REG-Lancashire Hld Ltd: Q4 Earnings Release
11/02/2022 07:05
LANCASHIRE HOLDINGS LIMITED
11 February 2022
Hamilton, Bermuda
STRONG PREMIUM GROWTH IN A CHALLENGING YEAR
Lancashire Holdings Limited (“Lancashire” or “the Group”) announces
its results for the year ended 31 December 2021.
Highlights:
* Gross premiums written increased by 50% year-on-year to a record $1.2
billion.
* Group RPI (Renewal Price Index) of 109%.
* Expansion into new classes of business and the addition of three new teams.
* Combined ratio of 107.3%, driven by significant weather and large loss
events of $306.4 million.
* Final dividend declared of $0.10 per common share.
Year ended
31 December 2021 31 December 2020
Financial highlights ($m)
Gross premiums written 1,225.2 814.1
Net premiums written 816.1 519.4
Underwriting profit 69.0 77.0
(Loss) profit before tax (56.8) 5.9
Comprehensive (loss) income (1) (92.9) 24.3
Change in FCBVS (2,3) (5.8%) 10.2%
Financial ratios
Total investment return 0.1% 3.9%
Net loss ratio 67.6% 59.6%
Combined ratio 107.3% 107.8%
Per share data
Fully converted book value per share $5.77 $6.28
Dividends per common share for the financial year $0.15 $0.15
Diluted (loss) earnings per share ($0.26) $0.02
(1 These amounts are attributable to Lancashire and exclude non-controlling
interests.)
(2 Defined as the change in fully converted book value per share, adjusted for
dividends. See the section headed “Alternative Performance Measures”
below.)
(3 The change in FCBVS excluding the impact of the capital raise in June 2020
as at 31 December 2020 would have been 2.4%.)
Alex Maloney, Group Chief Executive Officer, commented:
“2021 saw Lancashire successfully continue the long-term build-out of its
franchise and expand into a number of new classes, with gross premiums written
increasing by 50%. Much of this premium will continue to earn through in 2022
and is expected to provide earnings resilience in future years. Delivery
against this aspect of our strategy means we are well-positioned for
profitable growth in the most attractive market conditions of recent years.
However, 2021 was also a poor one for returns. With Winter Storm Uri,
hurricane Ida, European storms and floods, and Midwest U.S. tornadoes, among
others, industry-wide estimates place insured losses from natural catastrophes
between $105 billion and $130 billion making it one of the costliest years on
record. These events show the critical role the industry plays in delivering
risk solutions that protect people, economies, and businesses from
uncertainty. When the worst happens, it means disruption and hardship for many
and we recognise the human impacts these events have.
Financial losses are always disappointing but 2021 was only the second full
financial year that Lancashire made an overall loss since its inception.
Strong underlying profitability after nearly four years of rate increases, as
illustrated by improvement in our attritional loss ratio, was offset by
weather and large risk events during the year. Given the magnitude and
frequency of industry losses in 2021, these insurance losses were in line with
our expectations and risk tolerances. Importantly, we have followed our usual
conservative reserving philosophy to estimate the impact, which has served us
well over time.
Nevertheless, the overall impact of these events was a comprehensive loss of
$92.9 million, a combined ratio of 107.3%, and a negative change in FCBVS of
5.8% for the year. Of this comprehensive loss $31.6 million relates to
unrealised investment losses.
Despite the disappointing returns of the past year, we are fully energised by
the prospects for 2022 and profitable growth remains our main goal.
Our strong capital position allows us to execute our ambitious business plans
in which we expect further rate increases on our existing portfolio, with new
underwriting teams delivering additional premiums and new business growth
within both our catastrophe and non-catastrophe lines.
I would like to thank all our colleagues, investors, clients, and their
brokers for their support during 2021.”
Business Update
Delivering on our strategy
2021 was an exceptional year of growth with gross premiums written increasing
to a record $1.2 billion.
This delivers on our long-held strategic ambitions to maximise the
underwriting opportunity as market conditions improve and is testament to the
strong foundations that we have put in place during the past few years.
We continue to play to our strengths in those product segments where we have
built excellence over many years and are excited by the profitable
contribution that our newer product lines should bring in the longer term as
well as diversifying our portfolio mix.
As the market cycle has continued to improve, we have retained a strict focus
on underwriting discipline and deployed our capital to take advantage of new
opportunities.
Our balance sheet strength and the work we have done to enhance our franchise
during this period of improved pricing has allowed us to navigate a tough 12
months.
Building on our expertise
Lancashire has always been an ‘underwriting first’ business and this
allows us to attract talented people who value empowerment, inclusivity, and
meritocracy.
Our ongoing investment in new teams, in both underwriting and support
functions, is part of our journey to build resilience for the business across
the cycle with a clear focus on long-term profitability.
These new teams, much like our existing underwriters, are highly experienced
within their individual classes of business with proven track records. We have
talented people at Lancashire, with a strong and vibrant corporate culture,
and our new employees join what we believe is already one of the strongest
overall teams in the sector. We have also continued to promote existing talent
to more senior roles within the business in recognition of their expertise and
commitment.
COVID-19
As the COVID-19 pandemic continued during 2021, we retained our ‘business as
usual’ operations and responded through flexible and hybrid working models.
Many of our people have been impacted personally and our thoughts are with
them and everyone who has been affected. We would also like to thank those who
have worked to cope with the pandemic in our health service and more broadly.
