Bermuda-based insurer, Lancashire Holdings, reported a sector-beating first-half combined ratio (of claims to premiums) of 57.9 per cent - meaning hefty underwriting profits. The second-quarter performance was stronger still - helped by $35.3m (£21.1m) of reserve releases, the second-quarter combined ratio reached an impressive 35.4 per cent. The Lloyd's sector average ratio, for example, is nearer 80-90 per cent.
Overall conditions remain attractive as last year's hurricane-related losses continue to force underwriters to push up premium rates. "We are pleased with the business written in July at rating levels supporting our decision to hold back capacity earlier in the year," said chief executive Richard Brindle. "Trading conditions, with the exception of the Gulf of Mexico energy class, have generally met expectations."
And while investment income slipped year-on-year, the group's portfolio looks well placed. Indeed, the book delivered a 2.4 per cent annualised return at a time when many players in the sector are making chunky investment book losses. That reflects management's conservative asset allocation strategy - 81.7 per cent is invested in safe-looking fixed income assets with the rest in cash.
Numis Securities expects full-year pre-tax profits of $253m and EPS of 144¢ ($98m and 55¢ in 2008).
LANCASHIRE HOLDINGS (LRE) | ||||
|---|---|---|---|---|
| ORD PRICE: | 452p | MARKET VALUE: | £782.3m | |
| TOUCH: | 451-453p | 12-MONTH HIGH: | 519p | LOW: 242p |
| DIVIDEND YIELD: | 0.7% | PE RATIO: | 12 | |
| NET ASSET VALUE: | 820c | COMBINED RATIO: | 57.9% | |
| Half-year to 30 Jun | Net premiums ($m) | Pre-tax profit ($m) | Investment income ($m) | Dividend per share (¢) |
|---|---|---|---|---|
| 2008 | 324 | 136 | 30.6 | nil |
| 2009 | 338 | 148 | 27.5 | 5.00 |
| % change | +4 | +9 | -10 | - |
Ex-div: 26 Aug Payment: 7 Oct £1=$1.65 | ||||
