Insurance group Lancashire Holdings' performance was hurt by the Costa Concordia shipwreck in the first quarter, while pay costs have rocketed.
The main way insurance companies are judged is by something called the "combined ratio" - this compares the amount received in premiums against the amount paid out on claims. Any number below 100% implies a company is making a profit through the core activity of underwriting risk (as opposed to simply making money from investments).
Lancashire's combined ratio for the first quarter was 74%, up from 73.1% at the end of last year and the 63.7% seen over the whole of 2011. In other words, things have got marginally worse on the underwriting front. This is partly because the firm was stung by claims related to the Costa Concordia disaster in January.
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Lancashire's Chief Executive Officer, Richard Brindle complains that: "While the Costa Concordia loss affected our combined ratio, as it has many others in the industry, it has been frustrating to see industry-wide pricing in marine lines failing to show the improvements that might have been expected following such a loss."
So Lancashire and its peers are unable to charge more despite the Costa Concordia grounding costing the industry perhaps as much as $1bn.
Other bad news on the financial front was a big jump in pay costs which totalled $18.5m during the quarter compared to $10.3m in the same period of 2011. This increase is partly explained by a one-off national insurance charge of $6.9m, incurred as a result Lancashire's tax residency move to the UK effective from January 1st, 2012.
During the first quarter gross written premiums were $234m, up from the $171.9m seen at the same point of last year. Profits before tax were £46.5m against £8.4m in the prior year while the group's total investment return improved from 0.6% in 2011 to 1.1% so far this year.
At 08:30 Lancashire shares were down 2%, probably because of the worsening combined ratio. For the last 12 months though the stock is still ahead by 26% which is no mean feat in the current markets.
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