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.