REG-Lancashire Hld Ltd: Q3 2019 Trading Statement

Lancashire HoldingsAnnouncement

07/11/2019 07:05

LANCASHIRE HOLDINGS LIMITED

7 November 2019

Hamilton, Bermuda

Lancashire Holdings Limited (“Lancashire” or “the Group”) today
announces its trading statement for the nine months ended 30 September 2019.

Trading statement highlights

• Gross premiums written increased by 13.8% year on year to $578.0 million

• Renewal Price Index (RPI) of 106%

• Net loss estimates of $33.2 million from hurricane Dorian and typhoon
Faxai within expectations

• Strong investment performance generating a total investment return
(including internal currency hedging) of 4.1%

• Encouraging signs of market returning to underwriting discipline

                                                                             Nine months ended              
                                                                    30 September 2019     30 September 2018 
 Gross premiums written                                                       $578.0m               $507.7m 
 Renewal Price Index                                                   106 %                 104 %          
 Total investment return (including internal currency hedging)         4.1 %                 0.9 %          

Alex Maloney, Group Chief Executive Officer, commented:

“Once again the Atlantic and Pacific wind seasons have produced loss events
which have disrupted lives and livelihoods, with tragic consequences.
Lancashire’s products help our clients and ultimate insureds manage these
volatile risks and to rebuild after such moments of disruption.

The Group’s exposures to recent catastrophe loss events have been
comfortably within our expectations.

In the face of these market losses, which pose yet another challenge to the
global insurance industry, the markets have now reached a point at which the
pricing of both property and specialty risks has required reappraisal. There
is an increasing industry focus on the need for more disciplined underwriting
and better assessment of risk. We have benefited from that greater market
discipline and have taken the opportunity to achieve measured, disciplined
growth, in line with the underwriting opportunity and our strategy. There is
more progress for our industry to make in reaching a point at which the market
operates at more sustainable levels.  But I am encouraged that we are at a
stage in the cycle where we are benefiting from the realisation across the
market of the need to ensure long term, sustainable returns and underwriting
discipline.

Given our expectations of a continued improvement in the market in 2020, we
intend to retain all of our current capital in order to be able to take full
advantage of underwriting opportunities. Therefore, in line with our active
capital management policy, we are not declaring a special dividend at this
point. Our dividend policy remains unchanged and we fully expect to pay our
normal final dividend next year. We will continue to actively monitor our
capital levels versus underwriting opportunities and will update further at
the time of our full year 2019 results.”

Business update

Gross premiums written

                                      Nine months ended                                    
                30 September 2019     30 September 2018       Change       Change      RPI 
                               $m                    $m           $m            %        % 
 Property        210.1                 176.5              33.6         19.0        106     
 Energy           77.6                  88.1             (10.5 )      (11.9 )      104     
 Marine           33.1                  25.3               7.8         30.8        111     
 Aviation         24.1                  15.1               9.0         59.6        100     
 Lloyd’s         233.1                 202.7              30.4         15.0        108     
 Total           578.0                 507.7              70.3         13.8        106     

Gross premiums written increased by 13.8% in the first nine months of 2019
compared to the same period in 2018. The Group’s five principal segments,
and the key market factors impacting them, are discussed below.

Property gross premiums written increased by 19.0% for the first nine months
of 2019 compared to the same period in 2018. The property segment experienced
new business growth alongside rate and exposure-related premium increases
across all classes of business, particularly in the property catastrophe and
political risk classes. This was only partially offset by the impact of
multi-year contracts that were not yet due to renew.

Energy gross premiums written decreased by 11.9% for the first nine months of
2019 compared to the same period in 2018. While there was more new business in
the worldwide offshore and onshore energy classes in 2019 compared to 2018,
the prior year benefited more from the restructuring of an existing multi-year
deal and increased exposure on risk-attaching business from prior underwriting
years, particularly in the worldwide offshore and construction energy classes.

