Lancashire to pay special dividend

Insurance group Lancashire Holdings said Thursday that it will return 170m dollars to shareholders by way of a special dividend, as the company gained 'significant excess headroom', saying the market looks broadly flat following the loss from Hurricane Sandy.

Insurance group Lancashire Holdings said Thursday that it will return 170m dollars to shareholders by way of a special dividend, as the company gained 'significant excess headroom', saying the market looks broadly flat following the loss from Hurricane Sandy.

The payment is equal to $1.05 per share and the dividends will result in an aggregate payment of approximately $185.7m, and will be paid in sterling in April.

Advertisement - Article continues below

The group said that it has delivered a "solid" final quarter and an "excellent year" overall.

Richard Brindle, Group Chief Executive Officer, said: "The exceptional level of market losses witnessed in 2011 was not repeated in 2012. There were nonetheless material industry losses, including the loss of the Costa Concordia, which in addition to causing tragic loss of life was also the largest insured marine loss in history, and the devastation and injury of Sandy during the fourth quarter, which is likely to be one of the largest insured property losses of all time.

Advertisement - Article continues below

"At the beginning of 2012 I expressed a cautious optimism about the insurance pricing environment. That proved justified in our property retrocession and reinsurance lines and in the energy offshore accounts. Otherwise, the rating environment, outside of loss affected accounts in our core lines, remained competitive."

At the end of December, the fully converted book value per share had risen to $7.83, from $7.62 a year earlier.

Advertisement - Article continues below

Return on equity (RoE), which is defined as growth in fully converted book value per share, adjusted for dividends, for the fourth quarter was 3.1% (2011: 2.7%), while for the full year it came in at 16.7% (2011: 13.4%).

Elaine Whelan, Group Chief Financial Officer, said: "With our best estimate of our net loss from Sandy at $44.5m, after reinsurance and reinstatement premium, we produced a strong underwriting result for the fourth quarter with a combined ratio of 71.9%. In the face of continuing uncertainty and volatility in the investment markets, our portfolio held up well, producing a positive total return for the quarter of 0.3%.

"That brought us to a very satisfactory 3.1% total return for the year. I am therefore delighted to report a healthy RoE for the quarter of 3.1% and for the year of 16.7%."

Formation of new divisionThe group unveiled its new Lancashire Capital Management division, which will be led by Simon Fascione, the Chief Underwriting Officer of Lancashire Insurance Company, and will focus on the management and execution of existing managed premium strategies, in conjunction with the development of future products and structures.

CEO Brindle said: "The creation of Lancashire Capital Management is an exciting and logical step for Lancashire given the ongoing evolution of the third party capital market.

"We have an established track record in relation to the management of third party capital investments via Sirocco, Accordion and more recently Saltire. This announcement further illustrates our commitment to ensure we are continually exploring all avenues of innovation to meet the complex needs of both our clients and investors. Lancashire Capital Management will enhance the group's ability to match supply with demand within an industry in transition."

The share price climbed 0.57% to 875.50p by 09:15 on Thursday.




Investment strategy

Broker safety – your questions answered

Cris Sholto Heaton answers more of your questions about the safety of stockbroker accounts
25 Mar 2020
Investment strategy

How demographics affects stock valuations

New research suggests that stock and bond valuations are driven by the age of the population – at least in the US.
24 Feb 2020
Stocks and shares

Do you own shares in Sirius Minerals? Here’s what you need to do now

Mining giant Anglo American has proposed a cash takeover of Yorkshire-based minnow Sirius Minerals. Unhappy shareholders must decide whether to accept…
20 Feb 2020

Why investors should be “cautiously bullish” for 2020

Analysts have been out in force making rosy predictions for stockmarkets in 2020, but while there is certainly a case for optimism, investors should r…
17 Jan 2020

Most Popular


The end of the bond bull market and the return of inflation

Central bank stimulus, surging post-lockdown demand and the end of the 40-year bond bull market. It all points to inflation, says John Stepek. Here’s …
30 Jun 2020

This chart pattern could be extraordinarily bullish for gold

The mother of all patterns is developing in the gold charts, says Dominic Frisby. And if everything plays out well, gold could hit a price that invest…
1 Jul 2020
Global Economy

How “pent-up demand” could drive a V-shaped economic recovery

“Pent-up demand” is usually a myth. But not this time. The Covid lockdown has created genuine pent-up demand, says Merryn Somerset Webb. That’s now be…
29 Jun 2020