Thanks to a favourable claims environment, Bermuda-based underwriter Lancashire Holdings has made strong progress since floating on Aim at the end of 2005.
Inevitably, however, that benign claims picture has also put downward pressure on premium rates and Lancashire's book of business is skewed towards many of the high-margin areas - such as property and offshore energy installations - that are currently experiencing the biggest premium rate decreases. Indeed, chief financial officer Neil McConachie concedes that gross written premiums for 2008 are likely to be down on 2007. Reflecting that weakening environment, Lancashire now needs less capital to support its business - hence January's 110¢-a-share dividend.
On the investment side Lancashire's portfolio grew strongly, thanks in part to a high net operating cash flow that boosted net invested assets. And the portfolio's investment focus remains conservative - just a 4.1 per cent is invested in equities, with 58.6 per cent in fixed income investments, and 37.3 per cent in in cash. Moreover, there's no sub-prime mortgage related exposure in the book. Numis Securities currently expects EPS of 62.2p for 2008 (102p: 2007).
for a guide to the terms used in IC results tables
| LANCASHIRE HOLDINGS (LRE) | ||||
|---|---|---|---|---|
| ORD PRICE: | 307p | MARKET VALUE: | £560m | |
| TOUCH: | 306-307p | 12-MONTH HIGH: | 380p | LOW: 288p |
| DIVIDEND YIELD: | 36% | PE RATIO: | 3 | |
| NET ASSET VALUE: | 669¢ | COMBINED RATIO: | 46.3% | |
| Year to 31 Dec | Net premiums ($m) | Pre-tax profit ($m) | Investment income ($m) | Dividend per share (¢) |
|---|---|---|---|---|
| 2005 | 2.60 | -11.6 | 2.10 | nil |
| 2006 | 548 | 160 | 54.2 | nil |
| 2007 | 667 | 392 | 78.4 | nil* |
| % change | +22 | +145 | +45 | - |
Ex-div: - Payment: - *Excludes 110 per share special dividend, paid in January 2008 £ = $1.969 | ||||