Underwriting results
Year ended 31 December
Gross premiums written 2021 2020 Change Change RPI
$m $m $m % %
Property and casualty reinsurance 560.0 279.8 280.2 100.1 109
Property and casualty insurance 210.5 147.1 63.4 43.1 106
Aviation 176.4 151.0 25.4 16.8 108
Energy 184.8 144.7 40.1 27.7 110
Marine 93.5 91.5 2.0 2.2 109
Total 1,225.2 814.1 411.1 50.5 109
Property and casualty reinsurance
Gross premiums written in this segment have doubled since 2020, both from
increases in existing lines of business and the addition of new lines. These
classes also include reinstatement premiums received after the catastrophe
losses in the year. A significant amount of the capital raised in 2020 was
used to fund expansion in the property catastrophe and property retrocession
lines where the rating environment continued to improve in 2021.
The segment also benefited from the addition of new underwriting teams and
three new classes of business comprising accident and health, casualty
reinsurance and specialty reinsurance. In these new product lines the support
from clients and brokers enabled us to grow the premium base ahead of our
initial expectations.
Property and casualty insurance
The increase in the property and casualty insurance segment was principally
due to growth in the property direct and facultative class as we continued to
build out our book of business, again utilising the capital raised in 2020 to
support the growth. We also saw opportunities to write new business in the
property political risk class which benefited from increasing transactions
globally and opportunities in new territories. New business flow in the
political risk class of business is generally less predictable than other
classes due to the specific one-off nature of each deal.
Aviation
Our aviation segment continued to grow as market conditions improved, with an
overall RPI of 108%. The increase in this segment was mostly driven by new
business growth in the aviation hull and liability class of business and rate
and exposure increases in the aviation war class. More than half of the
increase in gross premiums written occurred during the fourth quarter which is
the major renewal period for the aviation segment and the majority of this
premium will be earned in 2022.
Energy
Significant increases in the energy segment were achieved in the power, energy
liabilities and downstream energy classes. In the power class, the Group
expanded its offering across underwriting platforms to take advantage of
improving market conditions. There was also strong new business growth in the
energy liabilities class of business, where the Group has added additional
underwriting expertise. Rate and exposure increases drove the growth in the
downstream energy class which is now well established after we commenced
underwriting this class in 2018.
Marine
In the Marine segment, new business growth was seen across all products. This
growth was largely offset by timing differences in the marine liability and
marine hull and total loss products where a number of multi-year or non-annual
policies were not yet up for renewal.
Outwards reinsurance premiums
Although the proportion of outwards reinsurance premiums to gross premiums
written decreased as we retained more risk in the hardening market, there was
an overall increase in reinsurance spend of $114.4 million, or 38.8%, in 2021
compared to 2020. This increase was due to cover purchased to protect the
new classes of inwards business that were entered into as well as
reinstatement premiums, rate increases and increased limits, particularly
within our property and casualty reinsurance segment.
Net insurance losses
The Group’s net loss ratio for 2021 was 67.6% compared to 59.6% in 2020. The
accident year loss ratio for 2021, including the impact of foreign exchange
revaluations, was 81.0% compared to 71.4% in 2020.
During 2021, we experienced net losses from significant weather and large loss
events of $306.4 million, excluding the impact of reinstatement premiums.
Within this, catastrophe losses for the full year, excluding the impact of
reinstatement premiums, were $237.6 million, including the impacts of Winter
Storm Uri, Hurricane Ida and European storms and floods, and Q4 weather events
including the Midwest tornadoes in the U.S., and the Australian storms.
Large risk losses for the year amounted to $68.8 million, and were principally
related to unrest in South Africa in July 2021.
These loss events reflect the nature of the insurance products offered by the
Group’s trading subsidiaries as part of their usual business and were within
the Group’s risk tolerances. The Group’s final ultimate losses may vary,
perhaps materially, from the current estimates.
Excluding the impact of foreign exchange revaluations, the table below shows
the impact of the current year loss events on the Group’s net loss ratio for
the year ended 31 December 2021:
Net Losses Net Loss ratio
$m %
Reported at 31 December 2021 470.5 67.6%
Absent catastrophe events - noted above 232.9 33.2%
Absent large losses - noted above 401.7 57.7%
Absent catastrophe events and large loss events 164.1 23.4%
(Note: The table does not sum to a total due to the impact of reinstatement
premium.)
In 2020 our total net catastrophe and large losses, excluding the impact of
reinstatement premiums, were $149.5 million. These included the impact of
COVID-19 related losses, hurricanes Laura and Sally, the Midwest Derecho
storm, the wildfires in California, as well as other large losses.
Excluding the impact of foreign exchange revaluations, the table below shows
the impact of prior year loss events on the Group’s net loss ratio for the
year ended 31 December 2020:
Net Losses Net Loss ratio
$m %
Reported at 31 December 2020 283.8 59.6%
Absent catastrophe events 216.8 45.5%
Absent COVID-19 losses 244.1 51.0%
Absent catastrophe and COVID-19 losses 177.1 36.9%
(Note: The table does not sum to a total due to the impact of reinstatement
premium.)
