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Lancashire Holdings Limited LSE:LRE London Ordinary Share BMG5361W1047 COM SHS USD0.50
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  21.00 3.2% 678.00 677.00 678.00 680.00 654.50 670.00 318,363 16:35:13
Industry Sector Turnover (m) Profit (m) EPS - Basic PE Ratio Market Cap (m)
Nonlife Insurance 403.4 4.3 1.5 469.1 1,654

Lancashire Hld Ltd Final Results

10/02/2021 7:00am

UK Regulatory (RNS & others)


 
TIDMLRE 
 
LANCASHIRE HOLDINGS LIMITED 
 
                               10 February 2021 
 
                               Hamilton, Bermuda 
 
Lancashire Holdings Limited ("Lancashire" or "the Group") announces its results 
for the year ended 31 December 2020. 
 
Highlights: 
 
  * Gross premiums written increased by 15.2% year on year to $814.1 million. 
  * Group RPI (Renewal Price Index) of 112% for the year. 
  * Combined ratio of 107.8%, including the impact of COVID-19. 
  * Year to date total investment return, including unrealised gains and 
    losses, of 3.9%. 
  * Final dividend of $0.10 per common share. 
 
                                                         Year ended 
 
                                              31 December 2020  31 December 2019 
 
Financial highlights ($m) 
 
Gross premiums written                                814.1             706.7 
 
Net premiums written                                  519.4             424.7 
 
Underwriting profit                                    77.0             186.5 
 
Profit before tax                                       5.9             119.5 
 
Comprehensive income1                                  24.3             145.7 
 
Change in FCBVS2                                       10.2  %           14.1  % 
 
Financial ratios 
 
Total investment return                                 3.9  %            4.9  % 
 
Net loss ratio                                         59.6  %           30.8  % 
 
Combined ratio                                        107.8  %           80.9  % 
 
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. 
 
Alex Maloney, Group Chief Executive Officer, commented: 
 
"The whole world faced a uniquely challenging year in 2020. Our first thoughts 
go to those whose lives have been impacted by personal tragedy and hardship. 
Similarly, our thanks go to all those who in their work and conduct are helping 
to defeat the current threat of the COVID-19 pandemic. 
 
This last year has demonstrated the value of our strategic planning in 
preparing for challenges and opportunities, both expected and unexpected. In 
the face of these challenges I am pleased to report that the Group's Change in 
FCBVS (formerly termed Return on Equity or RoE1) was 10.2% for the full year. 
As we entered 2020 I believed that we were then in the early stages of a 
necessary market correction. Since then the COVID-19 pandemic has generated a 
level of dislocation and uncertainty in the global economy and markets which 
has demonstrably accelerated a pronounced re-rating and improvement in the 
pricing of many of the (re)insurance products which we sell. In these times of 
heightened uncertainty, insurance has retained its value as an important risk 
management tool which remains central in the strategic planning of many of our 
clients. 
 
The strengthening in market pricing is illustrated by our cross class RPI of 
112% for the year. 
 
1Refer to Alternative Performance Measures (APMs) section below. 
 
We have also achieved a year on year increase in our gross premiums written 
under management which was $1,067.1 million in 2020, compared to $934.8 million 
in 2019. 
 
We have used the improving market not only to grow our premium income but also 
to build up our expertise. Across our business we have been active during 2020 
in recruiting new employees both to our underwriting teams and within the wider 
business. As we enter 2021 we have added to our underwriting  portfolio a 
casualty reinsurance book of business underwritten from our Bermuda office, 
which we intend to build out cautiously over the coming years. 
 
The COVID-19 pandemic has impacted the whole insurance industry as a loss 
event. Whilst it is too early to comment on total global insured losses from 
this event, I am pleased that Lancashire's approach to reserving for COVID-19 
losses has remained consistent throughout the year, albeit uncertainty still 
remains as this is an ongoing event. As a business we have generally avoided 
those retail and SME classes which have been most heavily impacted. Lancashire 
does not write the following lines of business: travel insurance; trade credit; 
and long-term life and prior to the COVID-19 pandemic did not write Directors' 
and Officers' liability or medical malpractice. The Group underwrites a small 
number of event cancellation contracts and has minimal exposure through 
mortgage, accident and health business. We also witnessed windstorm losses in 
the second half of the year and an unusually high level of frequency in 
non-natural catastrophe specialty losses throughout the year. Although these 
events were within our board-approved tolerances, a combination of these 
factors has meant that our underwriting returns have been stressed, resulting 
in a combined ratio of 107.8% for the year. 
 
