Lancashire holds back capacity awaiting rate rises

Lancashire this morning reported its gross written premiums had decreased by 23.5% in the first quarter of 2009 compared to the same period in 2008 to $142.8m.

The result was below a consensus set of analysts' expectations of $157.6m.

The insurance group said this was largely driven by Lancashire holding back a large amount of capacity in the direct property, retrocession and energy catastrophe classes in order to take better advantage of improving opportunities.

It also reported net written premiums of $99.2m, down 30.1%, and a combined ratio of 81.2%.

Richard Brindle, Group Chief Executive Officer, commented: "Lancashire had a reasonable quarter, growing book value per share by 3.1%. Our underwriting and investment returns were good, with an accident year loss ratio of 28.9% and an annualised total investment return of 4.6%. Our results were impacted by the previously announced reserve strengthening for Hurricane Ike, but our underlying earnings performance was strong.

"Since our inception, Lancashire has grown book value per share, including dividends, in twelve quarters out of thirteen, generating a compound annual return of 17.4%. Lancashire's key markets are experiencing a hardening in rates and terms. This has been gathering pace as the year has progressed and should continue to do so in the months to come.

"In certain segments, most notably in the offshore energy area, the market has been in disarray with renewals much later than expected. We have been patiently holding back capacity in several classes, waiting for the most opportune time to deploy our capital. Indeed, we wrote significantly less in the first quarter of 2009 compared to 2008. However, the market is now extremely active, with rates rising strongly year on year."

At 9.08am on Friday Lancashire shares were up 2.25 pence, or 0.48%, at 473.25.

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