Lancashire flags possibility of further disasters after tough year

(Sharecast News) - Lancashire Holdings reported a profit after tax of $321.3m in its 2024 final results on Thursday, and a 23.4% increase in diluted book value per share. The FTSE 250 company said gross premiums written rose 11.3% to $2.15m, while insurance revenue increased 16.1% to $1.77m.

It said it achieved an insurance service result of $379.9m, with a combined ratio of 89.1% on an undiscounted basis and 80.0% when discounted.

The investment portfolio contributed to results with a total return of 5%, supporting Lancashire's overall profitability.

Lancashire declared total dividends of $294.3m for the year, including a final ordinary dividend of 15 cents per share and a special dividend of 25 cents per share, subject to shareholder approval.

In total, capital returns to investors amounted to $354.2m in 2024.

Lancashire said it continued to expand its underwriting portfolio, more than doubling the number of product classes since 2018 to capture growth opportunities.

Despite a year of high industry losses, the company maintained strong underwriting discipline.

Net losses from catastrophe and large risk events, including hurricanes Milton, Helene, and Debby, storm Boris, and the Calgary hailstorms, totaled $214.1m.

The most significant large risk event was the MV Dali Baltimore bridge collision.

Looking ahead, Lancashire said it remained well-capitalised to fund future growth.

Early in 2025, the company announced expected losses of $145m to $165m from the California wildfires.

Assuming a similar level of catastrophe and large losses as in 2024, Lancashire anticipated delivering a mid-teens return on equity for 2025, reinforcing its strategy of providing more predictable investor returns.

The company noted that it was marking its 20th anniversary this year, adding that it remained focused on further growth in a market where demand for its specialised reinsurance solutions remains resilient.

"2024 was another superb year for Lancashire with an excellent profit after tax of $321.3m delivering a strong return on equity of 23.4%," said chief executive officer Alex Maloney.

"In a year of high industry losses this is an outstanding result. It shows the continued successful execution of our strategy to grow materially at the right time in the underwriting cycle, utilise our capital more efficiently, diversify our portfolio to reduce volatility, and retain and attract the best talent.

"Throughout 2024, we continued to take advantage of the healthy margin environment. Gross premiums written increased by 11.3% to more than $2.1bn and insurance revenue was $1.7bn, an increase of 16.1% on 2023."

Maloney said that as a result, the company delivered an "excellent" underwriting return, with an insurance service result of $379.9m, and a combined ratio of 89.1%, underpinned by Lancashire's "robust and disciplined" underwriting approach.

"Early in 2025, we have seen the terrible devastation wrought by the wildfires in California on those communities.

"As recently announced, for Lancashire, the impact is expected to be within the range $145m to $165m."

With a similar level of catastrophe and large losses as 2024, in addition to the wildfire loss, Maloney said Lancashire would anticipate delivering a return on equity in the mid-teens in 2025.

"Whilst this assumes a significantly above average loss environment, our guidance clearly demonstrates the continued delivery of our strategy of more predictable returns for investors."

Reporting by Josh White for Sharecast.com.