Our conservative investment philosophy has again served us well for the year, 
and after initial volatility in the first quarter, it was pleasing to see the 
investment portfolio recover and ultimately contribute to our profitability for 
the full year. The growth in shareholder equity achieved during the year was 
helped by the strong support from our shareholders for the equity placing which 
we conducted in June 2020. We are beginning to take advantage of the improving 
market conditions and there was evidence of further strengthening over the 
January renewal season. 
 
As we pass the end of another year, I would like to thank all our staff, our 
shareholders, clients and their brokers for their continuing support for our 
business. We understand that the challenges of the current pandemic are 
ongoing. But it is with some optimism that we enter 2021 with the right 
skill-set and capital base to enable us  to trade in a market which is 
materially improved from the soft market of recent years." 
 
Natalie Kershaw, Group Chief Financial Officer, commented: 
 
"We are pleased to have navigated 2020 relatively unscathed given the number of 
catastrophe and risk losses incurred in addition to the financial impacts of 
COVID-19. In such a difficult year we consider making an overall profit after 
tax of $4.2 million and comprehensive income of $24.3 million a very positive 
result. Our investment portfolio contributed significantly to our 
profitability, generating returns of 3.9% for the year. 
 
Our capital position coming into 2020 was strong and sufficient to fund the 
15.2% gross written premium growth during the year. Our outlook for 2021 is one 
of further rate hardening and we expect to utilise the $340.3 million of 
capital raised in our equity placing in June 2020 to fund further growth in our 
business during 2021. In line with our stated dividend policy we are declaring 
our standard final ordinary dividend of $0.10 per share. 
 
The Group also retained its strong operational resilience in 2020 as we 
transitioned from a world in which remote working was not the business norm, to 
one where we have all become adept at virtual forms of communication." 
 
Underwriting results 
 
                                               Year ended 31 December 
 
Gross premiums written                 2020     2019   Change    Change       RPI 
 
                                         $m       $m       $m         %         % 
 
Property                            426.9    382.1     44.8     11.7       108 
 
Aviation                            151.0    119.6     31.4     26.3       121 
 
Energy                              144.7    128.1     16.6     13.0       113 
 
Marine                               91.5     76.9     14.6     19.0       116 
 
Total                               814.1    706.7    107.4     15.2       112 
 
Gross premiums written increased by 15.2% in 2020 compared to 2019. The Group's 
four principal segments, and the key market factors impacting them, are 
discussed below. 
 
Within the property segment, our (re)insurance lines contain a high degree of 
catastrophe risk and as such have seen pricing dislocation during 2020 leading 
to a property segment RPI of 108% for the year. As well as these rating trends 
in renewal business, we have seen an increase in new business flows, in 
particular within the property catastrophe class and the property direct and 
facultative classes. These positive trends were marginally offset by the 
property political risk and property terrorism classes, a good portion of which 
are, by their nature, non-renewing. 
 
Our aviation segment has been building steadily in the past few years, growing 
our product offering as market conditions improve. The increase in aviation 
gross premiums written in 2020 was primarily due to new business and rate 
increases in the aviation deductible and the aviation hull and liability 
classes of business with strong support from the aviation reinsurance class. 
 
Our energy portfolio continued to evolve during 2020. The increase in energy 
gross premiums written was primarily focused in the power and downstream energy 
classes where both rate increases and new business led to the premiums almost 
doubling relative to 2019. Upstream energy remained broadly stable, as modest 
rate increases were offset by small reductions in exposures. 
 
Marine pricing has been rising, due to capacity withdrawals over a number of 
years, demonstrated by our RPI of 116% during 2020. The increase in marine 
gross premiums written was primarily due to new business growth in the marine 
cargo and the marine hull classes of business supported by rate and exposure 
increases across all lines of business. The marine segment also benefited from 
the favourable timing impact of multi-year policies renewing in 2020 compared 
to 2019. 
 