Prior year loss development
Prior year favourable development for 2021 was $86.5 million, compared to
$52.0 million of favourable development in 2020. The favourable development in
2021 was primarily driven by general IBNR releases on the 2020 accident year
across most lines of business due to a lack of reported claims. 2021 also
included favourable development on the 2017 accident year, mainly from reserve
releases on natural catastrophe loss events within the property and casualty
reinsurance segment, as well as some beneficial claims settlements from
earlier accident years. The Group’s COVID-19 related losses remained stable
during 2021.
In the prior year, the Group benefited from general IBNR releases across most
lines of business due to a lack of reported claims. There was favourable
development on the 2017 catastrophe loss events partially offset by a number
of late reported losses from the 2019 accident year, reserve deterioration on
a couple of marine claims in the 2017 and 2019 accident years, and adverse
development on the 2010 New Zealand earthquake.
The table below provides further detail of the prior years’ loss development
by class, excluding the impact of foreign exchange revaluations.
Year ended 31 December 2021 2020
$m $m
Property and casualty reinsurance 22.8 25.0
Property and casualty insurance 21.9 21.6
Aviation 12.2 3.3
Energy 24.9 17.2
Marine 4.7 (15.1)
Total 86.5 52.0
Note: Positive numbers denote favourable development.
The table below provides further detail of the prior years’ loss development
by accident year, excluding the impact of foreign exchange revaluations.
Year ended 31 December 2021 2020
$m $m
2016 accident year and prior 17.7 (0.9)
2017 accident year 18.4 20.7
2018 accident year 7.1 25.3
2019 accident year 8.8 6.9
2020 accident year 34.5 —
Total 86.5 52.0
Note: Positive numbers denote favourable development.
Investments
Net investment income, excluding realised and unrealised gains and losses, was
$23.0 million for 2021, a decrease of 20.7% compared to 2020. Total investment
return, including net investment income, net other investment income, net
realised gains and losses, impairments and net change in unrealised gains and
losses, was a gain of $1.3 million for 2021 compared to a gain of $69.1
million for 2020.
In a year of significant volatility, the investment portfolio generated a
return of 0.1%. The returns were driven primarily by unrealised losses in the
fixed maturity portfolios, given the significant increase in treasury yields,
particularly between the 2-year and 5-year treasuries. These losses were
mitigated somewhat by the majority of the risk assets which generated strong
returns, notably the bank loans, hedge funds, and the private investment
funds.
In 2020, the investment portfolio generated a strong total return of 3.9%,
with positive returns generated from all asset classes. The returns were
driven primarily by the fixed maturity portfolios, given the decline in
treasury yields and the tightening of credit spreads during the year. The
tighter spreads and stronger equity markets also drove significant returns in
the hedge fund and private debt portfolios. All other asset classes also had
positive returns on a year-to-date basis, similar to 2019.
The managed portfolio was as follows:
As at As at
31 December 2021 31 December 2020
Fixed maturity securities 78.4% 82.8%
Managed cash and cash equivalents 11.2% 8.5%
Private investment funds 4.6% 4.7%
Hedge funds 4.5% 4.0%
Index linked securities 1.3% —
Total 100.0% 100.0%
Key investment portfolio statistics for our fixed maturities and managed cash
were:
As at As at
31 December 2021 31 December 2020
Duration 1.8 years 2.0 years
Credit quality A+ A+
Book yield 1.3% 1.7%
Market yield 1.0% 0.7%
Third Party Capital Management
The total contribution from third party capital activities consisted of the
following items:
Year ended 31 December 2021 2020
$m $m
Lancashire Capital Management underwriting fees 10.6 10.0
Lancashire Capital Management profit commission 5.2 1.8
Lancashire Syndicates’ fees and profit commission 2.4 3.5
Total other income 18.2 15.3
Share of (loss) profit of associate (3.9) 10.7
Total net third party capital management income 14.3 26.0
The amount of Lancashire Capital Management profit commission recognised is
driven by the timing of loss experience, settlement of claims and collateral
release and therefore varies year on year. The share of (loss) profit of
associate reflects Lancashire’s equity interest in the Lancashire Capital
Management managed vehicle. The loss of $3.9 million in 2021 is primarily
driven by the active natural catastrophe loss environment experienced during
the first and third quarters of 2021.
Other operating expenses
Other operating expenses increased by $5.2 million compared to 2020. Higher
employment costs due to an increase in number of employees from 255 in the
prior year to 306 in the current year were more than offset by a reduction in
variable compensation given the Group’s financial performance in 2021.
Non-employment costs increased due to a number of project initiatives during
the year. The strengthening of the Sterling/U.S. dollar exchange rate in the
year also contributed to an overall increase in other operating expenses.
Capital
As at 31 December 2021, total capital available to Lancashire was
approximately $1.9 billion, comprising shareholders’ equity of $1.4 billion
and $0.5 billion of long-term debt. Tangible capital was $1.7 billion.
Leverage was 24.0% on total capital and 26.2% on total tangible capital. Total
capital and total tangible capital as at 31 December 2020 were $1.9 billion
and $1.7 billion respectively.
Long-term debt
During 2021, the Group issued $450.0 million in aggregate principal amount of
5.625% fixed-rate reset junior subordinated notes due 2041. The long-term debt
was issued in two tranches forming part of the same series of notes, with
$400.0 million issued on 18 March 2021 and $50.0 million issued on 31 March
2021. The fixed-rate interest is payable semi annually.
The majority of the net proceeds from the long-term debt issuance was used by
the Group to redeem its then-existing senior and subordinated indebtedness,
with the balance being used for general corporate purposes. Included in
financing costs of $45.8 million during 2021 were $18.7 million of one-off
costs associated with the refinancing of the long-term debt.
