Non-life insurance company Lancashire (LRE) extended its recent weak share price performance, now down more than 20% in the last six months, on a tepid response to full year results.
The company, which slipped 0.8% to 536.5p on Friday, swung to an annual loss in 2021 as ‘significant’ weather and large loss events offset a jump in premiums.
For the year ended 31 December 2021, its pre-tax loss was $56.8 million, down from a profit of $5.9 million year-on-year.
Gross premiums written were up 50% to $1.23 billion, but the combined ratio was 107.3%, driven by weather and large loss events of $306.4 million, including Hurricane Ida and widespread flooding in Europe. A final dividend of $0.10 per common share was declared.
AN INSURER’S BREAD AND BUTTER
A combined ratio of 100% or less means an insurer is earning more in premiums than it is paying out in claims and costs, and so it’s underwriting operations is making an operating profit. So arguably keeping this figure below 100% is an insurance firm’s bread and butter.
Shore Capital analyst Abid Hussain commented: ‘Rates across the book remain high, up 9%, a slight drop in the growth rate from the first nine months of the year, but positive nevertheless. The capital levels remain robust with management indicating the year will end above 222%, well above the 200% we think management wish to operate at.
‘In terms of performance the stock is up 2% year to date versus peers up by 1% to 13%, reflecting concerns on sustainability of rate increases and profitability.’
