REG-Lancashire Hld Ltd: Q1 2019 Trading Statement

Lancashire HoldingsAnnouncement

02/05/2019 07:05

LANCASHIRE HOLDINGS LIMITED

2 May 2019

Hamilton, Bermuda

Lancashire Holdings Limited (“Lancashire” or “the Group”) today
announces its trading statement for the three months ended 31 March 2019.

Q1 2019 overview

• Market trends in relation to the Group's business remain unchanged since
the Group's fourth quarter 2018 reporting

• Gross premiums written increased by 0.6% year on year to $217.2 million

• Rate increases remained consistent with full year 2018 trends, with a
Group RPI (Renewal Price Index) of 103% for the quarter

• The claims environment was relatively benign, with no new major net losses
in the quarter

• Total investment return of 1.8% in the quarter

                                    Q1            
                                 2019        2018 
 Gross premiums written       $217.2m     $215.8m 
 Group RPI                  103 %       105 %     
 Total investment return    1.8 %      (0.1 %)    

Alex Maloney, Group Chief Executive Officer, commented:

“Our performance for the first quarter of 2019 has been encouraging, with
rate and business momentum. Underwriting margins remain in line with our
expectations. There is evidence that the insurance and reinsurance markets in
which we operate are now going through a period of transition. The heavy
global insured losses sustained by the markets over the last 24 months have
demonstrated that premium levels in many classes had fallen too low. However,
we are now beginning to see early signs of greater market discipline.

Lancashire prides itself on its ability to manage the challenges of the
insurance cycle through a combination of careful risk selection, planning and
nimble capital management, all key pillars of our strategy. The Group has
demonstrated its ability to respond flexibly to market conditions and take
advantage of opportunities as they present themselves. In particular, we have
been able to strengthen our presence and premium income in our specialty
lines. Whilst pricing in our property reinsurance classes remains subdued
outside of loss impacted territories, we believe that we have the expertise to
develop profitable opportunities across our platforms and portfolios in this
period of transition.”

Business update

Gross premiums written

            Q1                                                        
                   2019        2018      Change       Change      RPI 
                     $m          $m          $m            %        % 
 Property     81.2        79.9        1.3          1.6        100     
 Energy       22.6        30.4       (7.8 )      (25.7 )      104     
 Marine       20.6        14.9        5.7         38.3        116     
 Aviation      5.9         4.0        1.9         47.5        100     
 Lloyd’s      86.9        86.6        0.3          0.3        104     
 Total       217.2       215.8        1.4          0.6        103     

Gross premiums written increased by 0.6% in the first quarter of 2019 compared
to the same period in 2018, with growth in the property, marine and aviation
portfolios slightly offset by reductions in the energy book.

Property trends were in line with expectations in the first quarter of 2019.
As reported in the Group’s full year 2018 results, the 1 January 2019
property catastrophe renewals experienced flat to low-single digit rate
reductions in some loss free territories, such as Europe, whilst loss impacted
territories and accounts experienced rate increases. As a result, we expect
property catastrophe rates to remain flat across the portfolio. The Group’s
terrorism and political risk business also saw broadly flat renewals. New
business across several of our property lines of business was largely offset
by the impact of multi-year contracts that were not yet due to renew.

Compared to the prior year, the energy segment experienced a lower level of
exposure-related premium increases arising on prior underwriting year
risk-attaching business in the worldwide offshore energy and construction
energy classes. Rate momentum remained consistent with 2018, with the offshore
energy book experiencing mid-single digit rate rises and the onshore energy
book experiencing low-double digit rate rises.

The increase in the marine segment was driven primarily by multi-year
contracts renewing in the marine hull and marine P&I classes. The rate
momentum in Lancashire's marine book was strong, benefiting from the renewal
of certain loss-affected contracts in the first quarter of 2019.

The first quarter is not a major renewal period for aviation. The growth in
the first quarter of 2019 was primarily due to exposure increases on prior
underwriting year risk-attaching business in the aviation deductible class.
The Group experienced some upward rating pressure on the small amount of
business that was written in the quarter, and we expect rates to remain
positive as we move through the year.

In the Lloyd’s segment, gross premiums written remained stable year on year.
Rate increases and new business growth in the energy, marine and aviation
deductible classes in the first quarter of 2019 were almost entirely offset by
reduced premiums in the property reinsurance and property direct and
facultative classes. The decision was taken to reposition part of the property
portfolio to participate on higher layers and not to renew certain contracts
due to unattractive rates.

Claims environment

The claims environment during the first quarter of 2019 was relatively benign,
with no new major net losses.

The Group's total ultimate loss estimates net of reinsurance and the impact of
inwards and outwards reinstatement premiums for the 2018 and 2017 major
catastrophe events remained stable in the aggregate during the quarter.

Investments

The managed investment portfolio was as follows:

                                31 March 2019     31 March 2018 
 Fixed maturity securities      81.5        %     81.3        % 
 Hedge funds                     8.9        %      8.4        % 
 Cash and cash equivalents       8.2        %      9.1        % 
 Equity securities               1.4        %      1.2        % 
 Total                         100.0        %    100.0        % 

The Group’s investment portfolio returned 1.8% during the first quarter of
2019. Strong equity markets, together with a decrease in treasury yields and a
narrowing of credit spreads, drove positive performance across all asset
classes, particularly the Group's bank loan, equity and hedge fund portfolios.

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 2 May 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                     18516305#        

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/1980034/A19789C885BB021078923EEB78316A24

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 BST on 2 May 2019.

NOTE REGARDING RPI METHODOLOGY:

LANCASHIRE’S RENEWAL PRICE INDEX (“RPI”) IS AN INTERNAL METHODOLOGY THAT
ITS MANAGEMENT USES TO TRACK TRENDS IN PREMIUM RATES OF A PORTFOLIO OF
INSURANCE AND REINSURANCE CONTRACTS. THE RPI WRITTEN BY LANCASHIRE INSURANCE
COMPANY LIMITED AND LANCASHIRE INSURANCE COMPANY (UK) LIMITED ("THE LANCASHIRE
COMPANIES") IN THE RESPECTIVE SEGMENTS IS CALCULATED ON A PER CONTRACT BASIS
AND REFLECTS LANCASHIRE’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 OF
LANCASHIRE 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 LANCASHIRE’S PORTFOLIO. 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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