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Lancashire Falls After Hail Storms, Floods Hurt Profit

Nov. 6 (Bloomberg) -- Lancashire Holdings Plc, a Bermuda-based insurer, fell the most in three months in London trading after third-quarter profit declined by 85 percent in the wake of hail storms and floods in Europe.

Net operating profit decreased to $11.2 million from $74.1 million in the three months to Sept 30, according to a statement today. The net loss ratio, or claims as a proportion of premiums, climbed to 56.4 percent from 14.6 percent a year earlier as the company reported a $19.7 million net loss from the natural catastrophes in Europe.

Lancashire’s shares fell as much as 3.5 percent, its biggest decline since Aug. 7 when the company sold shares to buy Lloyd’s of London insurer Cathedral Capital Ltd. It was down 2.3 percent to 800 pence at the close in London.

“From an operating perspective we had a very average quarter,” Elaine Whelan, Lancashire’s chief financial officer, said in the statement. “Investment markets, unsurprisingly, remained volatile this quarter and, while the U.S. wind season was quiet, the industry was impacted by losses from the European hail storms and floods.”

Hailstorms that struck Germany at the end of July were estimated to have caused $2 billion in damage, while the worst flooding in central Europe since 2002 was forecast to have insured losses of at least 3 billion euros ($4.1 billion).

The combined ratio, or claims and expenses as a percentage of premiums, increased to 90.8 percent in the third quarter, from 48.9 percent, indicating a deterioration in underwriting. Net investment income dropped 18 percent to $6.1 million.

The company declared a special dividend of 45 cents a common share, compared with 90 cents a year earlier.

To contact the reporter on this story: Sarah Jones in London at sjones35@bloomberg.net

To contact the editor responsible for this story: Edward Evans at eevans3@bloomberg.net

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