                                    ******* 
 
Ceded reinsurance premiums increased by $12.7 million, or 4.5%, in 2020 
compared to in 2019. The higher level of inwards gross premiums written has 
resulted in an increased level of outwards quota share reinsurance spend while 
the newer classes of business that the Group has started underwriting have also 
resulted in additional cover being purchased when compared to the prior year. 
These increases were somewhat offset by lower outwards reinstatement premiums 
compared to the prior year and a lower ceding percentage applied on some of the 
outwards quota share contracts purchased. 
 
                                    ******* 
 
The Group's net loss ratio for 2020 was 59.6% compared to 30.8% in 2019. The 
accident year loss ratio for 2020, including the impact of foreign exchange 
revaluations, was 71.4% compared to 51.3% in 2019. 
 
During 2020, Lancashire experienced an active loss environment across both its 
specialty and catastrophe lines, with exposure to COVID-19 related losses and 
to a number of natural catastrophe events, including hurricanes Laura and 
Sally, the Midwest derecho storm and the wildfires in California. In addition, 
as noted in our Q3 trading update, risk losses were higher than our 
expectations and this continued into Q4 2020, impacting all our segments. These 
loss events reflect the nature of the insurance products offered by the Group's 
trading subsidiaries as part of their usual business and are within the Group's 
risk tolerances. 
 
Our net losses, excluding the impact of inwards and outwards reinstatement 
premiums, from COVID-19 related losses, natural catastrophe and large risk loss 
events, amounted to $149.5 million for the year ended 31 December 2020. Our 
COVID-19 loss primarily relates to exposures within our property segment. Given 
the ongoing nature of the COVID-19 pandemic and the uncertain impact on the 
insurance industry, the Group's actual ultimate loss may vary, perhaps 
materially, from the current estimate. The final settlement of all of these 
claims is likely to take place over a considerable period of time. The Group's 
estimated ultimate net financial impact of COVID-19, including losses and 
reinstatement premiums, is consistent with that reported in July at 
approximately $42 million. In 2019, our net losses from catastrophe events, 
excluding the impact of inwards and outwards reinstatement premiums, were $52.1 
million. 
 
Excluding the impact of foreign exchange revaluations, the table below shows 
the impact of current accident year COVID-19 related losses and catastrophe 
loss events on the Group's loss ratio for the year ended 31 December 2020: 
 
                                                             Losses  Loss ratio 
 
                                                                 $m           % 
 
Reported at 31 December 2020                               283.8        59.6  % 
 
Absent catastrophe events noted above                      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. 
 
As reported in the Group's results for the year ended 31 December 2019, and 
excluding the impact of foreign exchange revaluations, the impact of the 
catastrophe loss events on the Group's 2019 loss ratio was as follows: 
 
                                                             Losses  Loss ratio 
 
                                                                 $m           % 
 
Reported at 31 December 2019                                  129.8     30.8  % 
 
Absent all catastrophe events                               77.7        18.5  % 
 
 
Prior year favourable development for 2020 was $52.0 million, compared to $88.0 
million of favourable development in 2019. The favourable development in both 
2020 and 2019 was primarily due to general IBNR releases across most lines of 
business due to a lack of reported claims. The second half of 2020 also 
included favourable development on the 2017 accident year, mainly from reserve 
releases on natural catastrophe loss events within the property segment. This 
was somewhat offset in the first half of the year 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 in the property segment. In the prior year, the Group 
benefited from favourable development on the 2017 catastrophe loss events 
partially offset by 2018 accident year claims in the energy segment. 
 
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                                        2020        2019 
 
                                                                $m          $m 
 
Property                                                    46.6       44.9 
 
Aviation                                                     3.3        6.8 
 
Energy                                                      17.2       23.9 
 
Marine                                                     (15.1)      12.4 
 
Total                                                       52.0       88.0 
 
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                                         2020        2019 
 
                                                                 $m          $m 
 
2015 accident year and prior                                (1.8)       19.0 
 
2016 accident year                                           0.9        19.3 
 
2017 accident year                                          20.7        30.8 
 
2018 accident year                                          25.3        18.9 
 
2019 accident year                                           6.9           - 
 
Total                                                       52.0        88.0 
 
Note: Positive numbers denote favourable development. 
 
The ratio of IBNR to total net loss reserves was 34.4% at 31 December 2020 
compared to 30.9% at 31 December 2019. 
 
Investments 
 
Net investment income, excluding realised and unrealised gains and losses, was 
$29.0 million for 2020, a decrease of 23.1% compared to 2019. 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 $69.1 million in 2020 compared to $83.2 million for 2019. 
 