Marine gross premiums written increased by 30.8% for the first nine months of
2019 compared to the same period in 2018. There have been more multi-year
contracts renewing during 2019 compared to 2018. This has been primarily in
the marine hull, marine P&I and builders risk classes, partially offset by a
reduction in the marine hull war class due to multi-year contracts not
renewing.

Aviation gross premiums written increased by 59.6% for the first nine months
of 2019 compared to the same period in 2018. The growth was driven primarily
by new business in the aviation deductible and other aviation classes of
business due to a continuation of the book build by our new team.

In the Lloyd’s segment, gross premiums written increased by 15.0% for the
first nine months of 2019 compared to the same period in 2018. The increase
was primarily due to new business in the energy, aviation, marine and
terrorism classes of business in addition to favourable premium adjustments on
policies written in prior underwriting years. Compared to the prior year,
there was a slight reduction in premiums on the property reinsurance and
property direct and facultative classes. While there was some new business in
those classes, part of the portfolio was repositioned to participate on higher
layers and certain contracts were not renewed due to less attractive rates.

Claims environment

The Group’s total ultimate loss estimate for hurricane Dorian and typhoon
Faxai, net of reinsurance and excluding the impact of inwards and outwards
reinstatement premiums, is $33.2 million. There were no other significant net
losses for the first nine months of the year. The Group is in the preliminary
stages of assessing the impact of typhoon Hagibis, which will be reflected in
its full year results for 2019.

Prior year favourable development for the first nine months of 2019 was $42.6
million, compared to $87.0 million for the same period in 2018. The favourable
development in both periods was primarily due to general IBNR releases across
most lines of business due to a lack of reported claims. However, the first
nine months of 2019 included some 2018 accident year claims in the energy and
Lloyd’s segments. In the first nine months of 2018, the Group benefited from
a reduction on prior accident year energy claims.

Investments

The managed investment portfolio statistics were:

                          30 September 2019     30 September 2018 
 Duration                         1.7 Years             1.6 Years 
 Credit quality                          A+                   AA- 
 Book yield                  2.6 %                 2.4 %          
 Market yield                2.3 %                 2.9 %          
 Managed investments              $1,709.4m             $1,840.1m 

The Group’s investment portfolio total return (including internal currency
hedging) was 4.1% during the first nine months of 2019 driven by a decline in
treasury yields and the narrowing of credit spreads during the year,
particularly in the first six months of 2019. The Group’s fixed maturity,
bank loan and equity portfolios all had a strong performance during the first
nine months of the year.

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 EST on 7 November 2019. The
conference call will be hosted by Lancashire management.

Participant Access:

Dial in 5-10 minutes prior to the start time using the number / confirmation
code below:

 United Kingdom - Toll free:  08003589473      
 United Kingdom - Local:      +44 3333000804   
 United States - Toll free:   +1 855 85 70686  
 United States - Local:       +1 6319131422    
 PIN Code                     18830240#        

URL for additional international dial in numbers:

https://events.arkadin.com/ev/docs/NE_W2_TF_Events_International_Access_List.pdf

The call can also be accessed via webcast, for registration and access:

https://event.on24.com/wcc/r/2093472/6E4A4119C023E48996A429E6B490D59D

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 has capital of approximately $1.4 billion and its 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 EU 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 GMT on 7 November 2019.

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 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 REGARING 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 2018.

NOTE REGARDING FORWARD-LOOKING STATEMENTS:

CERTAIN STATEMENTS AND INDICATIVE PROJECTIONS (WHICH MAY INCLUDE MODELLED LOSS
SCENARIOS) MADE IN THIS TRADING STATEMENT OR OTHERWISE THAT ARE NOT BASED ON
CURRENT OR HISTORICAL FACTS ARE FORWARD-LOOKING IN NATURE INCLUDING, WITHOUT
LIMITATION, STATEMENTS CONTAINING THE WORDS “BELIEVES”, “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 2018.

ALL FORWARD-LOOKING STATEMENTS IN THIS TRADING STATEMENT 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 TRADING
STATEMENT WHICH COULD CAUSE ACTUAL RESULTS TO DIFFER BEFORE MAKING AN
INVESTMENT DECISION.



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