REG-Lancashire Hld Ltd: Q1 Trading Statement

Lancashire HoldingsAnnouncement

27/04/2023 07:15

LANCASHIRE HOLDINGS LIMITED

27 April 2023

Hamilton, Bermuda

Lancashire Holdings Limited (“Lancashire” or “the Group”) today
announces its trading statement for the three  months ended 31 March 2023.

Trading statement highlights  
* Gross premiums written increased by 22.7% year-on-year to $586.2 million.
* Group Renewal Price Index (RPI) of 117%.
* IFRS 17 insurance revenue increased by 31.6% year-on-year to $338.7 million.
* Total net investment return, including unrealised gains and losses, of 1.5%.
* Regulatory ECR ratio of approximately 308% as at 31 December 2022.
Alex Maloney, Group Chief Executive Officer, commented:

“I am pleased to report that Lancashire has continued to execute its
strategy to take advantage of the significantly improved market conditions.

In the first three months of 2023 we maintained the momentum we built during
2022 with an increase in gross premiums written of 22.7% to $586.2 million,
the highest the Group has delivered in a first quarter.

Strong rate rises in a number of our product lines have persisted,
particularly in property catastrophe business where the supply and demand gap
for capacity which we saw at the January 1 renewals remains.

For most other lines, 2023 is the sixth year of consecutive rate increases and
we will continue to grow, where it makes sense, in this positive underwriting
environment.

As for our investments, they delivered a positive total net investment return
for the quarter of 1.5%.

Our track record of navigating the insurance cycle through disciplined risk
selection and capital management gives us confidence in delivering on our
strategic priorities for the remainder of 2023.

We look forward to making the most of these exciting underwriting
opportunities supported by our robust capital position and talented teams.”

Business update

Gross premiums written and IFRS 17 insurance revenue

                                         Three months ended                    
                             31 March 2023  31 March 2022  Change  Change  RPI 
                                        $m             $m      $m       %    % 
 Reinsurance                         369.3          310.3    59.0    19.0  124 
 Insurance                           216.9          167.6    49.3    29.4  109 
 Gross premium written               586.2          477.9   108.3    22.7  117 
                                                                               
 Reinsurance                         155.1          107.5    47.6    44.3      
 Insurance                           183.6          149.8    33.8    22.6      
 IFRS 17 insurance revenue           338.7          257.3    81.4    31.6      

Insurance revenue on an IFRS 17 basis comprises gross earned premium less
reinstatement premium and is net of commission costs. Lancashire will continue
to report gross premiums written as a growth metric and non-GAAP alternative
performance measure.

Gross premiums written increased by $108.3 million or 22.7% and IFRS 17
insurance revenue increased by $81.4 million or 31.6% in the first three
months of 2023 compared to the same period in 2022. The Group’s two
principal segments, and the key market factors impacting them, are discussed
below.

Reinsurance

The continued development of our casualty reinsurance classes was the most
significant contributor to growth in the reinsurance segment. Within property
reinsurance, Lancashire saw significant rate increases in property catastrophe
treaty whilst new business drove increases in specialty reinsurance.

Insurance

The growth in the insurance segment was primarily driven by property
insurance, where the Group continues to build out its property construction
book of business. We also saw substantial rate increases in the property
direct and facultative class. Additionally, there was strong growth in energy
and marine insurance driven by exposure increases in energy liabilities and
new business in cargo and specie.

Loss environment

The first quarter of 2023 saw natural catastrophe loss activity across a
number of events including U.S. convective storms, the Turkey earthquake and
flooding in New Zealand. We also incurred some risk losses, particularly in
our energy classes. These losses, both individually and in aggregate, were not
sufficiently material to exceed our normal disclosure threshold.

Investments

                            31 March 2023  31 March 2022 
 Duration                       1.6 years      2.0 years 
 Credit quality                       AA-             A+ 
 Book yield                          3.3%           1.5% 
 Market yield                        5.0%           2.3% 
 Managed investments ($m)        $2,542.0       $2,303.8 

In a quarter of continued volatility, the investment portfolio generated a
positive return of 1.5%. Returns were driven primarily by the fixed maturity
securities that benefited from falling interest rates resulting in an
unrealised investment gain for the quarter.

Adoption of new accounting standards

The Group adopted IFRS 17, Insurance Contracts and IFRS 9, Financial
Instruments: Classification and Measurement for the first time on 1 January
2023. The consolidated financial statements for the six months ending 30 June
2023 will be reported under these new accounting standards.