In a year of significant volatility, 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 2020   31 December 2019 
 
Fixed maturity securities                            82.8  %            79.0  % 
 
Cash and cash equivalents                             8.5  %            11.4  % 
 
Private investment funds                              4.7  %             0.9  % 
 
Hedge funds                                           4.0  %             8.7  % 
 
Total                                               100.0  %           100.0  % 
 
Key investment portfolio statistics for our fixed maturities and managed cash 
were: 
 
                                                       As at              As at 
 
                                            31 December 2020   31 December 2019 
 
Duration                                           2.0 years          1.8 years 
 
Credit quality                                            A+                 A+ 
 
Book yield                                            1.7  %             2.4  % 
 
Market yield                                          0.7  %             2.1  % 
 
Third Party Capital Management 
 
The total contribution from third party capital activities consisted of the 
following items: 
 
Year ended 31 December                                         2020       2019 
 
                                                                 $m         $m 
 
Lancashire Capital Management underwriting fees             10.0        7.9 
 
Lancashire Capital Management profit commission              1.8        1.0 
 
Lancashire Syndicates' fees & profit commission              3.5        2.5 
 
Total other income                                          15.3       11.4 
 
Share of profit of associate                                10.7        5.9 
 
Total net third party capital management income             26.0       17.3 
 
The higher Lancashire Capital Management ("LCM") underwriting fees in 2020 
reflect the increased level of premiums under management compared to 2019. The 
amount of LCM 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 profit of associate reflects Lancashire's equity 
interest in the LCM managed vehicle. 
 
Other operating expenses 
 
Other operating expenses were $114.4 million in 2020 compared to $106.0 million 
in 2019. The increase was primarily driven by higher employment costs due to an 
increase in the number of employees from 218 in the prior year to 255 in the 
current year. Non-employment costs increased slightly due to a number of 
project initiatives during the year which drove an increase in legal and 
external consulting fees. These increases were partly offset by reduced 
expenditure on travel and entertainment and promotional events. 
 
Equity based compensation 
 
The equity based compensation expense was $12.3 million in 2020 compared to 
$9.6 million in 2019. The equity based compensation charge was driven by 
anticipated vesting levels of active awards based on current performance 
expectations. Increased equity based compensation charges were recorded in 2020 
as higher performance targets were met. 
 
Capital 
 
On 10 June 2020 a total of 39,568,089 new common shares in Lancashire were 
placed at a price of 700 pence per share, raising proceeds of $340.3 million 
for the Company. The shares issued represented approximately 19.5% of the 
issued common share capital of Lancashire prior to the placing. 
 
As at 31 December 2020, total capital available to Lancashire was $1.866 
billion, comprising shareholders' equity of $1.539 billion and $327.5 million 
of long-term debt. Tangible capital was $1.712 billion. Leverage was 17.6% on 
total capital and 19.1% on total tangible capital. Total capital and total 
tangible capital as at 31 December 2019 were $1.517 billion and $1.363 billion 
respectively. 
 
Per share data 
 
Year ended                                    31 December 2020 31 December 2019 
 
Fully converted book value per share                     $6.28            $5.84 
 
Change in FCBVS1                                       10.2  %          14.1  % 
 
Dividends per common share for the financial             $0.15            $0.15 
year 
 
Diluted earnings per share                               $0.02            $0.58 
 
 
1  Defined as the change in fully converted book value per share, adjusted for 
dividends. See the section headed "Alternative Performance Measures" below. 
 
Dividends 
 
The Lancashire Board declared the following dividends during 2020: 
 
  * A final dividend relating to 2019 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 2020 of $0.10 (approximately £0.08) per common share, subject to a 
shareholder vote of approval at the AGM to be held on 28 April 2021, which will 
result in an aggregate payment of approximately $24.4 million. On the basis 
that the final dividend is approved by shareholders at the AGM, the dividend 
will be paid in Pounds Sterling on 4 June 2021 (the "Dividend Payment Date") to 
shareholders of record on 7 May 2021 (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 at: 
https://www.linkassetservices.com/shareholders-and-investors/ 
shareholder-services-uk. 
 
Financial Information 
 
The Audited Consolidated Financial Statements for the year ended 31 December 
2020 are published on Lancashire's website at www.lancashiregroup.com . 
 
