February 21, 2013 10:23 pm

Lancashire chief rejects positive analysis

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The chief executive of Lancashire has accused the specialist insurer’s rivals who say the industry has scope to increase prices as being “simply at odds with the facts”.

Speaking as the FTSE 250 company said it would pay much of its earnings out in dividends, including another special payout, Richard Brindle indicated he foresaw limited opportunities to turn decent profits from new business.

Other companies in the sub-sector, including Catlin, have avoided paying special dividends. Those keen on preserving capital have indicated they want flexibility to deploy it in further underwriting to take advantage of any increase in premiums.

However, Mr Brindle said on Thursday: “In my long years in the industry I don’t think I’ve ever seen such a disconnect between rhetoric and reality.”

Rivals had represented what he called a “merely a short-term uptick” in niche areas as a more widespread rise in rates. “The relentlessly positive commentary on the rating environment from companies is simply at odds with the facts,” he said.

Lancashire wrote $576m worth of premiums in 2012 after paying for reinsurance last year, ticking up from $565m a year earlier.

The relative lack of natural catastrophes that hurt the sector in 2011 helped Lancashire, which insures property, aircraft and oil rigs, raise pre-tax profits from $219m to $237m.

Analysts liken Lancashire to an “old-fashioned” underwriter, which writes business selectively, avoids aggressive expansion and rewards investors by returning much of its annual earnings.

After a special dividend of $0.90 a share declared last year, Lancashire confirmed plans on Thursday for another one-off payment of $1.05.

In addition the group declared a final dividend of $0.10 a share, on top of an interim payment of $0.05.

Diluted earnings per share were $1.29 ($1.20).

Shares in Lancashire ticked down 0.1 per cent to 869.44p.

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