Lancashire Hld Ltd Q3 Trading Statement
November 03 2022 - 2:00AM
UK Regulatory
TIDMLRE
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 30 September Change Change RPI
2022 2021
$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.htm l
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.
END
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