TIDMLRE
RNS Number : 9514F
Lancashire Holdings Limited
01 November 2018
LANCASHIRE HOLDINGS LIMITED
CHANGE IN FULLY CONVERTED BOOK VALUE PER SHARE, ADJUSTED FOR
DIVIDS, OF (1.9)% IN Q3 2018 AND 3.9% YEAR TO DATE
COMBINED RATIO OF 135.2% IN Q3 2018 AND 86.9% YEAR TO DATE
SPECIAL DIVID OF $0.20 PER COMMON SHARE
FULLY CONVERTED BOOK VALUE PER SHARE OF $5.54 AS AT 30 SEPTEMBER
2018
1 November 2018
London, UK
Lancashire Holdings Limited ("Lancashire" or "the Group") today
announces its results for the third quarter of 2018 and the nine
months ended 30 September 2018.
Financial highlights
30 September 30 September
2018 2017
--------------
Fully converted book value per
share $5.54 $5.53
Return on equity(1) - Q3 (1.9)% (10.4)%
Return on equity(1) - YTD 3.9% (5.1)%
Return on tangible equity(2) -
Q3 (2.2)% (11.9)%
Return on tangible equity(2) -
YTD 4.5% (5.8)%
Operating return on average equity
- Q3 (2.2)% (11.6)%
Operating return on average equity
- YTD 4.8% (7.0)%
Special dividend per common share(3) $0.20 -
-------------------------------------- --------- --- --------- ---
(1) Return on equity is defined as the change in fully converted
book value per share, adjusted for dividends.
(2) Return on tangible equity excludes goodwill and other
intangible assets.
(3) See "Dividends" below for Record Date and Dividend Payment
Date.
Three months ended Nine months ended
30 September 30 September 30 September 30 September
2018 2017 2018 2017
------------------------------- -------------- -------------- -------------- --------------
Highlights ($m)
Gross premiums written 115.2 143.0 507.7 524.2
Net premiums written 86.3 106.1 320.3 345.9
(Loss) profit before
tax (25.3) (136.4) 49.6 (69.7)
(Loss) profit after tax(1) (24.2) (134.2) 51.6 (65.7)
Comprehensive (loss)
income(1) (23.3) (131.7) 41.1 (57.1)
Net operating (loss)
profit(1) (24.6) (139.0) 53.7 (82.9)
Per share data
Diluted (loss) earnings
per share ($0.12) ($0.67) $0.26 ($0.33)
Diluted (loss) earnings
per share - operating ($0.12) ($0.69) $0.27 ($0.41)
Financial ratios
Total investment return
(including internal currency
hedging) 0.5% 0.6% 0.9% 2.1%
Net loss ratio 77.2% 175.4% 33.1% 79.2%
Combined ratio 135.2% 213.3% 86.9% 126.4%
Accident year loss ratio 116.0% 193.2% 61.3% 96.7%
------------------------------- --------- --------- --------- ---------
(1) These amounts are attributable to Lancashire and exclude
non-controlling interests.
Alex Maloney, Group Chief Executive Officer, commented:
"The third quarter of 2018 was at least as active as 2017 in
terms of the number of events to impact the industry. The magnitude
of insured loss, however, has been much smaller. We have,
nonetheless, produced a small loss for the quarter as a result of
these events. While it's always disappointing to lose money in any
quarter, we remain in positive territory for the year to date. The
loss events during the quarter are a well understood part of our
business model; we are prepared for such events and they lie within
our risk expectations.
Overall, rates are directionally up on last year and,
pleasingly, we continue to see rates improving across our specialty
lines of business. In our property catastrophe lines, recent loss
events may stimulate that market to maintain more discipline over
pricing in the run up to the January 1 renewals. While optically
our gross premiums written have declined in the third quarter, rate
increases and growth in the quarter are masked by the impact of
quarter on quarter reinstatement premiums plus the impact of the
timing of renewal of some multi-year deals in addition to exposure
adjustments on prior underwriting year contracts. We have again
added new business in the quarter, including across the new teams
we have recruited into the Group this year.
With the market in a state of flux, and as others in the market
exit lines of business that are underperforming, we are well
positioned to build out our offering by attracting high-calibre
underwriters to our team where we see opportunities. We have also
recently seen Lloyd's take a tougher stance on the need for market
underwriting discipline and for a return to pricing levels which
are fundamentally profitable. The Group's philosophy has, for many
years, stressed the central importance of disciplined underwriting
and we have a record of tailoring our income levels and our
exposures accordingly and therefore welcome these actions.
I believe we will have a growth opportunity in 2019 in our
specialty lines. The risk exposures in our property catastrophe
lines are likely to remain at similar levels as for 2018, although
we remain open to opportunities in these classes too.
Finally, I am pleased that we will be paying our shareholders a
special dividend of $0.20 per share."
