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.