Lancashire Holdings swing to loss as catastrophes take their toll

FTSE 250 insurer Lancashire Holdings said on Thursday that it swung to a full-year loss as it took a hit from natural catastrophes.

In the year to the end of December 2017, the company made a pre-tax loss of $72.9m compared to a profit of £150.4m the year before. Gross premiums written dropped to $591.6m from $633.9m in 2016, with net premiums written of $398m versus $458.7m.

Consensus expectations were for a smaller loss of $64m.

Lancashire's combined ratio, meanwhile, deteriorated to 124.9% from 76.5%. A ratio below 100% indicates that the company is making underwriting profit, while a ratio above means that it is paying out more money in claims than it is receiving from premiums.

Group chief executive Alex Maloney said: "In November I reported on the series of damaging catastrophe losses which had occurred over the summer months in the Caribbean, the Gulf of Mexico and U.S. coastal regions and the two sizeable earthquakes in Mexico. Adding to what was already a significant loss year, the run of catastrophe losses continued in the fourth quarter with the occurrence of wildfires across California in essentially two separate sequences of loss activity.

"These events have unfortunately resulted in one of the most severe years for catastrophe losses to the industry, with the sum of such insured losses in excess of $100bn, placing 2017 in the top three years for aggregate catastrophe losses in recent history. Such events are not unprecedented and, as a catastrophe (re)insurer, we plan our underwriting, reinsurance programme, capital and risk levels in anticipation of such scenarios."

Shore Capital analyst Eammon Flanagan said of the pre-tax losses: "In a year when insured catastrophe losses across the globe are expected to exceed $130bn, this should not be a surprise, given the deep exposure to, and focus on, catastrophe risks that Lancashire runs."

At 0810 GMT, the shares were down 6.1% to 614.00p.