Elaine Whelan, Group Chief Financial Officer, commented:
"In an active quarter for both risk losses and natural
catastrophes, we experienced a number of losses - none individually
material, but the accumulation of loss events resulted in a
negative return on equity for the Group. Our return of negative
1.9% for the third quarter brings us to a return on equity of 3.9%
for the year to date. Our year to date combined ratio stands at
86.9%. Our investment portfolio performed well through further
interest rate increases and volatility, producing a return of 0.5%
for the quarter.
Our outlook for 2019 is a continuation of current market trends.
We expect to maintain our core book of business and continue to
expand our specialty insurance lines of business. While we will
take advantage of any opportunities we see in the reinsurance
lines, due to further enhancements in our reinsurance program, we
do not anticipate needing any more capital for those. We are
therefore returning approximately $40.0 million of capital via a
special dividend. That represents 97.3% of comprehensive income for
the year to date. We have now returned $2.8 billion or 108.4% of
total comprehensive income since inception. We will, as ever,
monitor our capital needs on an on-going basis."
Renewal Price Index for major classes
The Renewal Price Index ("RPI") is an internal methodology that
management uses to track trends in premium rates on a portfolio of
insurance and reinsurance contracts. The RPI is calculated on a per
contract basis and reflects our assessment of relative changes in
price, terms, conditions and limits on like for like renewals only,
and is weighted by premium volume (see "Note Regarding RPI
Methodology" at the end of this announcement for further guidance).
The RPI does not include new business, to offer a consistent basis
for analysis. The following RPIs are expressed as an approximate
percentage of pricing achieved on similar contracts written in
2017, with our Lloyd's segment shown separately in order to aid
comparability:
RPI Lancashire (excluding Lloyd's segment)
Class YTD 2018 Q3 2018 Q2 2018 Q1 2018
---------------------------------------- ---------- --------- --------- ---------
Aviation (AV52) 99% 100% 100% 96%
Gulf of Mexico energy(*) 101% - 101% 110%
Energy offshore worldwide 103% 103% 103% 103%
Marine 98% 100% 97% 97%
Property retrocession and reinsurance 107% 100% 103% 111%
Terrorism 99% 99% 99% 100%
Lancashire (excluding Lloyd's segment) 104% 105% 101% 105%
---------------------------------------- ----- ----- ----- -----
* There was no renewing Gulf of Mexico energy business written
in the third quarter of 2018.
RPI Lloyd's segment
Class YTD 2018 Q3 2018 Q2 2018 Q1 2018
--------------------------------------- ---------- --------- --------- ---------
Aviation 103% 105% 105% 102%
Energy 103% 104% 103% 102%
Marine 103% 104% 104% 101%
Property retrocession and reinsurance 107% 102% 107% 108%
Terrorism 99% 99% 99% 99%
Lloyd's segment 106% 106% 107% 106%
--------------------------------------- ----- ----- ----- -----
Underwriting results
Gross premiums written
Q3 YTD
2018 2017 Change Change 2018 2017 Change Change
$m $m $m % $m $m $m %
---------- ----- ----- ------ ------ ----- ----- ------ --------
Property 32.4 46.8 (14.4) (30.8) 176.5 177.0 (0.5) (0.3)
Energy 20.3 24.4 (4.1) (16.8) 88.1 96.8 (8.7) (9.0)
Marine 1.4 15.3 (13.9) (90.8) 25.3 58.4 (33.1) (56.7)
Aviation 6.3 5.3 1.0 18.9 15.1 12.9 2.2 17.1
Lloyd's 54.8 51.2 3.6 7.0 202.7 179.1 23.6 13.2
-----
Total 115.2 143.0 (27.8) (19.4) 507.7 524.2 (16.5) (3.1)
---------- ----- ----- ----- ----- ----- ----- ----- -----
Gross premiums written decreased by 19.4% in the third quarter
of 2018 compared to the same period in 2017. For the first nine
months of 2018, gross premiums written decreased by 3.1% compared
to the first nine months of 2017. The reduction reflects the higher
level of reinstatement premiums in 2017 arising from the 2017
catastrophe events, in addition to multi-year deals written in our
property and energy segments in 2017 that were not yet due to
renew. The Group's five principal segments, and the key market
factors impacting them, are discussed below.
Property gross premiums written decreased by 30.8% for the third
quarter of 2018 compared to the same period in 2017 and decreased
by 0.3% in the first nine months of 2018 compared to the first nine
months of 2017. The third quarter of 2017 included $7.0 million of
reinstatement premiums in connection with hurricanes Harvey, Irma
and Maria and also included multi-year deals in the property
catastrophe and political risk classes that were not yet due to
renew. For the first nine months of 2018, property gross premiums
written were broadly flat. The property segment experienced growth
from new business and rate increases across most classes. However,
that growth was offset by reductions due to multi-year contracts
not yet due to renew in the property catastrophe and political risk
classes and the reinstatement premiums mentioned above.
