Lancashire declares surprise special dividend and strong final results
Insurer Lancashire Group pleased investors with a bumper set of final results and a large surprise special dividend of $0.50 per share.
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Lancashire Holdings Limited
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16:35 26/04/24
A lower level of catastrophe and attritional losses in the fourth quarter led to a combined ratio (COR) of 68.7% for the full year, with a return on equity (RoE) of 5.4% in the quarter bringing the annual total to 13.9%.
Lancashire, which acquired Lloyds syndicate Cathedral during the year to grow its array of underwriting firepower, reported pre-tax profits up 4% to $226.5m and well ahead of consensus estimates of $192m thanks to a COR described as "remarkable" by analysts and an investment return of 1.0%, up from 0.3% the year before.
Cathedral contributed 1.0% to RoE for the quarter and 1.6% in total for the year, after acquisition adjustments.
"Our key performance indicators demonstrating that our business model is built to provide strong results across the market cycle," said chief executive Alex Maloney.
"A solid return on equity and an excellent combined ratio have been achieved in difficult trading conditions and allowed us to maintain our excellent dividend record, based on our continued commitment to focusing on our underwriting and capital management."
Directors also decided to add to November's $1.20 special dividend with a further $0.50 special payout, reflecting their confident outlook for 2015 and further reductions in exposure at 1 January largely due to the impact of expanded outwards reinsurance and retrocession purchases.
But Maloney acknowledged that "there is too much capacity in many of the reinsurance and specialty arenas" which was driving competition on both price and terms and conditions.
However, he said the company's lead underwriters had "the ability to work with clients and brokers to design programmes and supply meaningful capacity" that protected it from the pressures on smaller operators.
Shore Capital analyst Eamonn Flanagan hailed an "excellent" set of results that were the "first real sign of the merits of the group's integrated approach".
He said the this "should allay any fears in the market regarding the underwriting and capital focus of the group".
He added that the company remained a genuine bid target.