Additional reinsurance payments for natural catastrophes and late claims on energy business written last year pushed Lancashire’s (LRE) combined ratio – of claims costs as a proportion of premium income – up from 67.1 per cent to 86.6 per cent during the first half. Higher claims were partially offset by higher investment income, which management does not expect to continue into the second half.
However, pricing has started to harden, with increases accelerating from a first-quarter average of 5 per cent to 7 per cent during the following three months. “These losses have highlighted the lack of sensible margin in the insurance and reinsurance industry,” said chief executive Alex Maloney. Gross written premiums rose almost 10 per cent thanks to improved pricing and volumes of business. The property, Lloyd’s and marine business lines reported double-digit premium growth, with the last of the trio leading the way, posting a 15 per cent increase.
However, the improvement in rates would take some time to fully feed through to the bottom line, said Mr Maloney, although it would benefit 2019 and 2020 full-year earnings.
Analysts at Peel Hunt expect net tangible assets of 510¢ a share at the December 2019 year-end, up from 455¢ in 2018.
| LANCASHIRE (LRE) | ||||
| ORD PRICE: | 713p | MARKET VALUE: | £ 1.44bn | |
| TOUCH: | 712.5-713.5p | 12-MONTH HIGH: | 731p | LOW: 492p |
| DIVIDEND YIELD: | 3.9% | PE RATIO: | 41 | |
| NET ASSET VALUE: | 555¢ | COMBINED RATIO: | 87% | |
| Half-year to 30 Jun | Gross premiums (£m) | Pre-tax profit ($m) | Investment income ($m) | Dividend per share (¢) |
| 2018 | 393 | 74.9 | 15.9 | 5 |
| 2019 | 430 | 40.5 | 19.6 | 5 |
| % change | +9 | -46 | +23 | - |
| Ex-div: | 08 Aug | |||
| Payment: | 06 Sep | |||
| £1=$1.27 | ||||
