REG-Lancashire Holdings Ltd: Q3 Trading Statement

Lancashire HoldingsAnnouncement

09/11/2023 07:15

LANCASHIRE HOLDINGS LIMITED

9 November 2023

Hamilton, Bermuda

Lancashire Holdings Limited (“Lancashire” or “the Group”) today
announces its trading statement for the nine  months ended 30 September 2023.

Trading statement highlights
* Gross premiums written increased by 23.2% year-on-year to $1.6 billion. 
* IFRS 17 insurance revenue increased by 22.1% year-on-year to $1.1 billion.
* Group Renewal Price Index (RPI) of 117%.
* Total net investment return, including unrealised gains and losses, of 2.8%.
* Capital return of up to $169 million ($119 million in special dividend and
up to $50 million in buy-backs of Lancashire’s Common Shares) following
strong operating performance year-to-date.

Alex Maloney, Group Chief Executive Officer, commented:

“During the first nine months of 2023, we have continued to successfully
implement our long-term strategy to manage the market cycle and deliver strong
profitable growth through a portfolio of diversified products.

Gross premiums written increased by 23.2% to $1.6 billion in the year to date,
with rates remaining extremely attractive across our product lines. We
continue to expect a positive environment into 2024, with further
opportunities for Lancashire.

Our investment returns have also continued to benefit from the higher interest
rate environment and the short duration of our portfolio, with a total net
investment return, including unrealised gains and losses, of 2.8% for the
period.

Capital management and balancing risk and return have for a long time been at
the heart of our strategy, and we continue to hold an extremely robust capital
position.

Our disciplined underwriting, and successful diversification strategy, mean
that we are in a position to pay out some of the capital generated to date,
and still have the flexibility to fund further growth and realise our
ambitions for this phase of the market cycle.

Following the strong operating performance in the year-to-date, I am pleased
to report that the Board has approved a capital return of up to $169 million,
including $119 million in special dividend and up to $50 million in buy-backs.

Our previously announced plans to expand our international footprint further
through Lancashire Insurance U.S. continue, and we are pleased with the
progress we are making towards an underwriting launch in early 2024.

I am always impressed by the talent, hard work and dedication of our people
across the Lancashire Group and I would like to thank them for their ongoing
commitment to the business.

I would also like to thank our clients, brokers and shareholders for their
continued support.”


Business update

Gross premiums written and IFRS 17 insurance revenue

                            Nine months ended                                                                                                               
                            30 September 2023                   30 September 2022                   Change                                 Change  RPI      
                            $m                                  $m                                  $m                                     %       %        
 Reinsurance                               837.7                               702.9                               134.8                   19.2 %  123  %   
 Insurance                                 722.2                               562.8                               159.4                   28.3 %  112  %   
 Gross premiums written                 1,559.9                             1,265.7                                294.2                   23.2 %  117 %    
                                                                                                                                                            
 Reinsurance                               521.7                               417.6                               104.1                   24.9 %           
 Insurance                                 589.5                               492.7                                 96.8                  19.6 %           
 IFRS 17 insurance revenue              1,111.2                                910.3                               200.9                   22.1 %           

Gross premiums written

Gross premiums written increased by $294.2 million or 23.2% in the first nine
months of 2023 compared to the same period in 2022. The Group’s two
segments, and the key market factors impacting them, are discussed below. 

Reinsurance segment
 

The build out of our casualty reinsurance lines continued to be the most
significant contributor to growth in the reinsurance segment. Our specialty
reinsurance class also continued to add new business in a positive rating
environment, with the property reinsurance class also benefiting from
significant rate increases. Overall the RPI was 123% for the segment.

Insurance segment
 

The growth in the insurance segment is primarily driven by property insurance,
with significant rate increases in the property direct and facultative class
and the continued build out of the property construction book of business. In
specialty insurance more premium was written in the political risk class, and
energy and marine continued to grow across our underwriting platforms taking
advantage of positive market conditions across most classes. Aviation
insurance benefited from exceptionally strong RPIs, albeit the major renewal
period is in the fourth quarter. Overall the RPI was 112% for the segment.

IFRS 17 insurance revenue

Insurance revenue is a new measure introduced by IFRS 17 and is comparable to
IFRS 4 gross premiums earned less inwards reinstatement premium and is net of
commission costs. Insurance revenue increased by $200.9 million or 22.1%, in
the first nine months of 2023 compared to the same period in 2022. The market
factors driving the increase in gross premiums written also drove the increase
in insurance revenue.


Loss environment

The first nine months of 2023 has seen natural catastrophe loss activity
across a number of events including U.S. wind and convective storms, the
Hawaiian wildfires, the Turkey earthquake, hurricane Idalia, and cyclones and
flooding in New Zealand. We also incurred some risk losses, particularly in
our energy classes. These losses were not individually material.