The 2020 Annual Report and Accounts are expected to be circulated to 
shareholders on 8 March 2021 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 EST on Wednesday 10 February 2021. 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: 74690404# 
 
URL for additional international dial in numbers: https://event.sharefile.com/ 
share/view/s7bae1d9235d495a8 
 
The call can also be accessed via webcast, for registration and access: https:/ 
/onlinexperiences.com/Launch/QReg/ShowUUID=E62A27A0-01C0-4486-A6BC-405997B36CDB 
 
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: 
 
                                  Financial      Financial      Long Term 
                                  Strength       Strength       Issuer 
                                  Rating(1)      Outlook(1)     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. 
 
For more information, please visit Lancashire's website at 
www.lancashiregroup.com. 
 
The Bermuda Monetary Authority ("BMA") is the Group Supervisor of the 
Lancashire Group. 
 
Lancashire Insurance Company Limited is regulated by the BMA, with its 
registered office at Power House, 7 Par-la-Ville Road, Hamilton HM 11, Bermuda. 
 
Lancashire Insurance Company (UK) Limited is authorised by the Prudential 
Regulation Authority ("PRA") and regulated by the Financial Conduct Authority 
("FCA") and the PRA, with its registered office at Level 29, 20 Fenchurch 
Street, London EC3M 3BY, United Kingdom. 
 
Lancashire Syndicates Limited is authorised by the PRA and regulated by the FCA 
and the PRA. It is also authorised and regulated by Lloyd's, with its 
registered office at Level 29, 20 Fenchurch Street, London EC3M 3BY, United 
Kingdom. 
 
Lancashire Capital Management Limited is regulated by the BMA, with its 
registered office at Power House, 7 Par-la-Ville Road, Hamilton HM 11, Bermuda. 
 
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 GMT on 10 February 2021. 
 
Alternative Performance Measures (APMs) 
 
As is customary in the insurance industry, the Group 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 this release 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, percentage 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. 
 
                                           31 December 2020 31 December 2019 
 
Net insurance losses                                  283.8              129.8 
 
Divided by net premiums earned                        475.8              421.7 
 
Net loss ratio                                        59.6%              30.8% 
 
Net acquisition 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 2020 31 December 2019 
 
Net acquisition expenses                              115.0              105.4 
 
Divided by net premiums earned                        475.8              421.7 
 
Net acquisition cost ratio                            24.2%              25.0% 
 
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 2020 31 December 2019 
 
Other operating expenses                              114.4              106.0 
 
Divided by net premiums earned                        475.8              421.7 
 
Net expense ratio                                     24.0%              25.1% 
 
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 2020 31 December 2019 
 
Net loss ratio                                        59.6%              30.8% 
 
Net acquisition cost ratio                            24.2%              25.0% 
 
Net expense ratio                                     24.0%              25.1% 
 
Combined ratio                                       107.8%              80.9% 
 
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 2020 31 December 2019 
 
Current accident year ultimate liability              339.1              217.8 
 
Divided by net premiums earned*                       474.9              424.8 
 
Accident year loss ratio                              71.4%              51.3% 
 
*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 2020 31 December 2019 
 
Shareholders' equity attributable to the      1,538,466,664      1,193,631,460 
Group 
 
Common voting shares outstanding*               241,811,908        201,453,615 
 
Shares relating to dilutive restricted            3,333,356          2,837,041 
stock 
 
Fully converted book value denominator          245,145,264        204,290,656 
 
Fully converted book value per share                  $6.28              $5.84 
 
*Common voting shares outstanding comprise issued share capital less amounts 
held in trust. 
 
Change in FCBVS (previously termed "ROE") (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 2020 31 December 2019 
 
Opening FCBVS                                       ($5.84)            ($5.26) 
 
Q1 dividend per share                                     -              $0.10 
 
Q2 dividend per share                                 $0.10                  - 
 
Q3 dividend per share                                 $0.05              $0.05 
 
Q4 dividend per share + closing FCBVS                 $6.28              $5.84 
 
Change in FCBVS*                                      10.2%              14.1% 
 
*Calculated using the internal rate of return. 
 
For the year ended 31 December 2020, the Group has renamed return on equity 
("ROE") to Change in FCBVS. It should be noted that the methodology in 
calculating this metric has remained unchanged and has been calculated in a 
consistent manner by the Group over the reporting periods. 
 
