Lancashire Holdings Ltd. fell the most in four months after the insurer reported a 10 percent decline in first-half profit amid “pricing pressure” in the Lloyd’s of London market.
Pretax profit dropped to $88.6 million in the six months through June, while gross written premiums fell by 33 percent to $423.6 million, the company said in a statement on Wednesday. The shares slumped as much as 5.3 percent to 635.5 pence in London, the biggest fall since March.
“Our response to the tough conditions has been to maintain underwriting discipline, focusing on bottom line rather than top,” Chief Underwriting Officer Paul Gregory said on a conference call with analysts. “This may not be particularly fashionable at the moment, but we remain convinced that our strategy remains correct.”
Lancashire gained access to the world’s oldest insurance market in 2013 with the takeover of Cathedral Capital Ltd., which provides coverage ranging from terrorism to aviation risks. The acquisition “slightly offset” a decline in premiums across other lines of business, the company said.
The shares were down 4.3 percent to 642.5 pence at 3:29 p.m. London trading.
“The main message in the statement is that it is a difficult market, but Lancashire is protecting its core book and remains important to clients,” Sarah Lewandowski, an analyst at Espirito Santo Investment Bank, said in a research note. “Should loss conditions remain benign, we expect Lancashire to distribute its earnings this year.’
The combined ratio, a measure of profitability, worsened to 75.1 percent from 70.6 percent a year earlier. The firm, which counts Invesco Ltd. as its largest shareholder, announced an interim dividend of 5 cents a share. Net investment income declined by 0.7 percent to $14.6 million, the company said in the statement.
‘‘It is not all one-way traffic but there’s no hiding the fact that this is a difficult market,” Chief Executive Officer Alex Maloney said. “We have to work hard and, if necessary, decline inadequately priced business.”
Analysts speculated earlier this year that the insurer, valued at 1.3 billion pounds ($2 billion), could be a takeover target following a number of deals in the Lloyd’s of London market.