Lancashire Holdings profit up but premiums down

FTSE 250 insurer Lancashire Holdings reported an increase in first-quarter profit but a drop in premiums on Thursday amid "difficult" market conditions.

In the three months to the end of March, gross premiums written fell to $196.5m from $230.8m in the first quarter of last year, while net premiums written declined to $76.3m from $121.6m.

Meanwhile, pre-tax profit rose to $28.7m from $26.5m, but net operating profit fell to $25.2m from $32.4m. The combined ratio - a measure of financial year underwriting profitability - was 85.6% compared to 72.7% in the same quarter a year ago.

Chief executive Alex Maloney said: "In what continues to be a difficult market we have had a good first quarter delivering a return on equity of 2.7%.

"Lancashire has always placed underwriting discipline at the core of its strategy. As I reported in February, at the 2017 January renewal season we were able to both renew and strengthen the majority of our book of business. There has been some evidence of a slowing of the decline in premium rates, and across our group we have prioritised servicing the needs of our core clients and their brokers. We also ensure that we moderate our overall risk exposures, not only through discipline on our inwards books, but in our purchasing of well-priced outwards reinsurance. These are our principal tools for prudent exposure management in the current soft market."

RBC Capital Markets said pre-tax profit was largely in line with its expectations of $28.6m and consensus of $29.2m. However, gross written premiums were 2% below the bank's forecasts and 9% lower than consensus, while the combined ratio was weaker, 2.1 percentage points above its estimate and 4.3 percentage points above consensus.

The lower the ratio, the more profitable the insurance company is.

At 1020 BST, the shares were down 2.3% to 678.50p.