Kinesis’ third-party capital contribution to Lancashire keeps growing

Specialty insurance and reinsurance company Lancashire Holdings reported further growth in the contribution from its third-party reinsurance capital unit Kinesis Capital Management today, as it revealed the first full-year profit commission to be booked from the vehicle.

For the first-quarter of 2015 Lancashire has reported a share of profits of associates, due to the firm’s 10% equity interest in the Kinesis vehicle, of $0.7m. That compares to a share of profits of associates of $1.6m for Q1 2014, but that was related to both Kinesis’ first quarter and also some remaining profit share to be taken from the now run-off Accordion vehicle.

In addition Lancashire reported that Kinesis Capital Management earned underwriting fees of $0.7m for providing underwriting services to the Kinesis vehicle, up from $0.6m in Q1 of 2014.

In addition Lancashire got to realise its first profit commission from Kinesis, as the vehicle has now been through a full underwriting cycle. The profit commission reported was $5.1m, much higher than profit commission of $3m reported in Q1 2014 which was from the Saltire vehicle.

Elaine Whelan, Group CFO, commented; “With the close out of Kinesis’ first underwriting cycle, and receipt of the related profit commission, total other income from Kinesis was $5.8 million.”

The $5.8m Whelan refers to is made up of the underwriting fees and profit commission. The share of profits of associates is booked separately as it is attributable to Lancashire.

So in total, Lancashire reports $5.8m of other income from Kinesis plus its $0.7m share of Kinesis profits, which for a quarter shows the growing contribution that Kinesis will make as it continues to build a track record in the marketplace.

Another $0.7 million in profit commission is expected to come through from the first underwriting cycle in the second quarter, we’re told.

To date Kinesis has deployed over $340m of fully-collateralized protection through its unique, multi-class product offering. It’s clearly proving popular with cedents and further growth is likely in the future as market conditions allow.