Insurer records £69m loss

Lancashire Holdings has put a brave face on a $105.7m (£69m) operating loss in the third quarter, claiming the economy has created “perfect storm” conditions.

Lancashire hopes to benefit from the well publicised troubles of its rival AIG. Jonny Creagh Coen, head of investor relations, accepted the insurer had absorbed a “major loss”, but insisted it was well positioned to benefit from hardening rates and pick up business from AIG.

He said AIG had discounted rates to hold on to business. Lex Baugh, AIG’s UK chief executive, told Insurance Times it had not cut rates, however.

Creagh Coen said: “We are very, very excited by some of the signs we are seeing in the market. The events at AIG are concerning risk buyers and their own employees. We wish them well, but let’s be realistic. AIG is dominant in a number of the classes we write, and one has to think that risk managers will look at that capacity.”

Lancashire reported a loss ratio of 152.5% and a combined ratio of 178.2%, for which it blamed hurricanes Gustav and Ike. It also reported a total annualised investment loss of 1.7% in the third quarter, including

net investment income, realised gains and losses, impairments and unrealised gains and losses.

In the third quarter the fully converted book value per share stood at $6.33 on 30 September, compared to $6.91 on 30 June, a drop of 8.4%. Gross written premium was $124.6m and net written premium was $120.3m.

The insurer had a net operating loss of $105.7m, or $0.61 diluted operating loss per share; and net loss after tax of $119.4m, or $0.69 diluted loss per share.

For the nine months to 30 September, it had a fully converted book value per share of $6.33 on 30 September, compared to $6.38 on 31 December 2007, down 0.8%.

Compound annual return on equity since inception was 16.2%; gross written premium was $508m and net written premium was $444.6m.