Lancashire dishes out dosh after quiet quarter

While sparing a thought for the victims of Hurricane Sandy. Bermuda-based insurer Lancashire Holdings gave thanks for a relatively disaster-free third quarter.

"With the third quarter producing little in the way of major losses, and with solid investment performance in choppy markets, we are pleased to report our 5.7% return on equity. As we watch the US recovering from the massive amount of damage wreaked by Sandy, we will undoubtedly see some impact on our fourth quarter results. It is, however, simply too early to provide any meaningful estimate for reserves," revealed Elaine Whelan, the group's Chief Financial Officer.

Profit before tax in the three months to September 30th eased to $78.0m from $79.0m in the corresponding period of 2011, but that did not stop the firm from announcing a special dividend of 90 cents per common share, an improvement on the 80 cents special divi it paid at the same stage of 2011.

Gross premiums written in the third quarter declined to $113.5m from $142.9m the year before, while net premiums written fell to $109.8m from $133.6m.

On the ratios front, total investment return was positive at 1.1% versus a negative 0.6% return the year before. The net loss ratio worsened to 14.6% from 12.2% while the combined ratio - a measure of how well the insurer took on risk (lower is better) deteriorated to 48.9% from 43.5% the year before.

"The third quarter return on equity of 5.7%, and 13.2% for the year to date, continues our record of consistent increase in book value per share, including dividends. We have now generated a compound annual return of 19.4% since inception, and with a combined ratio for the quarter of 48.9%, our inception to date combined ratio now stands at 58.3%," bragged Richard Brindle, Group Chief Executive.

Fully converted book value per share improved to $8.47 from $8.20 at the end of September 2011.

"In our view, the market outlook in our lines of business is stable. Premium rates will come under pressure for the January renewals with more than enough capacity in the great majority of our lines, but we believe that our emphasis on risk selection helps us to produce superior results across the cycle. We are surprised with the over positive note which we have seen from some about rate increases, as we do not believe that this will carry into 2013 for most classes," revealed Brindle.

The impact of Hurricane Sandy is sure to preoccupy investors' minds, however, but Chief Financial Officer Elaine Whelan assured that the group's recent debt issuance should allow it to absorb Sandy's impact and still carry more than normal excess headroom into the January 1st renewal season to take advantage of any unforeseen opportunities that may arise.

"As ever, if we can't find good ways to put our capital to work, we will re-assess our needs and return any surplus," she pledged.

JH