22 million for the first six months of 2020 compared to a gain of $57.1 million for the first six months of 2019.

Gross premiums written increased by 15.3% year on year to $495.5 million, ahead of rate, with the Group Renewal Price Index of 111%.

Alex Maloney, Group Chief Executive Officer, said, “In the face of the challenges generated by the COVID-19 pandemic to both sides of the balance sheet, there has been a retrenchment in (re)insurance market risk capital and capacity.

“In the year to 30 June 2020, we have witnessed double-digit percentage rate increases in many of our lines of business and accelerated rating dislocation in the catastrophe exposed reinsurance lines, resulting in rises in the range of 20%-30% for 1 June renewals in Florida.”

“I believe that the economic fundamentals now dictate that this pricing trend is likely to strengthen throughout 2020 and into 2021 across a number of our business lines, and that current market conditions present an attractive opportunity for growth consistent with our strategy of deploying capital in line with the insurance market cycle.

“During the second quarter of 2020, we increased our COVID-19 loss estimate to approximately $42 million, from approximately $35 million, net of reinsurance and reinstatement premiums.”

Natalie Kershaw, Group Chief Financial Officer, added, “For the first half of 2020 we generated an underwriting profit of $39.4 million and an overall comprehensive loss of $14.7 million.

“Our financial results were impacted by the COVID-19 losses, plus a number of late reported attritional claims from prior years.

“Excluding COVID-19 we did not incur any new major losses in the first half of the year and we have seen significant premium growth across all our underwriting segments.

“Our investment strategy remains conservative and whilst our portfolio was impacted by the volatility which occurred during the first quarter of 2020 as a result of the global pandemic, I am pleased to note that for the year to 30 June 2020 our portfolio recovered to generate a positive return of 1.3%.”

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