Investments
 

 As at                     30 September 2023  30 September 2022  
 Duration                  1.6 years          1.7 years          
 Credit quality            AA-                AA-                
 Book yield                3.9%               2.3%               
 Market yield              5.8%               4.6%               
 Managed investments ($m)  $2,661.4           $2,291.9           

The Group’s investment portfolio, including unrealised gains and losses,
returned 2.8% for the first nine months of 2023. The positive returns were
driven by $79.6 million of investment income as our portfolio benefited from
higher yields.

The Group’s investment portfolio, including unrealised gains and losses,
returned negative 5.0% for the first nine months of 2022. The majority of the
losses were driven by significant increases in treasury rates.


Dividends

Lancashire’s Board of Directors has declared a special dividend of $0.50 per
common share (approximately £0.41 per common share at the current exchange
rate), which will result in an aggregate payment of approximately $119
million. The dividend will be paid in Pounds Sterling on 15 December 2023 (the
“Dividend Payment Date”) to shareholders of record on 17 November 2023
(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.

Intention to purchase own shares

At Lancashire’s Annual General Meeting held on 26 April 2023, Lancashire’s
shareholders granted a general authority for Lancashire to make market
purchases of up to 24,401,000 of its own common shares of $0.50 each

(“Common Shares”). Pursuant to and in accordance with that authority,
Lancashire intends to purchase its own Common Shares within certain parameters
at an aggregate price not exceeding $50 million. 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 Bermuda time / 8:00am EST on Thursday 9 November
2023. 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.

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://register.vevent.com/register/BIff9dde6ecbf3496ebfbe9f58cb884ec5                 
                  Please register to obtain your personal audio conference pin and call details.          
                                                                                                          
 Webcast access:  https://onlinexperiences.com/Launch/QReg/ShowUUID=4FB61DDF-AA7E-4605-B287-CAAD2798E2CE  
                  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


Investor Day 2023

Lancashire will be holding an Investor Day on 14 November 2023 at 20 Fenchurch
Street, London. For further information please contact
jelena.bjelanovic@lancashiregroup.com.

Contact information  

 Lancashire Holdings Limited                                                         
 Christopher Head             +44 20 7264 4145chris.head@lancashiregroup.com         
 Jelena Bjelanovic            +44 20 7264 4066jelena.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 GMT on 9 November 2023.


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 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 2022 AND THE GROUP’S UNAUDITED
CONDENSED INTERIM CONSOLIDATED FINANCIAL

STATEMENTS FOR THE SIX MONTHS ENDING 30 JUNE 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 2022 AND THE GROUP’S UNAUDITED CONDENSED INTERIM
CONSOLIDATED FINANCIAL

STATEMENTS FOR THE SIX MONTHS ENDING 30 JUNE 2023. IN ADDITION TO THOSE
FACTORS CONTAINED IN THE GROUP’S 2022 ANNUAL REPORT AND ACCOUNTS AND THE
GROUP’S UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS FOR
THE SIX MONTHS ENDING 30 JUNE 2023, ANY FORWARD-LOOKING STATEMENTS CONTAINED
IN THIS RELEASE MAY BE AFFECTED BY: THE IMPACT OF THE ONGOING CONFLICTS IN
UKRAINE AND THE MIDDLE EAST, INCLUDING ANY ESCALATION OR EXPANSION THEREOF, ON
THE GROUP’S BUSINESS, RESERVES OR CLIENTS, THE CONTINUED UNCERTAINTY OF THE
SITUATION IN RUSSIA, INCLUDING ISSUES RELATING TO POLICY COVERAGE AND THE
IMPACT OF GOVERNMENT SANCTIONS, THE IMPACT ON SECURITIES IN OUR INVESTMENT
PORTFOLIO AND ON GLOBAL FINANCIAL MARKETS GENERALLY, AS WELL AS ANY
GOVERNMENTAL OR REGULATORY CHANGES, ARISING THEREFROM; THE NUMBER AND TYPE OF
INSURANCE AND REINSURANCE CONTRACTS THAT THE GROUP WRITES OR MAY WRITE; THE
GROUP’S ABILITY TO SUCCESSFULLY IMPLEMENT ITS BUSINESS STRATEGY DURING
‘SOFT’ AS WELL AS ‘HARD’ MARKETS; THE CONTINUATION OF INCREASED
PREMIUM RATES THAT ARE AVAILABLE AT POLICY INCEPTION FOR LINES WITHIN ITS
TARGETED BUSINESS; INCREASED COMPETITION ON THE BASIS OF PRICING, CAPACITY,
COVERAGE TERMS OR RELATED  FACTORS; AND CYCLICAL DOWNTURNS OF THE INDUSTRY.
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 AND THE UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL
STATEMENTS NOTED ABOVE WHICH COULD CAUSE ACTUAL RESULTS TO DIFFER BEFORE
MAKING AN INVESTMENT DECISION.



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