The new long-term debt was approved as “Tier 2 Ancillary Capital” by the
Bermuda Monetary Authority and has further improved the Group’s coverage
ratio of available statutory capital and surplus over the BMA’s enhanced
capital requirement.
Share repurchases
Pursuant to and in accordance with the general authority granted by
shareholders at Lancashire's Annual General Meeting held on 28 April 2021,
Lancashire purchased 1,000,000 of its common shares in order to satisfy a
number of future exercises of awards under its Restricted Share Scheme.
Dividends
The Lancashire Board declared the following dividends during 2021:
* A final dividend relating to 2020 of $0.10 per common share; and
* An interim dividend of $0.05 per common share.
Lancashire announces that its Board of Directors has declared a final dividend
for 2021 of $0.10 (approximately £0.07) per common share, subject to a
shareholder vote of approval at the AGM to be held on 27 April 2022, which
will result in an aggregate payment of approximately $24.2 million. On the
basis that the final dividend is approved by shareholders at the AGM, the
dividend will be paid in Pounds Sterling on 10 June 2022 (the “Dividend
Payment Date”) to shareholders of record on 13 May 2022 (the “Record
Date”) using the £ / $ spot market exchange rate at 12 noon London time on
the Record Date.
Shareholders interested in participating in the dividend reinvestment plan
(“DRIP”), or other services including international payment, are
encouraged to contact the Group’s registrars, Link Asset Services, for more
details.
Financial Information
The Audited Consolidated Financial Statements for the year ended 31 December
2021 are published on Lancashire’s website at www.lancashiregroup.com.
The 2021 Annual Report and Accounts are expected to be circulated to
shareholders’ from 7 March 2022 and will also be made available on
Lancashire’s website.
Analyst and Investor Earnings Conference Call
There will be an analyst and investor conference call on the results at 1:00pm
UK time / 9:00am Bermuda time / 8:00am EDT on Friday 11 February 2022. 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 Toll: +44 3333000804
United States Toll-Free: +1 855 85 70686
United States Toll: +1 6319131422
PIN code: 43568004#
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/scripts/Server.nxp?LASCmd=AI:4;F:QS!10100&ShowUUID=9D34AC23-0C86-4275-90F8-346BECCBE530
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. The Group
companies carry the following ratings (unchanged from 2020):
Financial Strength Rating ((1)) Financial Strength Outlook ((1)) Long Term Issuer Rating ((2))
A.M. Best A (Excellent) Stable bbb+
S&P Global Ratings A- Stable BBB
Moody’s A3 Stable Baa2
(1) Financial Strength Rating and Financial Strength Outlook apply to
Lancashire Insurance Company Limited and Lancashire Insurance Company (UK)
Limited.
(2) Long Term Issuer Rating applies to Lancashire Holdings Limited.
Lancashire Syndicates Limited benefits from Lloyd’s ratings: A.M. Best: A
(Excellent); S&P Global Ratings: A+ (Strong); and Fitch: AA- (Very Strong).
Lancashire has capital of approximately $1.9 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 (“BMA”) 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 Market Abuse
Regulation (EU) No. 596/2014 as it forms part of UK domestic law by virtue of
the European Union (Withdrawal) Act 2018, as amended, 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 11 February 2022.
Alternative Performance Measures (APMs)
As is customary in the insurance industry, the Group also utilises certain
non-GAAP measures in order to evaluate, monitor and manage the business and to
aid users’ understanding of the Group. Management believes that the APMs
included in the Financial Statements are important for understanding the
Group’s overall results of operations and may be helpful to investors and
other interested parties who may benefit from having a consistent basis for
comparison with other companies within the industry. However, these measures
may not be comparable to similarly labelled measures used by companies inside
or outside the insurance industry. In addition, the information contained
herein should not be viewed as superior to, or a substitute for, the measures
determined in accordance with the accounting principles used by the Group for
its audited consolidated financial statements or in accordance with GAAP.
In compliance with the Guidelines on APMs of the European Securities and
Markets Authority, as applied by the FCA, information on APMs which the Group
uses is described below. This information has not been audited. All amounts,
excluding share data, ratios, percentages or where otherwise stated, are in
millions of U.S. dollars.
Net loss ratio:
Ratio, in per cent, of net insurance losses to net premiums earned. This ratio
gives an indication of the amount of claims expected to be paid out per $1.00
of net premium earned in the financial year. The net loss ratio may also be
presented with net insurance losses absent catastrophe and other large losses.
31 December 2021 31 December 2020
Net insurance losses 470.5 283.8
Divided by net premiums earned 696.5 475.8
Net loss ratio 67.6% 59.6%
Net acquisition cost ratio:
Ratio, in per cent, of net insurance acquisition expenses to net premiums
earned. This ratio gives an indication of the amount expected to be paid out
to insurance brokers and other insurance intermediaries per $1.00 of net
premium earned in the financial year.
31 December 2021 31 December 2020
Net acquisition expense 157.0 115.0
Divided by net premiums earned 696.5 475.8
Net acquisition cost ratio 22.5% 24.2%
Net expense ratio:
Ratio, in per cent, of other operating expenses, excluding restricted stock
expenses, to net premiums earned. This ratio gives an indication of the amount
of operating expenses expected to be paid out per $1.00 of net premium earned
in the financial year.
