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Lancashire sees massive profit slump in 2020

Lancashire sees massive profit slump in 2020 | Insurance Business

Lancashire sees massive profit slump in 2020

Results season continues with Lancashire Holdings Limited the latest to report how it fared in the year ended December 31, 2020.  

In a release this morning, the global specialty (re)insurance provider said its profit before tax amounted to US$5.9 million (around £4.3 million) – a steep fall from 2019’s US$119.5 million. Gross written premium in the year grew to US$814.1 million, but the group’s underwriting profit declined from US186.5 million previously to US$77 million this time around.

Lancashire’s combined ratio in the past year stood at 107.8%.

“The whole world faced a uniquely challenging year in 2020,” said group chief executive Alex Maloney. “Our first thoughts go to those whose lives have been impacted by personal tragedy and hardship. Similarly, our thanks go to all those who in their work and conduct are helping to defeat the current threat of the COVID-19 pandemic.”

Maloney asserted that 2020 demonstrated the value of Lancashire’s strategic planning in preparing for both expected and unexpected challenges and opportunities.   

Referring to the company’s fully converted book value per share (FCBVS), the CEO noted: “In the face of these challenges I am pleased to report that the group’s change in FCBVS (formerly termed ‘return on equity’) was 10.2% for the full year. As we entered 2020 I believed that we were then in the early stages of a necessary market correction.

“Since then the COVID-19 pandemic has generated a level of dislocation and uncertainty in the global economy and markets which has demonstrably accelerated a pronounced re-rating and improvement in the pricing of many of the (re)insurance products which we sell. In these times of heightened uncertainty, insurance has retained its value as an important risk management tool which remains central in the strategic planning of many of our clients.”

Maloney – who expressed gratitude for the firm’s staff, shareholders, and clients and their brokers – highlighted that Lancashire has used the improving market to grow its premium income, as well as build up the group’s expertise. Lancashire not only has actively recruited but has also added a casualty reinsurance book of business to its underwriting portfolio.

“The COVID-19 pandemic has impacted the whole insurance industry as a loss event,” the chief executive went on to state. “While it is too early to comment on total global insured losses from this event, I am pleased that Lancashire’s approach to reserving for COVID-19 losses has remained consistent throughout the year, albeit uncertainty still remains as this is an ongoing event.

“As a business we have generally avoided those retail and SME classes which have been most heavily impacted. Lancashire does not write the following lines of business: travel insurance; trade credit; and long-term life and prior to the COVID-19 pandemic did not write directors’ and officers’ liability or medical malpractice.”

Excluding the impact of inwards and outwards reinstatement premiums, Lancashire’s net losses from the pandemic, as well as natural catastrophe and large risk loss events for the year, reached US$149.5 million.

Meanwhile the company’s board has declared a final dividend for 2020 of US$0.10.