Lloyd’s of London insurer Lancashire share price falls on year of losses and challenging outlook

Lloyd’s of London insurer Lancashire swung into the red today after counting the cost of a string of natural catastrophes and warning 2018 would be challenging.

Shares dived over four per cent as dividends were slashed.

Net annual operating losses for 2017 were $86m (£61m), compared with profits of $144m in 2016. Investors will see payouts total 15 cents per share, down from 90 cents in 2016.

Lancashire had previously flagged a $165m hit from hurricanes Harvey, Irma, and Maria as well as devastating earthquakes in Mexico. But investors scurried for cover as gross written premiums fell 29 per cent to $67.4m in the three months to December – weaker than market expectations.

“In the classes of business which we underwrite we are well positioned to take a lead in what may now prove to be a more interesting phase of the market cycle,” said Lancashire chief executive Alex Maloney, adding:

I expect 2018 to be another challenging year for our industry.

Read more: Lloyd’s bosses hail “phenomenal” response to raft of natural disasters

Stress test

However, Maloney went on to say 2017’s natural disasters had provided a real-time “stress test” for Lancashire’s risk management functions.

“With the impairment of capital due to these catastrophe losses, and attrition across many specialty classes, the market has finally turned a corner and we are witnessing rate increases, or at least stability, across most of the classes of business we underwrite,” he said.

Peel Hunt analyst Andreas van Embden said Lancashire’s full-year figures were broadly in line with expectations.

Many analysts expect catastrophe insurance premiums to rise in 2018 in the wake 2017’s events.

“Lancashire is geared to a turn in the underwriting cycle and the performance of the stock will depend on the opportunities a hardening market might bring,” said van Embden.

Read more: Here’s why insurer Lancashire’s share price has rocketed this morning