Analyst and Investor Conference Call

There will be an analyst and investor conference call on the trading statement
at 1:00pm UK time / 9:00am Bermuda time / 8:00am EDT on Thursday 27 April
2023. The conference call will be hosted by Lancashire management and a
presentation will be made available on the Group’s website prior to the
call.

Participant Registration and Access Information:

Audio conference call access:

https://register.vevent.com/register/BI7e86732415664652a8820d207d4b42b1

Please register at this link to obtain your personal audio conference pin and
call details.

Webcast access:

https://onlinexperiences.com/Launch/QReg/
(https://onlinexperiences.com/Launch/QReg/ShowUUID=F48CE46D-577C-4F1C-918A-67DCBB8FBF37)S
(https://onlinexperiences.com/Launch/QReg/ShowUUID=F48CE46D-577C-4F1C-918A-67DCBB8FBF37)h
(https://onlinexperiences.com/Launch/QReg/ShowUUID=F48CE46D-577C-4F1C-918A-67DCBB8FBF37)owUUID=F48CE46D-577C-4F1C-918A-67DCBB8FBF37
(https://onlinexperiences.com/Launch/QReg/ShowUUID=F48CE46D-577C-4F1C-918A-67DCBB8FBF37)

Please use this link to register and access the call via webcast.

A webcast replay facility will be available for 12 months and accessible at:
https://www.lancashiregroup.com/en/investors/results-reports-and-presentations.html

For further information, please contact:

 Lancashire Holdings Limited                                                           
 Christopher Head             +44 20 7264 4145 chris.head@lancashiregroup.com          
 Jelena Bjelanovic            +44 20 7264 4066  jelena.bjelanovic@lancashiregroup.com  
                                                                                       
 FTI Consulting               +44 20 37271046                                          
 Edward Berry                 Edward.Berry@FTIConsulting.com                           
 Tom Blackwell                Tom.Blackwell@FTIConsulting.com                          

About Lancashire

Lancashire, through its UK and Bermuda-based operating subsidiaries, is a
provider of global specialty insurance and reinsurance products.

Lancashire common shares trade on the premium segment of the Main Market of
the London Stock Exchange under the ticker symbol LRE. Lancashire has its head
office and registered office at Power House, 7 Par-la-Ville Road, Hamilton HM
11, Bermuda.

The Bermuda Monetary Authority is the Group Supervisor of the Lancashire
Group.

For more information, please visit Lancashire’s website at
www.lancashiregroup.com.

This release contains information, which may be of a price sensitive nature
that Lancashire is making public in a manner consistent with the UK Market
Abuse Regulation and other regulatory obligations. The information was
submitted for publication, through the agency of the contact persons set out
above, at 07:00 BST on 27 April 2023.

NOTE REGARDING RPI METHODOLOGY:

THE RENEWAL PRICE INDEX (“RPI”) IS AN INTERNAL METHODOLOGY THAT MANAGEMENT
USES TO TRACK TRENDS IN PREMIUM RATES OF A PORTFOLIO OF INSURANCE AND
REINSURANCE CONTRACTS. THE RPI WRITTEN IN THE RESPECTIVE SEGMENTS IS
CALCULATED ON A PER CONTRACT BASIS AND REFLECTS MANAGEMENT’S ASSESSMENT OF
RELATIVE CHANGES IN PRICE, TERMS, CONDITIONS AND LIMITS AND IS WEIGHTED BY
PREMIUM VOLUME. THE RPI DOES NOT INCLUDE NEW BUSINESS, TO OFFER A CONSISTENT
BASIS FOR ANALYSIS. THE CALCULATION INVOLVES A DEGREE OF JUDGEMENT IN RELATION
TO COMPARABILITY OF CONTRACTS AND THE ASSESSMENT NOTED ABOVE. TO ENHANCE THE
RPI METHODOLOGY, MANAGEMENT MAY REVISE THE METHODOLOGY AND ASSUMPTIONS
UNDERLYING THE RPI, SO THE TRENDS IN PREMIUM RATES REFLECTED IN THE RPI MAY
NOT BE COMPARABLE OVER TIME. CONSIDERATION IS ONLY GIVEN TO RENEWALS OF A
COMPARABLE NATURE SO IT DOES NOT REFLECT EVERY CONTRACT IN THE PORTFOLIO OF
CONTRACTS. THE FUTURE PROFITABILITY OF THE PORTFOLIO OF CONTRACTS WITHIN THE
RPI IS DEPENDENT UPON MANY FACTORS BESIDES THE TRENDS IN PREMIUM RATES.

