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Lancashire on course to weather Covid-19 storm
30th Apr 2020 10:32
(Sharecast News) - Lloyd's of London syndicate Lancashire Holdings reported a 12% jump in quarterly premiums on Thursday, and insisted its business model would help it navigate the global disruption caused by Covid-19.
The insurer said gross premiums written in the three months to 31 March 2020 were ahead 11.8% year-on-year, at $242.8m, while the renewal price index was 108% against 103% in the first quarter of 2019.
The total net investment return, including unrealised gains and losses, was -1.9%, compared to 1.8% a year earlier, which Lancashire attributed to turbulence on global markets.
"The majority of the unrealised losses were driven by the bank loan and hedge fund portfolios given the significant spread widening in credit and volatility in equities," the firm said. "The short duration and higher credit quality of our fixed income portfolios helped mitigate the losses during the quarter."
Lancashire, which has offices in Hamilton, Bermuda, as well as London, also estimated around $35m of Covid-19 claims for the quarter, including the impact of reinsurance and reinstatement premiums.
Lancashire provides a wide range of insurance services, from underwriting ships and aircraft to terrorism or war damages. But it does not write travel insurance, accident and health, medical malpractice, or long-term life, and has only minimal exposure to the mortgage and event cancellation sectors.
Alex Maloney, chief executive, said: "While the world's attention is naturally focused on the current pandemic crisis, we should remember this is one of many possible risks, and that risk management is our expertise.
"While we expect economic challenges for clients in a number of sectors, including aviation, marine and energy, we have thus far seen demand hold up in many of our business classes.
"In the face of this real world stress test, I have been impressed by the resilience of our business model. The group retains a robust solvency buffer and we stand ready to meet the challenges and opportunities that lie ahead."
As at 1030 BST, shares in Lancashire were trading 3% higher at 614.06p.
Alan Devlin, analyst at Shore Capital, said the renewal price index suggested "high single digit price increases".
He continued: "The company estimates that its exposure to Covid-19 claims is a modest $35m net of reinsurance and reinstatement premiums, around 3.5% of its $1bn shareholders equity, compared to $170m at Beazley and at least $150m at Hiscox.
"The company believes the January 2020 renewal season and its results is evidence of improved market discipline, and with the recent stress to many insurance balance sheets, it considered that the need for improved risk pricing will continue during 2020."
The insurer said gross premiums written in the three months to 31 March 2020 were ahead 11.8% year-on-year, at $242.8m, while the renewal price index was 108% against 103% in the first quarter of 2019.
The total net investment return, including unrealised gains and losses, was -1.9%, compared to 1.8% a year earlier, which Lancashire attributed to turbulence on global markets.
"The majority of the unrealised losses were driven by the bank loan and hedge fund portfolios given the significant spread widening in credit and volatility in equities," the firm said. "The short duration and higher credit quality of our fixed income portfolios helped mitigate the losses during the quarter."
Lancashire, which has offices in Hamilton, Bermuda, as well as London, also estimated around $35m of Covid-19 claims for the quarter, including the impact of reinsurance and reinstatement premiums.
Lancashire provides a wide range of insurance services, from underwriting ships and aircraft to terrorism or war damages. But it does not write travel insurance, accident and health, medical malpractice, or long-term life, and has only minimal exposure to the mortgage and event cancellation sectors.
Alex Maloney, chief executive, said: "While the world's attention is naturally focused on the current pandemic crisis, we should remember this is one of many possible risks, and that risk management is our expertise.
"While we expect economic challenges for clients in a number of sectors, including aviation, marine and energy, we have thus far seen demand hold up in many of our business classes.
"In the face of this real world stress test, I have been impressed by the resilience of our business model. The group retains a robust solvency buffer and we stand ready to meet the challenges and opportunities that lie ahead."
As at 1030 BST, shares in Lancashire were trading 3% higher at 614.06p.
Alan Devlin, analyst at Shore Capital, said the renewal price index suggested "high single digit price increases".
He continued: "The company estimates that its exposure to Covid-19 claims is a modest $35m net of reinsurance and reinstatement premiums, around 3.5% of its $1bn shareholders equity, compared to $170m at Beazley and at least $150m at Hiscox.
"The company believes the January 2020 renewal season and its results is evidence of improved market discipline, and with the recent stress to many insurance balance sheets, it considered that the need for improved risk pricing will continue during 2020."