Insurance group Lancashire Holdings said Thursday that it will return 170m dollars to shareholders by way of a special dividend, as the company gained 'significant excess headroom', saying the market looks broadly flat following the loss from Hurricane Sandy.
The payment is equal to $1.05 per share and the dividends will result in an aggregate payment of approximately $185.7m, and will be paid in sterling in April.
The group said that it has delivered a "solid" final quarter and an "excellent year" overall.
Richard Brindle, Group Chief Executive Officer, said: "The exceptional level of market losses witnessed in 2011 was not repeated in 2012. There were nonetheless material industry losses, including the loss of the Costa Concordia, which in addition to causing tragic loss of life was also the largest insured marine loss in history, and the devastation and injury of Sandy during the fourth quarter, which is likely to be one of the largest insured property losses of all time.
"At the beginning of 2012 I expressed a cautious optimism about the insurance pricing environment. That proved justified in our property retrocession and reinsurance lines and in the energy offshore accounts. Otherwise, the rating environment, outside of loss affected accounts in our core lines, remained competitive."
At the end of December, the fully converted book value per share had risen to $7.83, from $7.62 a year earlier.
Return on equity (RoE), which is defined as growth in fully converted book value per share, adjusted for dividends, for the fourth quarter was 3.1% (2011: 2.7%), while for the full year it came in at 16.7% (2011: 13.4%).
Elaine Whelan, Group Chief Financial Officer, said: "With our best estimate of our net loss from Sandy at $44.5m, after reinsurance and reinstatement premium, we produced a strong underwriting result for the fourth quarter with a combined ratio of 71.9%. In the face of continuing uncertainty and volatility in the investment markets, our portfolio held up well, producing a positive total return for the quarter of 0.3%.
"That brought us to a very satisfactory 3.1% total return for the year. I am therefore delighted to report a healthy RoE for the quarter of 3.1% and for the year of 16.7%."
Formation of new division
The group unveiled its new Lancashire Capital Management division, which will be led by Simon Fascione, the Chief Underwriting Officer of Lancashire Insurance Company, and will focus on the management and execution of existing managed premium strategies, in conjunction with the development of future products and structures.
CEO Brindle said: "The creation of Lancashire Capital Management is an exciting and logical step for Lancashire given the ongoing evolution of the third party capital market.
"We have an established track record in relation to the management of third party capital investments via Sirocco, Accordion and more recently Saltire. This announcement further illustrates our commitment to ensure we are continually exploring all avenues of innovation to meet the complex needs of both our clients and investors. Lancashire Capital Management will enhance the group's ability to match supply with demand within an industry in transition."
The share price climbed 0.57% to 875.50p by 09:15 on Thursday.