Despite having a poor year for returns, the group reached record breaking levels of gross written premium after investing in expanding its portfolio

Global speciality (re)insurance provider Lancashire Holdings has reported a combined operating ratio (COR) of 107.3% for the 12 months to 31 December 2021, driven by significant weather and large loss events amounting to $306.4m (£226m), according to its 2021 full year financial results, published today (11 February 2022).

The group’s gross written premiums (GWP), however, have increased by 50% year-on-year to reach a record $1.2bn (£885.3m). This follows the firm expanding into several new classes, which the business hopes will support its “main goal” of “profitable growth” by “providing earning resilience in future years”, said group chief executive Alex Maloney.

In 2020, the group’s GWP sat at $814.1m (£600.4m).

Looking at returns, Winter Storm Uri last February, Hurricane Ida in August and September 2021, European storms and floods, as well as midwest US tornadoes saw the group suffer a loss in income of $92.9m (£68.5m), compared to 2020’s profit of $24.3m (£17.9m).

These natural catastrophe events, among others, also impacted the insurer’s fully converted book value per share (previously termed return on equity) – triggering a negative change of 5.8% for the year.

Of this $92.9m loss, $31.6m (£23.3m) relates to unrealised investment losses – this happens when a business holds on to an investment which has decreased in value, rather than selling.

Underwriting profit also dropped to $69m (£50.9m) in 2021 – down from $77m (£56.8m) last year.

Risk tolerances and expectations

Although Maloney admitted that “financial losses are always disappointing”, he highlighted that 2021 was only the second full financial year that the business has made an overall loss since its inception in 2005.

He continued: “Strong underlying profitability after nearly four years of rate increases, as illustrated by improvement in our attritional loss ratio, was offset by weather and large risk events during the year.

“Given the magnitude and frequency of industry losses in 2021, these insurance losses were in line with our expectations and risk tolerances.

“Importantly, we have followed our usual conservative reserving philosophy to estimate the impact, which has served us well over time.”

Lancashire Holdings’ net premiums written rose to $816.1m (£601.6m) in 2021 – up from $519.4m (£382.9m) in 2020.

Maloney added: “Despite the disappointing returns of the past year, we are fully energised by the prospects for 2022.

”Our strong capital position allows us to execute our ambitious business plans, in which we expect further rate increases on our existing portfolio, with new underwriting teams delivering additional premiums and new business growth within both our catastrophe and non-catastrophe lines.

“I would like to thank all our colleagues, investors, clients and their brokers for their support during 2021.”