Specialty insurance and reinsurance group Lancashire Holdings expanded its property and casualty reinsurance portfolio by 73% in the first half of the year, while revenues from its third party capital and guaranteed reinsurance business increased by 122 % over the period.
Lancashire has put the newly raised capital at the service of renewals until 2021, with this expansion seen as an opportunity to bring together some of the most profitable business volumes it has seen in years.
Overall, gross written premiums increased 40.7% year-over-year, but the growth was most impressive in P&C reinsurance, where premiums increased by 73% and in the same Over time, the Lancashire Renewal Price Index stood at 111%, indicating a marked improvement in market prices.
The company had a combined ratio of 80.7% for the first half of 2021, which, had winter storm Uri been ruled out, could have been as low as 65.7%.
As a result, Lancashire reported half-yearly profits of $ 127.1 million, well up from $ 39.4 million in previous years.
Alex Maloney, Group CEO, commented on the strong first half of the year: “I am particularly pleased with the strong growth in Group premiums of 40.7% in the first half of the year. Our strategy has always been to underwrite more business and deploy more of our capital when market conditions require, and these results amply demonstrate our continued focus on achieving our strategic objectives. The Group achieved FCBVS growth of 2.4% over the half-year, excluding one-off debt repayment costs, FCBVS growth would have been 3.5%. The rating environment remains favorable for most of the products we market, resulting in a renewal price index of 111% and significant organic growth.
“It is important to note that we are starting to take advantage of the cumulative rate increases that we have achieved over the past three years on our profitability. This is illustrated by our combined ratio of 80.7% for the half year.
“Going forward, we expect the rating environment to remain positive. In addition, the new teams we have recently hired should contribute to the Group’s growth in the future. Our continued commitment to the underwriting discipline will be at the heart of our success. “
Natalie Kershaw, Group Chief Financial Officer, added: “For the first half of 2021, we were very pleased to generate an underwriting profit of $ 127.1 million despite the impact of winter storm Uri in the first quarter of 2021. We incurred no other significant losses and generated positive reserves of $ 53.6 million during the period. In addition, the Group’s provisions for losses for COVID-19 remain stable. “
The growth in property and casualty reinsurance observed was largely driven by new business and rate increases in the catastrophe and property retrocession lines of business, Lancashire explains.
The company said it was able to “grow into the toughening market” in the reinsurance business.
It will also have been positive for Lancashire Capital Management Limited, the company’s third party guaranteed reinsurance underwriting arm.
That said, its third-party capital arm had underwritten its best portfolio since its inception in early 2021, any postings in the second quarter and mid-year will also have paid off, although it should be noted that Lancashire Capital Management (LCM) tends to write the majority of his book at 1/1.
LCM business contributed to much higher revenue levels for Lancashire Holdings in the first half of 2021 as earnings commissions rebounded strongly.
Underwriting commissions were slightly lower than last year at $ 2.4 million, but also accrued $ 3.6 million in profit commissions during the period.
Overall, this $ 6 million in revenue from Lancashire Capital Management business was 122% up from the previous first half of the year when it was just $ 2.7 million.
Lancashire noted that the $ 3.6 million in profit commissions accrued this year has so far come from the 2019 subscription cycle, as profits are made.
However, associates’ profit share fell to $ 0.3 million from $ 1.1 million the previous year, reflecting Lancashire’s stake in the LCM-run vehicle.
After recent years of loss impacts, the LCM vehicle continues to make profits from previous years, as warranties can be released, it seems. This process is expected to continue over time, and along with its larger and stronger written book, the vehicle is expected to perform better for a period, if significant losses permit.