Thursday 16 February 2017 9:45 am

Lancashire bolsters its balance sheet and beats expectations despite a tough market

Shares in Lloyd's insurer Lancashire rocketed by nine per cent this morning after beating expectations during a "turbulent" economic environment and a "very challenging" insurance market.

The figures

Gross written premiums for the full-year fell by 1.1 per cent from $641m (£513m) to $634m with net written premiums falling from $482m to $459m.

Profits dropped to £150m from £182m with earnings per share falling from $0.91 to $0.76.

After paying $0.90 per share in dividends during 2016, the firm said it would maintain its final dividend at $0.10 per share.

Why it's interesting

While on the face of it the results don't look like anything to write home about, analysts were gushing in their praise.

Eamonn Flanagan of Shore Capital said they were "another excellent set of results, with the 2016 figures comfortably ahead of both our and the market's expectations".

He added some of the firm's full-year figures were "unlikely to be beaten by any of its UK quoted peers and demonstrates again the group’s ability to maintain discipline and eke out areas of profitability".

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Lancashire has a policy of returning considerable amounts of cash to investors through payments of special dividends.

Finance chief Elaine Whelan said: "We are therefore carrying a bit more of a capital buffer than we typically would, which gives us the ability to take advantage of any opportunities that may materialise this year."

And the extra cash on the balance sheet meant one thing to Andreas van Embden, an analyst at Peel Hunt. He said: "A surplus capital buffer will support ongoing special dividends."

Chief executive Alex Maloney said he was looking forward to realising the potential from two new key personnel as part of a "rebuilding and reinvigorating of our Lloyd's platform".

Jon Barnes joined in December and has been designated Lloyd's active underwriter for Syndicate 2010. Andrew McKee is set to join Lancashire in June 2017, as the new chief executive of Lancashire's Lloyd's managing agency.

Flanagan applauded the "strong recruitment" at Lancashire. He added: "We especially applaud the pending arrival of Andrew McKee…top bloke, ex Amlin!"

What the company said

Chief executive Alex Maloney said: "The 2016 year proved a turbulent one for the global political and macroeconomic environment and the insurance market remained very challenging. Against this background I am particularly pleased with the results for both the fourth quarter and the full year."

Whilst we expect market conditions to remain difficult for the foreseeable future, which requires discipline and patience to navigate, our strategy has the ability to respond across the insurance cycle.