Riding on the success of its limited exposure to recent natural calamities that helped it beat forecasted quarterly profit, Insurer Lancashire announced on Wednesday of its decision to move its tax base from Bermuda to Britain.
Since the current British rules on tax treatment of companies with overseas operations allow a three-year exemption, Lancashire said it does not expect tax liabilities to rise as a result of the move.
The change of domicile will give the company greater leverage in strategic decision making, said Jonny Creagh-Coen, head of investor relations at Lancashire.
“Every time we have to make a serious decision, it doesn’t mean the CEO has to go offshore to make that decision. Board meetings can now be held in London,” he said.
Lancashire’s move goes against the recent trend which saw British insurers like Brit and Beazley moving to the Netherlands and Ireland respectively.
Bermuda is considered a tax haven and many international insurers and reinsurers have re-domiciled their operations in the island nation.
However, not everybody seems to agree. “Given that at zero percent the tax rate can only move in the wrong direction … we expect there will be some concern from investors that the tax rate may edge up,” wrote Joy Ferneyhough, an analyst at Espirito Santo.
Lancashire’s pre-tax profit for three months to June 30 was reported at $91 million. This compares with the commercial insurer’s pre-tax profit of $84.5 million during same period last year.
According to the average of 12 forecasts compiled by the company, analysts had put the profit figure at $71 million.
The aircraft, oil rig and ship insurer’s profits got a boost due to less number of claims over the last year. Many in the industry had to pay big amounts due to the Gulf of Mexico oil spill.
The US tornadoes in April and May had little effect on business. A ten per cent drop in premium revenue was offset by lower claims losses.