Michael Faulkner looks at the performance of two of the UK's biggest brokers.
This week saw two of the UK biggest brokers update the City on their first quarter performance. JLT, which has faced a buffeting from the weak dollar and competitive market conditions, gave a relatively upbeat report, saying its first quarter performance was ahead of expectations in some areas. The broker’s chief executive, Dominic Burke, said the group had made a positive start to the year and that it continued to expect profitable growth in 2008. The past two years have seen Burke restructure the business, reducing costs and focusing on target markets. The news was greeted positively by traders, with JLT’s share price climbing to over 380p from 370p.
Reinsurance broking heavyweight Benfield Group warned that in the absence of major catastrophes its full-year profits would fall marginally below its 2007 figure. The broker reported a continued softening of the reinsurance market in the first four months of 2008. The annual reinsurance renewals for the Japanese market, a key indicator, showed reductions in catastrophe rates for windstorm and earthquake of up to 10%.
Grahame Chilton, chief executive of Benfield, said: “The business continues to face headwinds in the form of adverse currency trends and the softening reinsurance market. Nevertheless, we are firmly focused on achieving targeted cost savings while continuing to pursue opportunities for profitable growth, particularly those made available by our capital markets expertise.” Benfield said it was cutting employment, travel and entertainment costs to save about £15m a year from 2009. The company’s share price rose over 4% this week to 264p.
Meanwhile, insurer Lancashire Holdings reported a strong performance in the first quarter of the year despite extensive industry losses in the period and soft rates. Lancashire’s loss ratio was 38.9% and its combined ratio was 61.2%.
Richard Brindle, group chief executive said: “Our estimated loss from the property risk events in the first quarter is between $20m and $25m (£10m and £12.7m), gross and net. In the context of losses in this sector estimated at up to $6bn, together with cat losses of approximately $3bn-$4bn, this is solid evidence of our underwriting strength. ”In contrast, Advent last week reported a loss of £5.5m in the first quarter, blaming the high level of single-risk property losses for its performance. Lancashire’s share price leapt this week, rising 10% to 314p.