31 December 2021 31 December 2020
Other operating expenses 119.6 114.4
Divided by net premiums earned 696.5 475.8
Net expense ratio 17.2% 24.0%
Combined ratio (KPI):
Ratio, in per cent, of the sum of net insurance losses, net acquisition
expenses and other operating expenses to net premiums earned. The Group aims
to price its business to ensure that the combined ratio across the cycle is
less than 100%.
31 December 2021 31 December 2020
Net loss ratio 67.6% 59.6%
Net acquisition cost ratio 22.5% 24.2%
Net expense ratio 17.2% 24.0%
Combined Ratio 107.3% 107.8%
Accident year loss ratio:
The accident year loss ratio is calculated using the accident year ultimate
liability revalued at the current balance sheet date, divided by net premiums
earned. This ratio shows the amount of claims expected to be paid out per
$1.00 of net premium earned in an accident year.
31 December 2021 31 December 2020
Net insurance losses current accident year 557.0 339.1
Net premiums earned current accident year* 687.9 474.9
Accident year loss ratio 81.0% 71.4%
*For the accident year loss ratio, net premiums earned excludes inwards and
outwards reinstatement premium from prior accident years.
Fully converted book value per share (‘FCBVS’) attributable to the Group:
Calculated based on the value of the total shareholders’ equity attributable
to the Group and dilutive restricted stock units as calculated under the
treasury method, divided by the sum of all shares and dilutive restricted
stock units, assuming all are exercised. Shows the Group net asset value on a
diluted per share basis for comparison to the market value per share.
31 December 2021 31 December 2020
Shareholders’ equity attributable to the Group 1,412,308,553 1,538,466,664
Common voting shares outstanding* 241,839,109 241,811,908
Shares relating to dilutive restricted stock 2,805,365 3,333,356
Fully converted book value denominator 244,644,474 245,145,264
Fully converted book value per share $ 5.77 $ 6.28
*Common voting shares outstanding comprise issued share capital less amounts
held in the Employee Benefit Trust.
Change in FCBVS (KPI):
The internal rate of return of the change in FCBVS in the period plus accrued
dividends. Sometimes referred to as ROE. The Group’s aim is to maximise
risk-adjusted returns for shareholders across the cycle through a purposeful
and sustainable business culture.
31 December 2021 31 December 2020
Opening FCBVS $ (6.28) $ (5.84)
Q1 dividend per share $ — $ —
Q2 dividend per share $ 0.10 $ 0.10
Q3 dividend per share $ 0.05 $ 0.05
Q4 dividend per share + closing FCBVS $ 5.77 $ 6.28
Change in FCBVS* (5.8%) 10.2%
*Calculated using the internal rate of return.
Total investment return (KPI):
Total investment return in percentage terms, is calculated by dividing the
total investment return excluding foreign exchange by the investment portfolio
net asset value, including managed cash on a daily basis. These daily returns
are then annualized through geometric linking of daily returns. The return
can be approximated by dividing the total investment return excluding foreign
exchange by the average portfolio net asset value, including managed cash. The
Group’s primary investment objectives are to preserve capital and provide
adequate liquidity to support the Group’s payment of claims and other
obligations. Within this framework we aim for a degree of investment portfolio
return.
31 December 2021 31 December 2020
Total investment return 1.3 69.1
Average invested assets* 2,167.5 1,873.9
Approximate total investment return 0.1% 3.7%
Reported total investment return 0.1% 3.9%
*Calculated as the average between the opening and closing investments and our
externally managed cash.
Total shareholder return (KPI):
The increase/(decrease) in share price in the period, measured on a total
return basis, which assumes the reinvestment of dividends. The Group’s aim
is to maximise the Change in FCBVS over the longer term and we would expect
that to be reflected in our share price and multiple. This is a long-term
goal, recognising that the cyclicality and volatility of both the insurance
market and the financial markets in general will impact management’s ability
to maximise the Change in FCBVS in the immediate term. The total return
measurement basis used will generally approximate the simple method of
calculating the increase/(decrease) in share price adjusted for dividends as
recalculated below.
31 December 2021 31 December 2020
Opening share price $ 9.88 $ (10.17)
Q1 dividend per share $ — $ —
Q2 dividend per share $ 0.10 $ 0.10
Q3 dividend per share $ 0.05 $ 0.05
Q4 dividend per share + closing share price $ 7.17 $ 9.88
Total shareholder return (25.8%) (1.4%)
Comprehensive income returned to shareholders (KPI):
The percentage of comprehensive income returned to shareholders equals the
total capital returned to shareholders through dividends and share repurchases
in a given year, divided by the Group’s comprehensive income. The Group aims
to carry the right level of capital to match attractive underwriting
opportunities, utilising an optimal mix of capital tools. Over time, through
proactive and flexible capital management across the cycle, we aim to maximise
risk-adjusted returns for shareholders.
31 December 2021 31 December 2020
Capital returned 43.3 32.3
Comprehensive (loss) income attributable to the Group (92.9) 24.3
Comprehensive income return to shareholders n/a* 132.9%
*The % comprehensive income returned to shareholders is n/a when reporting a
comprehensive loss for the period.
