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Lancashire inches into the black

The specialist insurer faced down claims inflation, catastrophes and Covid-19 in 2020
February 10, 2021
  • Underwriting and investment performance beats forecasts
  • Pandemic made up small portion of 2020 losses

A strong investment portfolio performance came to the rescue of Lancashire (LRE) in 2020, as the specialist insurer was forced to swallow $244m (£177m) of losses even before the small matter of Covid-19.

Claims stemming from the pandemic, largely from property exposures, came in just shy of the $42m forecast in July. The remaining exposures – including losses from hurricanes as well as “unusually high level of frequency in non-natural catastrophe” lines –  were within Lancashire’s risk tolerance, but 88 per cent ahead of 2019.

“In such a difficult year, we consider making an overall profit after tax of $4.2m and comprehensive income of $24.3m a very positive result,” said CFO Natalie Kershaw. That seems a fair summary.

Avoiding event cancellation and business interruption lines also put the group ahead of listed Lloyd’s rivals Beazley and Hiscox, so investors get the final dividend alongside hardening rates, and good options to deploy the $340m capital raised last June. Buy.

Last IC View: Buy, 621p, 14 Feb 2019

LANCASHIRE HOLDINGS (LRE)  
ORD PRICE:762pMARKET VALUE:£1.9bn
TOUCH:761-763p12-MONTH HIGH:853pLOW: 481p
DIVIDEND YIELD:1.4%PE RATIO:N/A
NET ASSET VALUE:628¢COMBINED RATIO:108%
Year to 31 DecGross premiums ($m)Pre-tax profit ($m)Investment income ($m)Dividend per share (¢)*
201663415029.815
2017592-7330.515
20186393434.735
201970712037.715
20208145.929.015
% change+15-95-23-
Ex-div:6 May   
Payment:4 Jun   
£1=$1.38 *Excludes special dividends of 20¢ in 2018, 75¢ in 2017.