REG-Lancashire Holdings Ltd: Q1 Trading Statement

Lancashire HoldingsAnnouncement

02/05/2024 07:15

LANCASHIRE HOLDINGS LIMITED

2 May 2024

Hamilton, Bermuda

Lancashire Holdings Limited (“Lancashire” or “the Group”) today
announces its trading statement for the three months ended 31 March 2024.

Trading statement highlights
* Gross premiums written increased by 7.8% year-on-year to $631.7 million. 
* Insurance revenue increased by 24.6% year-on-year to $422.0 million.
* Group Renewal Price Index (RPI) of 104%.
* Total investment return, including unrealised gains and losses, of 0.9%.
* Regulatory ECR ratio of 328% as at 31 December 2023.

Alex Maloney, Group Chief Executive Officer, commented:

“Lancashire has had a very strong start to 2024, reporting a record quarter.

The positive underwriting environment allowed us to grow our business further
with gross premiums written increasing nearly 8% year-on-year to $631.7
million. Insurance revenue increased by nearly 25% year-on-year to $422
million.

We continue to see strong opportunities for profitable growth across our
portfolio with a Group RPI for the quarter of 104%.

Our new U.S. operation, Lancashire Insurance U.S., has now begun underwriting
excess and surplus lines business in the property and energy casualty classes.
We are very pleased with the strong team we have built and we believe that
there are significant long-term opportunities for Lancashire in this market.

In terms of the loss environment, the market impact of the tragic Baltimore
bridge disaster late in the quarter is still being assessed, however our
potential exposure will be within our expectations for an event of this type.

We affirm the guidance we gave for the 2024 financial year for an undiscounted
combined ratio around the mid-80% range, and a return on equity, as measured
by the change in diluted book value per share, of around 20%.

On investments, our portfolio delivered a positive return of 0.9% for the
quarter. The market yield of 5.4% was offset by mark to market movements on
fixed maturities.

I am excited by the prospects for Lancashire as we move through 2024. Our
strong balance sheet, with a regulatory ECR ratio of 328%, gives us the
flexibility to achieve our goals. We remain focused on writing profitable
business across our diversified product suite, offering relevant solutions to
our clients, and fully delivering on our strategic priorities.”


Business update

Gross premiums written and insurance revenue

                         Three months ended                                                                                                               
                         31 March 2024                       31 March 2023                       Change                                 Change   RPI      
                         $m                                  $m                                  $m                                     %        %        
 Reinsurance                            399.7                               369.3                                 30.4                  8.2  %   103  %   
 Insurance                              232.0                               216.9                                 15.1                  7.0  %   105  %   
 Gross premiums written                 631.7                               586.2                                 45.5                  7.8 %    104 %    
                                                                                                                                                          
 Reinsurance                            201.8                               155.1                                 46.7                  30.1 %            
 Insurance                              220.2                               183.6                                 36.6                  19.9 %            
 Insurance revenue                      422.0                               338.7                                 83.3                  24.6 %            

Gross premiums written

Gross premiums written increased by $45.5 million, or 7.8%, in the first three
months of 2024 compared to the same period in 2023. The Group’s two
principal segments, and the key market factors impacting them, are discussed
below. 

Reinsurance segment

The most significant contributor to growth in this segment was in property
reinsurance, with new business written across all lines as well as positive
RPIs. Offsetting this somewhat, RPIs were flat in the casualty reinsurance
class and there were some exposure reductions on contracts written in prior
years.

Insurance segment

Property insurance was the main driver of growth in the insurance segment.
This class of business benefited from the recent addition of the new
Lancashire U.S. operation, growth from the Lancashire Australia office, as
well as positive RPIs. We also continued to write new business across the
other insurance classes, somewhat offset by exposure decreases.

Insurance revenue

Insurance revenue increased by $83.3 million, or 24.6%, in the first three
months of 2024 compared to the same period in 2023. Growth was more
substantial for insurance revenue than gross premiums written as we continue
to benefit from earnings coming through from prior underwriting years. Gross
premium earned, which is a major driver of insurance revenue, as a percentage
of gross premiums written was 76.6% for the first quarter of 2024 compared to
69.1% in 2023. This increase was largely driven by the casualty treaty book.


Loss environment

The loss environment during the first quarter of 2024 was relatively benign
with no natural catastrophe losses of note. Whilst the Group has some exposure
to the Baltimore bridge disaster, it will be within expectations for this type
of event. We do not expect to change our undiscounted combined ratio guidance
for the year.


Investments

 As at                     31 March 2024  31 March 2023  
 Duration                  1.7 years      1.6 years      
 Credit quality            A+             AA-            
 Book yield                4.3%           3.3%           
 Market yield              5.4%           5.0%           
 Managed investments ($m)  $2,824.9       $2,542.0       

The investment portfolio generated a positive return of 0.9% in the first
quarter of 2024. While the market yield remained elevated at 5.4%, generating
strong investment income, interest rates increased across the yield curve
outside the 6-month maturity. The negative return from interest rate increases
was somewhat negated by credit spread tightening.  The bank loan and private
credit portfolios generated strong returns in the quarter.


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 2 May 2024.
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

Please note that conference call participants are required to register in
advance to access either the audio conference call or webcast, the full
registration and access details are set out below.
 

 Audio access:    https://url.uk.m.mimecastprotect.com/s/n6bwCGZA9IA55o0I1zdSz?domain=emportal.ink          
                  Please register to obtain your personal audio conference pin and call details.            
                                                                                                            
 Webcast access:  https://url.uk.m.mimecastprotect.com/s/blj7CBgvnT8553MHjgheg?domain=onlinexperiences.com  
                  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


Contact information  

 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 2 May 2024.


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 2023.


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 2023. IN ADDITION TO THOSE FACTORS CONTAINED IN THE
GROUP’S 2023 ANNUAL REPORT AND ACCOUNTS, ANY FORWARD-LOOKING STATEMENTS
CONTAINED IN THIS RELEASE MAY BE AFFECTED BY: THE IMPACT OF THE COLLAPSE OF
THE FRANCIS SCOTT KEY BRIDGE IN BALTIMORE WHICH OCCURRED IN THE FIRST QUARTER
OF 2024; AND THE ESCALATION OF HOSTILITIES IN THE MIDDLE EAST AND ITS IMPACT
ON THE STABILITY OF THE REGION, GLOBAL SUPPLY ROUTES AND INSURANCE AND
FINANCIAL MARKETS. 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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