Gross premiums written under management (KPI):
The gross premiums written under management equals the total of the Group’s
consolidated gross premiums written plus the external names portion of the
gross premiums written in LSL Syndicate 2010 plus the gross premiums written
in LCM. The Group aims to operate nimbly through the cycle. We will grow in
existing and new classes where favourable and improving market conditions
exist, whilst monitoring and managing our risk exposures and not seek top-line
growth for the sake of it in markets where we do not believe the right
opportunities exist.
31 December 2021 31 December 2020
Gross premiums written by the group 1,225.2 814.1
LSL Syndicate 2010 - external Names portion of gross premiums written (unconsolidated) 142.3 126.6
LCM gross premiums written (unconsolidated) 135.9 126.4
Total gross premiums written under management 1,503.4 1,067.1
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 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”, “ANTICIPATES”, “AIMS”,
“PLANS”, “PROJECTS”, “FORECASTS”, “GUIDANCE”, “INTENDS”,
“EXPECTS”, “ESTIMATES”, “PREDICTS”, “MAY”, “CAN”,
“LIKELY”, “WILL”, “SEEKS”, “SHOULD”, OR, IN EACH CASE, THEIR
NEGATIVE OR COMPARABLE TERMINOLOGY. ALL SUCH STATEMENTS OTHER THAN STATEMENTS
OF HISTORICAL FACTS INCLUDING, WITHOUT LIMITATION, THE FINANCIAL POSITION OF
THE COMPANY AND ITS SUBSIDIARIES (THE “GROUP”), THE GROUP’S TAX
RESIDENCY, LIQUIDITY, RESULTS OF OPERATIONS, PROSPECTS, GROWTH, CAPITAL
MANAGEMENT PLANS AND EFFICIENCIES, ABILITY TO CREATE VALUE, DIVIDEND POLICY,
OPERATIONAL FLEXIBILITY, COMPOSITION OF MANAGEMENT, BUSINESS STRATEGY, PLANS
AND OBJECTIVES OF MANAGEMENT FOR FUTURE OPERATIONS (INCLUDING DEVELOPMENT
PLANS AND OBJECTIVES RELATING TO THE GROUP’S INSURANCE BUSINESS) ARE
FORWARD-LOOKING STATEMENTS. 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.
THESE FACTORS INCLUDE, BUT ARE NOT LIMITED TO: THE ACTUAL DEVELOPMENT OF
LOSSES AND EXPENSES IMPACTING ESTIMATES FOR CLAIMS WHICH ARISE AS A RESULT OF
THE COVID-19 PANDEMIC WHICH IS AN ONGOING EVENT AS AT THE DATE OF THIS
RELEASE, THE KENTUCKY TORNADOES, HURRICANE IDA AND THE EUROPEAN STORMS WHICH
OCCURRED IN THE SECOND HALF OF 2021, WINTER STORM URI WHICH OCCURRED DURING
THE FIRST QUARTER OF 2021, HURRICANES LAURA AND SALLY, MIDWEST DERECHO STORM
AND THE WILDFIRES IN CALIFORNIA WHICH OCCURRED DURING THE SECOND HALF OF 2020,
TYPHOON HAGIBIS WHICH OCCURRED IN THE FOURTH QUARTER OF 2019, HURRICANE DORIAN
AND TYPHOON FAXAI WHICH OCCURRED IN THE THIRD QUARTER OF 2019, THE CALIFORNIAN
WILDFIRES AND HURRICANE MICHAEL WHICH OCCURRED IN THE FOURTH QUARTER OF 2018,
HURRICANE FLORENCE AND THE TYPHOONS THAT OCCURRED IN THE THIRD QUARTER OF
2018; THE IMPACT OF COMPLEX AND UNIQUE CAUSATION AND COVERAGE ISSUES
ASSOCIATED WITH ATTRIBUTION OF LOSSES TO WIND OR FLOOD DAMAGE OR OTHER PERILS
SUCH AS FIRE OR BUSINESS INTERRUPTION RELATING TO SUCH EVENTS; POTENTIAL
UNCERTAINTIES RELATING TO REINSURANCE RECOVERIES, REINSTATEMENT PREMIUMS AND
OTHER FACTORS INHERENT IN LOSS ESTIMATIONS; THE GROUP’S ABILITY TO INTEGRATE
ITS BUSINESSES AND PERSONNEL; THE SUCCESSFUL RETENTION AND MOTIVATION OF THE
GROUP’S KEY MANAGEMENT; THE INCREASED REGULATORY BURDEN FACING THE GROUP;
