Shares of Bermudian-domiciled insurer Lancashire Holdings Ltd soared 7.1 per cent in London yesterday after the company said it expected to benefit from higher rates.

The company suffered a fourth-quarter loss but swung to profit for the full year 2018, partly helped by a rise in gross written premiums.

The Lloyd’s of London insurer, which writes policies for heavy-duty assets such as oil rigs, ships and aircraft, reported profit before tax of $33.6 million for 2018, compared with a loss of $72.9 million a year earlier.

Its combined ratio — a measure of underwriting profitability — was 92.2 per cent, a significant improvement on last year’s 124.9 per cent.

Lancashire recorded a 7.9 per cent rise in gross written premiums to $638.5 million.

The company said the fourth quarter had been challenging with “higher levels of loss activity than average”.

Lancashire said it expected to see “improved rates across many of our lines of business, and growth through new business where we have recently added new teams”.

A final dividend of 10 cents per share was declared, taking the total dividend for the year to 35 cents a share, helped by the special dividend of 20 cents declared earlier this year.

Alex Maloney, Lancashire’s chief executive, said: “The fourth quarter of 2018 once again witnessed higher levels of loss activity than average, with the occurrence of Hurricane Michael in October and a further series of catastrophic wildfires in California causing a tragic loss of life.

“When considered with the other major loss events during the year, 2018 ranks among the four largest loss years of the last couple of decades.

“Following 2017, this is the second year in succession of well above average global insured catastrophe losses. Against this backdrop, the group has generated a positive return on equity for the full year of 2.4 per cent. Overall, I am pleased at the resilience of our portfolio and our reinsurance programme, given the loss environment.”

Andreas van Embden, an analyst with Peel Hunt, said: “The outlook is encouraging as specialty insurance rates recover and the company starts rebuilding its portfolio, which had been shrinking in a disciplined way during the soft cycle.”

Lancashire shares rose 42p to close on 637p in London after the results were announced.