REG-Lancashire Hld Ltd: Q3 Trading Statement

Lancashire HoldingsAnnouncement

03/11/2022 07:00

LANCASHIRE HOLDINGS LIMITED

3 November 2022

Hamilton, Bermuda

Lancashire Holdings Limited (“Lancashire” or “the Group”) today
announces its trading statement for the nine  months ended 30 September 2022.

Trading statement key points
* Gross premiums written increased by 34.3% year-on-year to $1.3 billion.
* Group Renewal Price Index (RPI) of 107%.
* Net loss estimates from hurricane Ian in the range of $160-$190 million.
* Total net investment return of negative 5.0%, primarily driven by unrealised
losses.
* Strong balance sheet and robust capital position.
Alex Maloney, Group Chief Executive Officer, commented:

“During the quarter we witnessed a number of catastrophe events and we
extend our sympathies to the many people impacted. Insurers play a vital role
in offering protection to vulnerable communities and we are reminded of both
the potential destructive power of nature and the value of the risk solutions
we offer. Our current estimate of the net impact of hurricane Ian, excluding
inwards and outwards reinstatement premiums and Lancashire Capital Management,
is within the range of $160 million to $190 million. This is within our
expectations for an event of this type.

During 2022, Lancashire has continued to grow and diversify its underwriting
portfolio and deliver on its underwriting strategy. This has been fuelled by
solid rate increases and strong market conditions which has given us
additional resilience.

Gross premiums written increased by 34.3% year-on-year to $1.3 billion.

We expect the broader positive conditions to continue into 2023 and our
strategy is to take advantage of attractive market opportunities. We believe
we could see significant increases in rates and improving terms and conditions
due to recent events and the fact that capacity had already been tightened in
the wider market.

Clearly the macro-economic outlook is increasingly uncertain with significant
increases in interest rates, higher inflation, and broader dislocation in
global markets and we expect this volatility to continue. Lancashire reported
a total net investment return of negative 5%, primarily driven by unrealised
losses. Future earnings in our portfolio should be bolstered by the higher
interest rate environment, which we should benefit from relatively quickly
given the short duration of our portfolio.

We believe we are well-placed to manage inflationary pressures and have
competence in dealing with previous inflationary and deflationary changes
within a number of our product lines. Inflation will also present further
opportunities for us as clients seek to purchase additional cover.

Even allowing for the impact of hurricane Ian, and unrealised investment
losses, our capital position remains strong and we will drive forward with our
growth strategy and capitalise on the strong rate environment through our
diversified product portfolio.

As always, my thanks go to all our colleagues for their hard work and to our
brokers, clients and shareholders for their support.”

Business update

Gross premiums written

                                                      Nine months ended                        
                                     30 September 2022  30 September 2021  Change  Change  RPI 
                                                    $m                 $m      $m       %    % 
 Property and casualty reinsurance               739.3              503.4   235.9    46.9  108 
 Property and casualty insurance                 217.8              158.4    59.4    37.5  106 
 Aviation                                         93.9               92.1     1.8     2.0  111 
 Energy                                          156.0              145.2    10.8     7.4  103 
 Marine                                           93.1               68.6    24.5    35.7  105 
 Total                                         1,300.1              967.7   332.4    34.3  107 

The increase in gross premiums written of 34.3% for the first nine months of
2022, compared to the same period in 2021, was primarily due to growth in the
property and casualty reinsurance segment. This was mainly due to new business
in the casualty reinsurance and financial lines classes of business as well as
the continued strong RPI for this segment of 108%, which is driven by the
continued hardening in property reinsurance classes.

In the property and casualty insurance segment the new property construction
class of business has contributed meaningfully to the premium growth alongside
the continued build-out of the property direct and facultative book of
business.

The gross premium written in the aviation segment remained comparable to the
prior year, albeit the major renewal period for this segment is in the fourth
quarter.

Most of our energy classes of business grew through the addition of new
underwriting teams and product expansion across underwriting platforms to take
advantage of the improving market conditions.

The premium increase in the marine segment was primarily driven by new
business in the marine cargo and marine liability classes as well as
additional premiums recognised due to exposure increases on prior years’
contracts in the marine cargo class.