THE NUMBER AND TYPE OF INSURANCE AND REINSURANCE CONTRACTS THAT THE GROUP
WRITES OR MAY WRITE; THE GROUP’S ABILITY TO IMPLEMENT SUCCESSFULLY ITS
BUSINESS STRATEGY DURING ‘SOFT’ AS WELL AS ‘HARD’ MARKETS; THE PREMIUM
RATES WHICH MAY BE AVAILABLE AT THE TIME OF SUCH RENEWALS WITHIN THE GROUP’S
TARGETED BUSINESS LINES; THE POSSIBLE LOW FREQUENCY OF LARGE EVENTS;
POTENTIALLY UNUSUAL LOSS FREQUENCY; THE IMPACT THAT THE GROUP’S FUTURE
OPERATING RESULTS, CAPITAL POSITION AND RATING AGENCY AND OTHER CONSIDERATIONS
MAY HAVE ON THE EXECUTION OF ANY CAPITAL MANAGEMENT INITIATIVES OR DIVIDENDS;
THE POSSIBILITY OF GREATER FREQUENCY OR SEVERITY OF CLAIMS AND LOSS ACTIVITY
THAN THE GROUP’S UNDERWRITING, RESERVING OR INVESTMENT PRACTICES HAVE
ANTICIPATED; THE RELIABILITY OF, AND CHANGES IN ASSUMPTIONS TO, CATASTROPHE
PRICING, ACCUMULATION AND ESTIMATED LOSS MODELS; INCREASED COMPETITION FROM
EXISTING ALTERNATIVE CAPITAL PROVIDERS, INSURANCE LINKED FUNDS AND
COLLATERALISED SPECIAL PURPOSE INSURERS, AND THE RELATED DEMAND AND SUPPLY
DYNAMICS AS CONTRACTS COME UP FOR RENEWAL; THE EFFECTIVENESS OF THE GROUP’S
LOSS LIMITATION METHODS; THE POTENTIAL LOSS OF KEY PERSONNEL; A DECLINE IN THE
GROUP’S OPERATING SUBSIDIARIES’ RATINGS WITH A.M. BEST, S&P GLOBAL
RATINGS, MOODY’S OR OTHER RATING AGENCIES; INCREASED COMPETITION ON THE
BASIS OF PRICING, CAPACITY, COVERAGE TERMS OR OTHER FACTORS; CYCLICAL
DOWNTURNS OF THE INDUSTRY; THE IMPACT OF A DETERIORATING CREDIT ENVIRONMENT
FOR ISSUERS OF FIXED MATURITY INVESTMENTS; THE IMPACT OF SWINGS IN MARKET
INTEREST RATES, CURRENCY EXCHANGE RATES AND SECURITIES PRICES; CHANGES BY
CENTRAL BANKS REGARDING THE LEVEL OF INTEREST RATES AND THE TIMING AND EXTENT
OF ANY SUCH CHANGES; THE IMPACT OF INFLATION OR DEFLATION IN RELEVANT
ECONOMIES IN WHICH THE GROUP OPERATES; THE EFFECT, TIMING AND OTHER
UNCERTAINTIES SURROUNDING FUTURE BUSINESS COMBINATIONS WITHIN THE INSURANCE
AND REINSURANCE INDUSTRIES; THE IMPACT OF TERRORIST ACTIVITY IN THE COUNTRIES
IN WHICH THE GROUP WRITES RISKS; A RATING DOWNGRADE OF, OR A MARKET DECLINE
IN, SECURITIES IN THE GROUP’S INVESTMENT PORTFOLIO; CHANGES IN GOVERNMENTAL
REGULATIONS OR TAX LAWS IN JURISDICTIONS WHERE THE GROUP CONDUCTS BUSINESS;
LANCASHIRE HOLDINGS LIMITED OR ANY OF THE GROUP’S BERMUDIAN SUBSIDIARIES
BECOMING SUBJECT TO INCOME TAXES IN THE UNITED STATES OR IN THE UNITED
KINGDOM; THE IMPACT OF THE CHANGE IN TAX RESIDENCE ON STAKEHOLDERS OF THE
COMPANY; THE IMPACT OF THE EXPIRATION OF THE TRANSITION PERIOD ON 31 DECEMBER
2020 FOLLOWING THE UK’S WITHDRAWAL FROM THE EUROPEAN UNION ON THE GROUP’S
BUSINESS, REGULATORY RELATIONSHIPS, UNDERWRITING PLATFORMS OR THE INDUSTRY
GENERALLY; THE FOCUS AND SCRUTINY ON ESG-RELATED MATTERS REGARDING THE
INSURANCE INDUSTRY FROM KEY STAKEHOLDERS OF THE GROUP; AND ANY ADVERSE ASSET,
CREDIT, FINANCING OR DEBT CAPITAL MARKET CONDITIONS GENERALLY, WHICH MAY
AFFECT THE ABILITY OF THE GROUP TO MANAGE ITS LIQUIDITY.
ALL FORWARD-LOOKING STATEMENTS IN THIS RELEASE SPEAK ONLY AS AT THE DATE OF
PUBLICATION. LANCASHIRE HOLDINGS LIMITED 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 WHICH
COULD CAUSE ACTUAL RESULTS TO DIFFER BEFORE MAKING AN INVESTMENT DECISION.