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 2020 31 December 2019 
 
Total investment return                                69.1               83.2 
 
Average invested assets*                            1,873.9            1,732.2 
 
Approximate total investment return                    3.7%               4.8% 
 
Reported total investment return                       3.9%               4.9% 
 
*Calculated as the average between the opening and closing investments and 
externally managed cash. 
 
NOTE REGARDING RPI METHODOLOGY 
 
THE RENEWAL PRICE INDEX ("RPI") IS AN INTERNAL METHODOLOGY THAT MANAGEMENT USES 
TO TRACK TRS 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 TRS 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 DEPENT UPON 
MANY FACTORS BESIDES THE TRS 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", "INTS", "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, DIVID 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, 
HURRICANES LAURA AND SALLY, MIDWEST DERECHO STORM AND THE WILDFIRES IN 
CALIFORNIA WHICH OCCURRED DURING THE FOURTH QUARTER 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, 
HURRICANES HARVEY, IRMA AND MARIA AND THE EARTHQUAKES IN MEXICO THAT OCCURRED 
IN THE THIRD QUARTER OF 2017 AND THE WILDFIRES WHICH IMPACTED PARTS OF 
CALIFORNIA DURING 2017; 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 DIVIDS; 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; 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; AND 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. 
 
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 income 
 
For the year ended 31 December 2020 
 
                                                                2020         2019 
 
                                                                  $m           $m 
 
Gross premiums written                                      814.1        706.7 
 
Outwards reinsurance premiums                              (294.7)      (282.0) 
 
Net premiums written                                        519.4        424.7 
 
Change in unearned premiums                                 (51.5)       (35.8) 
 
Change in unearned premiums on premiums ceded                 7.9         32.8 
 
Net premiums earned                                         475.8        421.7 
 
Net investment income                                        29.0         37.7 
 
Net other investment income                                   6.5          8.0 
 
Net realised gains (losses) and impairments                  12.8          8.9 
 
Share of profit of associate                                 10.7          5.9 
 
Other income                                                 15.3         11.4 
 
Net foreign exchange gains (losses)                           1.4         (1.5) 
 
Total net revenue                                           551.5        492.1 
 
Insurance losses and loss adjustment expenses               363.6        264.5 
 
Insurance losses and loss adjustment expenses               (79.8)      (134.7) 
recoverable 
 
Net insurance acquisition expenses                          115.0        105.4 
 
Equity based compensation                                    12.3          9.6 
 
Other operating expenses                                    114.4        106.0 
 
Total expenses                                              525.5        350.8 
 
Results of operating activities                              26.0        141.3 
 
Financing costs                                              20.1         21.8 
 
Profit before tax                                             5.9        119.5 
 
Tax charge                                                   (1.4)        (1.3) 
 
Profit after tax                                              4.5        118.2 
 
Non-controlling interests                                    (0.3)        (0.3) 
 
Profit after tax attributable to Lancashire                   4.2        117.9 
 
Net change in unrealised gains/losses on investments         20.8         28.6 
 
Tax charge on net change in unrealised gains/losses on       (0.7)        (0.8) 
investments 
 
Other comprehensive income                                   20.1         27.8 
 
Total comprehensive income attributable to Lancashire        24.3        145.7 
 
Net loss ratio                                               59.6  %      30.8  % 
 
Net acquisition cost ratio                                   24.2  %      25.0  % 
 
Administrative expense ratio                                 24.0  %      25.1  % 
 
Combined ratio                                              107.8  %      80.9  % 
 
Basic earnings per share                                $    0.02    $    0.59 
 
Diluted earnings per share                              $    0.02    $    0.58 
 
Change in FCBVS                                              10.2  %      14.1  % 
 