Loss environment

Our estimated ultimate net losses incurred in relation to hurricane Ian,
excluding the impact of reinstatement premiums and Lancashire Capital
Management, are in the range of $160 million to $190 million. Loss information
after these types of catastrophe events can take some time to emerge. As
additional information emerges, the Group’s actual ultimate net losses may
vary, perhaps materially, from current estimates. See ‘Note Regarding
Forward-Looking Statements’ below.

Investments

                            30 September 2022  30 September 2021 
 Duration                           1.7 years          1.9 years 
 Credit quality                           AA-                 A+ 
 Book yield                              2.3%               1.3% 
 Market yield                            4.6%               0.8% 
 Managed investments ($m)            $2,291.9           $2,267.8 

The investment portfolio delivered a negative return of 5.0% year-to-date. The
majority of the losses are unrealised, resulting from further significant
interest rate hikes by the U.S. Federal Reserve.

Further intention to purchase own shares

During the nine months ended 30 September 2022, Lancashire repurchased
4,589,592 of its common shares (out of a combined maximum Board-approved limit
for share repurchases of 6,000,000 common shares). These repurchases were made
pursuant to and in accordance with the general authority granted by
shareholders at Lancashire's Annual General Meeting held on 27 April 2022.

Pursuant to and in accordance with that same general authority, Lancashire
intends to purchase up to a further 3,000,000 of its common shares of $0.50
each. All repurchased shares will be used to satisfy future exercises of
awards under Lancashire’s Restricted Share Scheme. A further announcement in
accordance with Listing Rule 12.4 will be made in due course.

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 EDT on Thursday 3 November 2022. 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 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:      +443333000804    
 United States - Toll free:   +1 855 85 70686  
 United States - Local:       +1 6319131422    
 PIN Code                     52088920#        

URL for additional international dial in numbers:
 

https://events-ftp.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://onlinexperiences.com/Launch/QReg/ShowUUID=CB9829B9-858E-40F6-96C8-4AA4950AEE36

A webcast replay facility will be available for 12 months and accessible at:

https://www.lancashiregroup.com/en/investors/results-reports-and-presentations.html
(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’s 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 3 November 2022.

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 2021.

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 2021 AND OUR UNAUDITED CONDENSED INTERIM CONSOLIDATED
FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 JUNE 2022. IN ADDITION TO
THOSE FACTORS CONTAINED IN THE GROUP’S PRIOR RELEASES, ANY FORWARD-LOOKING
STATEMENTS CONTAINED IN THIS RELEASE MAY BE AFFECTED BY: THE ACTUAL
DEVELOPMENT OF LOSSES AND EXPENSES IMPACTING ESTIMATES FOR CLAIMS WHICH ARISE
AS A RESULT OF HURRICANE IAN (WHICH OCCURRED LATE IN THE THIRD QUARTER), THE
IMPACT OF THE ONGOING CONFLICT IN UKRAINE, INCLUDING ANY ESCALATION OR
EXPANSION THEREOF, ON THE GROUP’S CLIENTS, RESERVES, THE CONTINUED
UNCERTAINTY OF THE SITUATION IN RUSSIA, INCLUDING ISSUES RELATING THE IMPACT
OF SANCTIONS; THE IMPACT OF COMPLEX AND UNIQUE CAUSATION AND COVERAGE ISSUES
ASSOCIATED WITH ATTRIBUTION OF LOSSES RELATING TO SUCH EVENTS; POTENTIAL
UNCERTAINTIES RELATING TO REINSURANCE RECOVERIES, REINSTATEMENT PREMIUMS AND
OTHER FACTORS INHERENT IN LOSS RANGE ESTIMATIONS; THE PRELIMINARY NATURE OF
LOSS ESTIMATES BASED ON CURRENTLY AVAILABLE INFORMATION DERIVED FROM MODELS,
CLIENTS AND BROKERS; THE SECURITIES IN OUR INVESTMENT PORTFOLIO AND GLOBAL
FINANCIAL MARKETS GENERALLY, AS WELL AS ANY GOVERNMENTAL OR REGULATORY
CHANGES, ARISING THEREFROM; AND A CONTINUATION IN FINANCIAL MARKET VOLATILITY
AND OTHER ADVERSE MARKET CONDITIONS GENERALLY. 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 GROUP’S PRIOR RELEASES NOTED ABOVE WHICH
COULD CAUSE ACTUAL RESULTS TO DIFFER BEFORE MAKING AN INVESTMENT DECISION.



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