Consolidated statement of comprehensive (loss) income
For the year ended 31 December 2021
2021 2020
$m $m
Gross premiums written 1,225.2 814.1
Outwards reinsurance premiums (409.1) (294.7)
Net premiums written 816.1 519.4
Change in unearned premiums (140.0) (51.5)
Change in unearned premiums on premiums ceded 20.4 7.9
Net premiums earned 696.5 475.8
Net investment income 23.0 29.0
Net other investment income 3.8 6.5
Net realised gains (losses) and impairments 6.1 12.8
Share of (loss) profit of associate (3.9) 10.7
Other income 18.2 15.3
Net foreign exchange gains 3.5 1.4
Total net revenue 747.2 551.5
Insurance losses and loss adjustment expenses 667.6 363.6
Insurance losses and loss adjustment expenses recoverable (197.1) (79.8)
Net insurance acquisition expenses 157.0 115.0
Equity based compensation 11.1 12.3
Other operating expenses 119.6 114.4
Total expenses 758.2 525.5
Results of operating activities (11.0) 26.0
Financing costs 45.8 20.1
(Loss) profit before tax (56.8) 5.9
Tax charge (4.8) (1.4)
(Loss) profit after tax (61.6) 4.5
Non-controlling interests (0.6) (0.3)
(Loss) profit after tax attributable to Lancashire (62.2) 4.2
Net change in unrealised gains/losses on investments (31.6) 20.8
Tax credit (charge) on net change in unrealised gains/losses on investments 0.9 (0.7)
Other comprehensive (loss) income (30.7) 20.1
Total comprehensive (loss) income attributable to Lancashire (92.9) 24.3
Net loss ratio 67.6% 59.6%
Net acquisition cost ratio 22.5% 24.2%
Administrative expense ratio 17.2% 24.0%
Combined ratio 107.3% 107.8%
Consolidated balance sheet
As at 31 December 2021
2021 2020
$m $m
Assets
Cash and cash equivalents 517.7 432.4
Accrued interest receivable 7.1 8.0
Investments 2,048.1 1,856.0
Inwards premiums receivable from insureds and cedants 490.6 371.9
Reinsurance assets
- Unearned premiums on premiums ceded 117.8 97.4
- Reinsurance recoveries 418.8 338.7
- Other receivables 38.2 31.1
Other receivables 18.8 27.3
Investment in associate 118.7 127.2
Property, plant and equipment 0.8 0.7
Right-of-use asset 13.4 16.1
Deferred acquisition costs 121.6 89.0
Intangible assets 157.9 154.5
Total assets 4,069.5 3,550.3
Liabilities
Insurance contracts
- Losses and loss adjustment expenses 1,291.1 952.8
- Unearned premiums 597.9 457.9
- Other payables 20.3 22.5
Amounts payable to reinsurers 205.6 151.7
Deferred acquisition costs ceded 27.0 19.6
Other payables 37.4 46.1
Corporation tax payable 1.6 1.5
Deferred tax liability 12.2 10.9
Lease liability 17.9 20.9
Long-term debt 445.7 327.5
Total liabilities 2,656.7 2,011.4
Shareholders’ equity
Share capital 122.0 122.0
Own shares (18.1) (21.2)
Other reserves 1,221.6 1,221.6
Accumulated other comprehensive income 2.9 33.6
Retained earnings 83.9 182.5
Total shareholders’ equity attributable to equity shareholders of Lancashire 1,412.3 1,538.5
Non-controlling interest 0.5 0.4
Total shareholders’ equity 1,412.8 1,538.9
Total liabilities and shareholders’ equity 4,069.5 3,550.3
Consolidated statement of cash flows
For the year ended 31 December 2021
2021 2020
$m $m
Cash flows from operating activities
(Loss) profit before tax (56.8) 5.9
Adjustments for:
Tax paid (3.2) (1.6)
Depreciation 3.3 3.3
Interest expense on long-term debt 25.8 15.7
Interest expense on lease liabilities 1.1 1.3
Interest income (34.1) (36.9)
Net amortisation of fixed maturity securities 7.0 4.9
Redemption cost on senior and subordinated loan notes 12.8 —
Net realised / unrealised losses (gains) on interest rate swaps 3.4 (1.1)
Equity based compensation 11.1 12.3
Foreign exchange gains (0.4) (3.2)
Share of loss (profit) of associate 3.9 (10.7)
Net other investment income (4.7) (7.4)
Net realised (gains) losses and impairments (6.1) (12.8)
Changes in operational assets and liabilities
- Insurance and reinsurance contracts 285.6 84.5
- Other assets and liabilities (4.9) 26.7
Net cash flows from operating activities 243.8 80.9
Cash flows used in investing activities
Interest received 42.7 39.9
Purchase of property, plant and equipment (0.7) —
Purchase of underwriting capacity (0.2) —
Internally generated intangible asset (3.2) —
Investment in associate 4.6 (8.2)
Purchase of investments (1,348.5) (1,129.7)
Proceeds on sale of investments 1,118.5 837.9
Net cash flows used in investing activities (186.8) (260.1)
Cash flows from financing activities
Interest paid (20.8) (15.9)
Interest rate swap (3.4) —
Lease liabilities paid (4.0) (3.5)
Proceeds from issuance of common shares — 340.3
Proceeds from issue of long-term debt 445.4 —
Redemption of long-term debt (339.6) —
Dividends paid (36.4) (32.3)
Dividends paid to minority interest holders (0.5) (0.5)
Share repurchases (6.9) —
Distributions by trust (1.0) (0.8)
Net cash flows from financing activities 32.8 287.3
Net increase in cash and cash equivalents 89.8 108.1
Cash and cash equivalents at the beginning of year 432.4 320.4
Effect of exchange rate fluctuations on cash and cash equivalents (4.5) 3.9
Cash and cash equivalents at end of period 517.7 432.4
Copyright (c) 2022 PR Newswire Association,LLC. All Rights ReservedRecent news on Lancashire Holdings
See all newsREG-Lancashire Holdings Ltd: Executive Director Appointment
AnnouncementREG-Lancashire Holdings Ltd: Appointment of Chair
AnnouncementREG-Lancashire Holdings Ltd: Result of AGM
AnnouncementREG-Lancashire Holdings Ltd: Q1 Trading Statement
AnnouncementREG-Lancashire Holdings Ltd: Notice of AGM
Announcement