Consolidated balance sheet 
 
As at 31 December 2020 
 
                                                               2020        2019 
 
                                                                 $m          $m 
 
Assets 
 
Cash and cash equivalents                                  432.4       320.4 
 
Accrued interest receivable                                  8.0         7.2 
 
Investments                                              1,856.0     1,525.1 
 
Inwards premiums receivable from insureds and cedants      371.9       350.5 
 
Reinsurance assets 
 
- Unearned premiums on premiums ceded                       97.4        89.5 
 
- Reinsurance recoveries                                   338.7       327.5 
 
- Other receivables                                         31.1        16.9 
 
Other receivables                                           27.3        51.7 
 
Investment in associate                                    127.2       108.3 
 
Property, plant and equipment                                0.7         1.2 
 
Right-of-use asset                                          16.1        18.2 
 
Deferred acquisition costs                                  89.0        81.7 
 
Intangible assets                                          154.5       154.5 
 
Total assets                                             3,550.3     3,052.7 
 
Liabilities 
 
Insurance contracts 
 
- Losses and loss adjustment expenses                      952.8       874.5 
 
- Unearned premiums                                        457.9       406.4 
 
- Other payables                                            22.5        27.4 
 
Amounts payable to reinsurers                              151.7       126.6 
 
Deferred acquisition costs ceded                            19.6        17.6 
 
Other payables                                              46.1        47.5 
 
Corporation tax payable                                      1.5         2.4 
 
Deferred tax liability                                      10.9         9.6 
 
Interest rate swap                                             -         1.1 
 
Lease liability                                             20.9        21.9 
 
Long-term debt                                             327.5       323.5 
 
Total liabilities                                        2,011.4     1,858.5 
 
Shareholders' equity 
 
Share capital                                              122.0       101.5 
 
Own shares                                                 (21.2)      (13.3) 
 
Other reserves                                           1,221.6       881.3 
 
Accumulated other comprehensive income                      33.6        13.5 
 
Retained earnings                                          182.5       210.6 
 
Total shareholders' equity attributable to equity        1,538.5     1,193.6 
shareholders of Lancashire 
 
Non-controlling interest                                     0.4         0.6 
 
Total shareholders' equity                               1,538.9     1,194.2 
 
Total liabilities and shareholders' equity               3,550.3     3,052.7 
 
Basic book value per share                                 $6.36       $5.92 
 
Fully converted book value per share                       $6.28       $5.84 
 
Consolidated statement of cash flows 
 
For the year ended 31 December 2020 
 
                                                                 2020      2019 
 
                                                                   $m        $m 
 
Cash flows from operating activities 
 
Profit before tax                                               5.9     119.5 
 
Tax paid                                                       (1.6)     (2.1) 
 
Depreciation                                                    3.3       3.9 
 
Interest expense on long-term debt                             15.7      18.5 
 
Interest expense on finance leases                              1.3       1.3 
 
Interest and dividend income                                  (36.9)    (39.7) 
 
Net amortisation of fixed maturity securities                   4.9      (1.3) 
 
Equity based compensation                                      12.3       9.6 
 
Foreign exchange (gains) losses                                (3.2)      2.5 
 
Share of profit of associate                                  (10.7)     (5.9) 
 
Net other investment income                                    (7.4)     (8.8) 
 
Net realised (gains) losses and impairments                   (12.8)     (8.9) 
 
Net unrealised losses on interest rate swaps                   (1.1)      0.7 
 
Changes in operational assets and liabilities 
 
- Insurance and reinsurance contracts                          84.5     (46.0) 
 
- Other assets and liabilities                                 26.7      (8.8) 
 
Net cash flows from operating activities                       80.9      34.5 
 
Cash flows (used in) from investing activities 
 
Interest and dividends received                                39.9      41.1 
 
Purchase of property, plant and equipment                         -      (1.1) 
 
Purchase of underwriting capacity                                 -      (0.7) 
 
Investment in associate                                        (8.2)    (35.3) 
 
Purchase of investments                                    (1,129.7)   (948.3) 
 
Proceeds on sale of investments                               837.9   1,127.7 
 
Net cash flows (used in) from investing activities           (260.1)    183.4 
 
Cash flows from (used in) financing activities 
 
Interest paid                                                 (15.9)    (18.5) 
 
Lease liabilities paid                                         (3.5)     (3.6) 
 
Proceeds from issuance of common shares                       340.3         - 
 
Dividends paid                                                (32.3)    (30.2) 
 
Dividends paid to minority interest holders                    (0.5)        - 
 
Distributions by trust                                         (0.8)     (1.3) 
 
Net cash flows from (used in) financing activities            287.3     (53.6) 
 
Net increase in cash and cash equivalents                     108.1     164.3 
 
Cash and cash equivalents at the beginning of year            320.4     154.6 
 
Effect of exchange rate fluctuations on cash and cash           3.9       1.5 
equivalents 
 
Cash and cash equivalents at end of period                    432.4     320.4 
 
 
 
END 
 
 

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