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Share Name Share Symbol Market Type Share ISIN Share Description
Lancashire Holdings Limited LSE:LRE London Ordinary Share BMG5361W1047 COM SHS USD0.50
  Price Change % Change Share Price Bid Price Offer Price High Price Low Price Open Price Shares Traded Last Trade
  -6.00 -0.83% 716.00 716.50 718.00 735.50 715.00 735.50 228,543 16:35:20
Industry Sector Turnover (m) Profit (m) EPS - Basic PE Ratio Market Cap (m)
Nonlife Insurance 371.1 90.1 44.5 16.5 1,747

Lancashire Hld Ltd Q3 Trading Statement

05/11/2020 7:00am

UK Regulatory (RNS & others)


 
TIDMLRE 
 
LANCASHIRE HOLDINGS LIMITED 
 
                                5 November 2020 
 
                               Hamilton, Bermuda 
 
Lancashire Holdings Limited ("Lancashire" or "the Group") today announces its 
trading statement for the nine months ended 30 September 2020. 
 
Trading statement highlights 
 
  * Gross premiums written increased by 14% year on year to $658.7 million 
  * Group RPI (Renewal Price Index) of 112% for the first nine months of 2020 
  * Catastrophe losses in the range of $65.0 - $75.0 million in the third 
    quarter 
  * Specialty single risk losses in the quarter were $30 million above our 
    attritional guidance 
  * No change to the previously announced COVID-19 loss estimate of 
    approximately $42.0 million 
  * Year to date total net investment return, including unrealised gains and 
    losses, of 2.4% 
 
Alex Maloney, Group Chief Executive Officer, commented: 
 
"In what has been a uniquely challenging year to date, I am pleased with the 
resilience demonstrated by our people, our business model and our operations. 
Having successfully worked from home throughout the lockdown earlier in the 
year, we were able during the quarter to move to a flexible mixed office and 
homeworking model across our two offices. However, as a result of the recent UK 
Government announcement our UK team has again largely reverted to homeworking 
and our Bermuda office remains open. In any event, we continue to operate in a 
seamless manner and interact with our brokers and clients, while continuing to 
prioritise the safety and well-being of our people and external partners. 
 
We continue to see strengthening premium rate increases across the majority of 
our business portfolio, with RPIs of 117% for the quarter and 112% for the year 
to 30 September. In addition, with certain competitors continuing to retrench, 
we have seen strong new business flows. Looking to the future, I am encouraged 
by the opportunity these trends provide for meaningful and disciplined growth. 
Rates continue to harden. The capital which we raised in June remains at our 
disposal to take full advantage of the opportunities that we believe lie ahead 
in 2021. 
 
Since we reported in July, the insurance industry has experienced a mix of both 
natural catastrophe losses, which are always a threat to communities and 
livelihoods during wind season, and an unusually frequent run of non-natural 
catastrophe risk losses. These losses come on top of the COVID-19 pandemic, 
which has been a stress to individuals, societies and economies and a material 
loss event for the (re)insurance industry. Within this difficult context, I am 
pleased to report that the Group's COVID-19 loss estimate of approximately 
$42.0 million (net of reinsurance and reinstatement premiums) has remained 
unchanged since we reported in July. 
 
As insurers, we expect to support our clients and to pay covered losses when 
they occur, and the sequence of both natural catastrophe and risk loss events 
during the year so far has impacted our, and the industry's, profitability for 
the year to date. I would expect this to put further impetus on the industry to 
charge an adequate and sustainable price per unit of risk. Pricing, 
particularly in capital intensive lines of business, has increased 
significantly and I expect rates and terms of coverage to improve throughout 
2021 in most of our core business lines. 
 
Against this backdrop, our strategy and ability to operate effectively through 
the cycle, alongside the recent capital we have raised, leaves us well 
positioned and I am optimistic about the strategic opportunity available to 
Lancashire." 
 
Business update 
 
Gross premiums written 
 
                                          Nine months ended 
 
                         30 September  30 September       Change       Change          RPI 
                                 2020          2019 
 
                                   $m            $m           $m            %            % 
 
Property                     384.3         347.7          36.6         10.5          108 
 
Energy                       118.0         103.7          14.3         13.8          111 
 
Marine                        75.3          62.0          13.3         21.5          116 
 
Aviation                      81.1          64.6          16.5         25.5          122 
 
Total                        658.7         578.0          80.7         14.0          112 
 
Gross premiums written increased by 14.0% in the first nine months of 2020 
compared to the same period in 2019.  This is a reflection of increases in both 
premium rates and new business volumes. 
 
Within the property segment, the RPI was 108% for the nine month period ending 
30 September 2020 and an encouraging 111% for the third quarter. As well as 
these rating trends in renewal business, we have seen an increase in new 
business flows, in particular within the property catastrophe and property 
direct and facultative classes. Whilst some market indiscipline remains, it 
tends to be more isolated and contract specific than earlier in the year. 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. 
 
The energy segment saw good growth, in particular from the power and downstream 
energy classes where both rate increases and new business led to the premiums 
almost doubling relative to the same period in 2019. Upstream energy remained 
broadly stable, as modest rate increases were offset by small reductions in 
exposures. 
 
With a retraction of market capacity in the marine classes of business, we 
continue to see more new business at prices that meet our return criteria. In 
the nine months ended 30 September 2020, we have seen new business in the 
marine cargo, marine hull and total loss and the marine builders' risk classes 
of business. The marine segment also benefited from multi-year policies 
renewing in the marine hull and total loss class. 
 