NOTE REGARDING ALTERNATIVE PERFORMANCE MEASURES:

THE GROUP USES ALTERNATIVE PERFORMANCE MEASURES TO HELP EXPLAIN BUSINESS
PERFORMANCE AND FINANCIAL POSITION. THESE MEASURES HAVE BEEN CALCULATED
CONSISTENTLY WITH THOSE AS DISCLOSED IN THE GROUP’S ANNUAL REPORT AND
ACCOUNTS FOR THE YEAR ENDED 31 DECEMBER 2022.

NOTE REGARDING FORWARD-LOOKING STATEMENTS:

CERTAIN STATEMENTS AND INDICATIVE PROJECTIONS (WHICH MAY INCLUDE MODELLED LOSS
SCENARIOS) MADE IN THIS RELEASE OR OTHERWISE THAT ARE NOT BASED ON CURRENT OR
HISTORICAL FACTS ARE FORWARD-LOOKING IN NATURE INCLUDING, WITHOUT LIMITATION,
STATEMENTS CONTAINING THE WORDS “BELIEVES”, “AIMS”, “ANTICIPATES”,
“PLANS”, “PROJECTS”, “FORECASTS”, “GUIDANCE”, “INTENDS”,
“EXPECTS”, “ESTIMATES”, “PREDICTS”, “MAY”, “CAN”,
“LIKELY”, “WILL”, “SEEKS”, “SHOULD”, OR, IN EACH CASE, THEIR
NEGATIVE OR COMPARABLE TERMINOLOGY. SUCH FORWARD-LOOKING STATEMENTS INVOLVE
KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER IMPORTANT FACTORS THAT COULD
CAUSE THE ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS OF THE GROUP TO BE
MATERIALLY DIFFERENT FROM FUTURE RESULTS, PERFORMANCE OR ACHIEVEMENTS
EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. FOR A DESCRIPTION OF
SOME OF THESE FACTORS, SEE THE GROUP’S ANNUAL REPORT AND ACCOUNTS FOR THE
YEAR ENDED 31 DECEMBER 2022. IN ADDITION TO THOSE FACTORS CONTAINED IN THE
GROUP’S 2022 ANNUAL REPORT AND ACCOUNTS, ANY FORWARD-LOOKING STATEMENTS
CONTAINED IN THIS RELEASE MAY BE AFFECTED BY: THE NUMBER AND TYPE OF INSURANCE
AND REINSURANCE CONTRACTS THAT THE GROUP WRITES OR MAY WRITE; THE GROUP’S
ABILITY TO SUCCESSFULLY IMPLEMENT ITS BUSINESS STRATEGY DURING ‘SOFT’ AS
WELL AS ‘HARD’ MARKETS; THE PREMIUM RATES WHICH MAY BE AVAILABLE AT THE
TIME OF SUCH RENEWALS WITHIN ITS TARGETED BUSINESS LINES; INCREASED
COMPETITION ON THE BASIS OF PRICING, CAPACITY, COVERAGE TERMS OR OTHER
FACTORS; CYCLICAL DOWNTURNS OF THE INDUSTRY. ALL FORWARD-LOOKING STATEMENTS IN
THIS RELEASE OR OTHERWISE SPEAK ONLY AS AT THE DATE OF PUBLICATION. LANCASHIRE
EXPRESSLY DISCLAIMS ANY OBLIGATION OR UNDERTAKING (SAVE AS REQUIRED TO COMPLY
WITH ANY LEGAL OR REGULATORY OBLIGATIONS INCLUDING THE RULES OF THE LONDON
STOCK EXCHANGE) TO DISSEMINATE ANY UPDATES OR REVISIONS TO ANY FORWARD-LOOKING
STATEMENT TO REFLECT ANY CHANGES IN THE GROUP’S EXPECTATIONS OR
CIRCUMSTANCES ON WHICH ANY SUCH STATEMENT IS BASED. ALL SUBSEQUENT WRITTEN AND
ORAL FORWARD-LOOKING STATEMENTS ATTRIBUTABLE TO THE GROUP OR INDIVIDUALS
ACTING ON BEHALF OF THE GROUP ARE EXPRESSLY QUALIFIED IN THEIR ENTIRETY BY
THIS NOTE. PROSPECTIVE INVESTORS SHOULD SPECIFICALLY CONSIDER THE FACTORS
IDENTIFIED IN THIS RELEASE AND THE REPORT AND ACCOUNTS NOTED ABOVE WHICH COULD
CAUSE ACTUAL RESULTS TO DIFFER BEFORE MAKING AN INVESTMENT DECISION.



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