(Alliance News) -Â Lancashire Holdings Ltd on Wednesday reported a slump in profit for 2020, though held its dividend steady and looked to further insurance rate hardening in the year ahead.
Shares in Lancashire were up 2.0% at 760.00 pence in London on Wednesday.
Gross premiums written in 2020 rose 15% to USD814.1 million from USD706.7 million, with net premiums written up 22% at USD519.4 million from USD424.7 million in 2019.
Net investment income fell 23% to USD29.0 million, the Bermuda-based insurance firm said.
Underwriting profit fell by 59% to USD77.0 million from USD186.5 million. Lancashire's combined ratio deteriorated sharply to 107.8% in 2020 from 80.9% in 2019. A ratio above 100% means an insurer is making a loss from its underwriting.
Lancashire noted it has "generally avoided those retail and SME classes which have been most heavily impacted" by Covid-19, and does not write travel insurance.
"The group underwrites a small number of event cancellation contracts and has minimal exposure through mortgage, accident and health business. We also witnessed windstorm losses in the second half of the year and an unusually high level of frequency in non-natural catastrophe specialty losses throughout the year. Although these events were within our board-approved tolerances, a combination of these factors has meant that our underwriting returns have been stressed," said Lancashire.
Pretax profit all but collapsed to USD5.9 million from USD119.5 million.
Total expenses surged 50% to USD525.5 million from USD350.8 million, largely due to insurance losses and loss adjustment expenses rising 37% to USD363.6 million from USD264.5 million.
Net losses related to Covid-19, natural catastrophe and large risk loss events amounted to USD149.5 million for 2020.
"The final settlement of all of these claims is likely to take place over a considerable period of time. The group's estimated ultimate net financial impact of Covid-19, including losses and reinstatement premiums, is consistent with that reported in July at approximately USD42 million," Lancashire said.
Lancashire declared a final dividend of USD0.10, bringing the total payout for the year to USD0.15, in line with 2019.
"We are pleased to have navigated 2020 relatively unscathed given the number of catastrophe and risk losses incurred in addition to the financial impacts of Covid-19. In such a difficult year we consider making an overall profit after tax of USD4.2 million and comprehensive income of USD24.3 million a very positive result. Our investment portfolio contributed significantly to our profitability, generating returns of 3.9% for the year," said Chief Financial Officer Natalie Kershaw.
"Our outlook for 2021 is one of further rate hardening and we expect to utilise the USD340.3 million of capital raised in our equity placing in June 2020 to fund further growth in our business during 2021."
By Lucy Heming;Â lucyheming@alliancenews.com
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