Aviation gross premiums written increased due to both new business and rate 
improvement across all sub-classes of the portfolio. 
 
Claims environment 
 
In the third quarter of 2020, Lancashire experienced an active loss environment 
across both its catastrophe and specialty business lines. 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 well within the Group's 
risk tolerances. 
 
In what has been an above-average year in terms of North Atlantic hurricane 
frequency, the Group has had exposure to a number of recent natural catastrophe 
events, including hurricanes Laura and Sally, Midwest derecho storm and the 
wildfires in California. Our ultimate loss estimate, net of reinsurance and 
reinstatement premiums, from these natural catastrophe events, is expected to 
be in the range of $65.0 million to $75.0 million for the quarter ended 30 
September 2020. This is approximately equivalent to our ten-year average annual 
loss exposure to such events. 
 
In addition, the Group suffered an accumulation of single risk losses as a 
result of exposures to a number of recent loss events across the Group's 
specialty business lines, impacting all of our segments. The frequency of these 
occurrences was unusually high for a single quarter, albeit risk losses are 
characteristically unpredictable in terms of timing. Our ultimate loss 
estimate, net of reinsurance and reinstatement premiums, from these risk loss 
events is approximately $30.0 million for the quarter ended 30 September 2020 
above our usual attritional guidance. 
 
As at 30 September 2020, the Group's COVID-19 ultimate loss estimate, net of 
reinsurance and reinstatement premiums, amounted to approximately $42.0 
million, which has remained unchanged from half year 2020. 
 
Prior year favourable development for the year to date and quarter was $11.2 
million and $16.3 million respectively, compared to $42.6 million and $26.7 
million for the equivalent periods in the prior year. 
 
Investments 
 
                                                    30 September 2020  30 September 2019 
 
Duration                                                    2.0 years          1.7 years 
 
Credit quality                                                    AA-                 A+ 
 
Book yield                                                     1.7  %             2.6  % 
 
Market yield                                                   0.9  %             2.3  % 
 
Managed investments ($m)                                     $1,982.0           $1,709.4 
 
The Group's investment portfolio total return was 2.4% during the first nine 
months of 2020 driven by the significant decline in treasury yields and the 
narrowing of credit spreads during the second and third quarters given the 
reduction in the Federal Funds Rate and the extensive fiscal stimulus from the 
U.S. Government. On a year to date basis, the majority of the Group's assets 
have positive returns, with only a few asset classes having small negative year 
to date returns. 
 
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 5 November 
2020. 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:                                +443333000804 
 
United States - Toll free:                             +1 855 85 70686 
 
United States - Local:                                 +1 6319131422 
 
PIN Code                                               33250114# 
 
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:/ 
/onlinexperiences.com/Launch/QReg/ShowUUID=DFBA4CBD-93CF-46BA-A8FD-E012B57F910F 
 
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 $1.8 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 GMT on 5 November 2020. 
 
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 
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 2019. 
 
NOTE REGARDING FORWARD-LOOKING STATEMENTS: 
 
CERTAIN STATEMENTS AND INDICATIVE PROJECTIONS (WHICH MAY INCLUDE MODELLED LOSS 
SCENARIOS AND ESTIMATES) 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 2019 AND THE GROUP'S 2020 
HALF-YEAR RESULTS, PUBLISHED ON 29 JULY 2020. IN ADDITION TO THOSE FACTORS 
CONTAINED IN THE GROUP'S ANNUAL REPORT AND ACCOUNTS AND THE GROUP'S HALF-YEAR 
RESULTS, ANY FORWARD-LOOKING STATEMENTS CONTAINED IN THIS TRADING STATEMENT MAY 
BE AFFECTED BY THE IMPACT OF THE COVID-19 PANDEMIC ON THE GROUP'S CLIENTS, THE 
SECURITIES IN OUR INVESTMENT PORTFOLIO AND ON GLOBAL FINANCIAL MARKETS 
GENERALLY AS WELL AS ANY GOVERNMENTAL OR  REGULATORY CHANGES INCLUDING POLICY 
COVERAGE ISSUES ARISING THEREFROM. 
 
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. 
 
NOTE REGARDING NATURAL CATASTROPHE LOSSES: 
 
IT SHOULD BE NOTED THAT THE GROUP HAS NATURAL CATASTROPHE LOSS EXPOSURE TO 
HURRICANE, STORM AND WILDFIRE RISKS ACROSS ALL SEGMENTS. THE PRELIMINARY 
ESTIMATES FOR THE NATURAL CATASTROPHE AND LOSS EVENTS NOTED ABOVE HAVE BEEN 
DERIVED FROM A COMBINATION OF MARKET DATA AND ASSUMPTIONS, A LIMITED NUMBER OF 
PROVISIONAL LOSS ADVICES, LIMITED CLIENT LOSS DATA AND MODELLED LOSS 
PROJECTIONS. AS ADDITIONAL INFORMATION EMERGES, THE GROUP'S ACTUAL ULTIMATE 
LOSS MAY VARY FROM THE PRELIMINARY ESTIMATES ANNOUNCED. THE FINAL SETTLEMENT OF 
ALL CLAIMS FROM NATURAL CATASTROPHE LOSSES IS LIKELY TO TAKE PLACE OVER A 
CONSIDERABLE PERIOD OF TIME. 
 
 
 
END 
 

(END) Dow Jones Newswires

November 05, 2020 02:00 ET (07:00 GMT)

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