A lack of major claims meant that premiums continued to soften in the Lloyd’s of London market, but Lancashire (LRE) resisted the temptation to chase unprofitable business in the first half. At the same time, reinsurance remained attractively priced, and more protection for hurricane risk was bought than in previous years. And with risk levels at historic lows, if there are no major events in the coming hurricane season Lancashire expects to return capital to shareholders later in the year.
Gross property premiums written fell by 13.6 per cent, mainly because multi-year contracts in the political risk and terrorism classes are not yet due for renewal. Energy gross premiums were also down, falling by 18 per cent, while the timing on non-annual renewals helped to boost marine gross premiums by 56.7 per cent, and in the Lloyd’s section premiums fell by 12.9 per cent. Aviation premiums were down by more than a half.
The major declines came in the energy, property and terrorism books as overcapacity in the market continued to put downward pressure on rates. Net investment income fell 8.1 per cent (see table), equating to a return of 1.5 per cent.
Analysts at Numis are forecasting EPS of 52.2p for the year to December 2017, from pre-tax profit of $150m, down from 61.2p in 2016.
| LANCASHIRE (LRE) | ||||
| ORD PRICE: | 735p | MARKET VALUE: | £1.47bn | |
| TOUCH: | 734.5-735.5p | 12-MONTH HIGH: | 774p | LOW: 531p |
| DIVIDEND YIELD: | 1.6% | PE RATIO: | 12 | |
| NET ASSET VALUE: | 629¢ | COMBINED RATIO: | 78.4% | |
| Half-year to 30 Jun | Gross premiums ($m) | Pre-tax profit ($m) | Investment income ($m) | Dividend per share (¢) |
| 2016 | 431 | 56.6 | 16.0 | 5 |
| 2017 | 381 | 66.7 | 14.7 | 5 |
| % change | -11 | +18 | -8 | - |
| Ex-div: | 10 Aug | |||
| Payment: | 6 Sep | |||
| £1=$1.303 | ||||
