Wellington 1st Half Net Up 78% at $105 Million; Katrina Losses $75 Million

September 8, 2005

The U.K.-based Wellington Plc, which operates both in the Lloyd’s market and as a general insurer with several U.S. subsidiary companies, posted impressive first half results with net pre-tax profits up 78 percent to 57.2 million pounds ($105 million).

Other “financial highlights” for Group underwriting operations noted by the report include the following:
— Net combined ratio of 82.4 percent (HY 2004: 85.7 percent).
— Return on equity from Group Underwriting Operations (annualised) of 30.9 percent (HY 2004: 21.2 percent).
— Interim dividend per share up 40 percent to 1.40 pence ($2.57) – (2004: 1.00 pence [$1.84]).

CEO Preben Prebensen commented: “This is another strong performance from our Group Underwriting Operations, with profit up 78 percent, a net combined ratio of 82 percent and a return on equity of over 30 percent. I am also pleased to announce a 40 percent increase in the interim dividend.

“The consolidated results were further boosted by the investment in Aspen [Wellington is a major stakeholder in the Bermuda-based reinsurer], which contributed 11.8 million pounds [$21.7 million] to profit before tax and 13.4 million pounds [$24.63 million] to shareholders’ equity before tax. As reported we have begun the Aspen disposal process by selling 13 percent of our shares and we are returning the proceeds to our shareholders through a stock buy back programme as part of our commitment to managing our capital.”

Commenting on Katrina’s impact on the company, Prebensen stated: “We have estimated a net loss of $75 million from hurricane Katrina which is comparable to the net losses from the 2004 hurricanes. We believe the impact on rating levels from hurricane Katrina will be much more significant and we are reviewing opportunities for the balance of 2005 and 2006”.

“Core business highlights” included the following:
— Underwriting profit from participation on syndicate 2020 increased by 53 percent to 31.8 million pounds ($58.43 million) (HY 2004: 20.8 million pounds [$38.22 million]), reflecting continued favourable market conditions
— Purchases of additional capacity increasing from 46 percent to 56 percent for the 2003 year of account and to 66 percent for the 2005 year of account, increased the Group’s share of net earned premiums and resulting underwriting profit
— Wellington Underwriting Inc. (WU Inc.) increased gross written premiums to US $88 million (HY 2004: US$79 million)

Commenting on the results, Board Chairman John Barton stated: “The result for the first six months reflects the strong underwriting capabilities at Wellington and our continuing focus on cycle management. We are further demonstrating our commitment to return capital to shareholders through the confirmation of dividends in respect of 2005 of not less than 4p and through the share buy back programme currently in place for the return of £18m of proceeds from the first sale of the investment in Aspen. Hurricane Katrina has had a devastating impact on many people on the gulf coast of Louisiana and Mississippi and our thoughts are with them. This is no doubt a significant event for the market. Wellington has the expertise and resources to quickly respond to changing conditions in order to maximise shareholder returns.”

The full report and further comment may be obtained on the Group’s Website at: http://www.wellington.co.uk.

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