Energy gross premiums written decreased by 16.8% for the third
quarter of 2018 compared to the same period in 2017 and decreased
by 9.0% in the first nine months of 2018 compared to the first nine
months of 2017. The dollar movement for the quarter was small and
mainly due to multi-year contracts written in the offshore energy
class in 2017 that were not yet due to renew. The decrease for the
first nine months of 2018 was mainly due to multi-year contracts
written in the Gulf of Mexico and offshore energy class in 2017
that were not yet due to renew, plus the restructuring of an
existing Gulf of Mexico multi-year deal. These reductions were
offset somewhat by new business in the onshore energy class and
exposure increases on prior underwriting year risk-attaching
business in the energy construction class.
Marine gross premiums written decreased by 90.8% for the third
quarter of 2018 compared to the same period in 2017 and decreased
by 56.7% in the first nine months of 2018 compared to the first
nine months of 2017. The decrease for the quarter and the first
nine months of the year was mainly due to the timing of non-annual
contract renewals and the prior periods being more impacted by
increases in exposure on risk-attaching business from prior
underwriting years. There was also less pro-rata business written
in both the quarter and the first nine months of the year compared
to the prior year.
Aviation gross premiums written increased by 18.9% for the third
quarter of 2018 compared to the same period in 2017 and increased
by 17.1% in the first nine months of 2018 compared to the first
nine months of 2017. The dollar movement for both the quarter and
the first nine months to 30 September was small and was primarily
due to increased exposure on prior underwriting year risk-attaching
business.
In the Lloyd's segment gross premiums written increased by 7.0%
for the third quarter of 2018 compared to the same period in 2017
and increased by 13.2% in the first nine months of 2018 compared to
the first nine months of 2017. While there were increases across
most lines of business for both the quarter and the first nine
months of 2018, the majority of the increase was driven by the
property direct and facultative, marine and aviation books due to
improved rates, new business and exposure increases on prior
underwriting year risk-attaching business. These were partly offset
by lower reinstatement premiums. The third quarter of 2017 included
$10.0 million of reinstatement premiums in connection with
hurricanes Harvey, Irma and Maria plus the Mexican earthquakes.
*******
Ceded reinsurance premiums decreased by $8.0 million, or 21.7%,
for the third quarter of 2018 compared to the same period in 2017
and increased by $9.1 million, or 5.1%, for the first nine months
of 2018 compared to the first nine months of 2017. The decrease in
spend for the quarter was primarily due to lower reinstatement
premiums plus some timing impacts, with some additional cover being
purchased earlier in the year. For the nine months to 30 September
2018 the increased spend was primarily due to a combination of rate
increases and the additional cover purchased, offset partially by
lower reinstatement premiums.
*******
Net premiums earned decreased by $30.1 million for the third
quarter of 2018 compared to the same period in 2017 and $27.4
million for the first nine months of 2018 compared to the first
nine months of 2017. The decrease in both the quarter and the first
nine months was primarily driven by lower net reinstatement
premiums in 2018 compared to 2017. In addition for the third
quarter and the first nine months of 2017 there was a greater
impact from positive adjustments to underlying exposures on prior
year risk-attaching business. Net premiums earned as a proportion
of net premiums written was 103.0% in the third quarter of 2018
compared to 112.2% for the same period in 2017 and 95.8% in the
nine months to 30 September 2018 compared to 96.7% in the same
period of 2017. The decrease in the earnings percentage for the
third quarter of 2018 reflected a higher proportion of outwards
reinsurance premiums ceded during the first half of 2018 compared
to the corresponding period in 2017. The earnings ratios were
relatively stable on an annual basis.
*******
As previously reported on 8 October, during the third quarter of
2018 the Group had exposure to loss events within its marine
portfolio. In addition, the Group suffered an accumulation of
attritional losses as a result of exposures to a number of recent
natural catastrophe events, including hurricane Florence and
typhoons Jebi, Mangkhut and Trami. While individually these risk
losses and natural catastrophe events were below thresholds that
would ordinarily warrant disclosure, due to their combined
financial impact, they were previously announced. The third quarter
of 2017 was characterised by significant catastrophe activity, in
the form of hurricanes Harvey, Irma and Maria, in addition to two
earthquakes in Mexico.
As a result, the Group's net loss ratio for the third quarter of
2018 was 77.2% compared to 175.4% for the same period in 2017 and
33.1% for the first nine months of 2018 compared to 79.2% for the
same period in 2017. The accident year loss ratio for the third
quarter of 2018, including the impact of foreign exchange
revaluations, was 116.0% compared to 193.2% for the same period in
2017 and 61.3% for the first nine months of 2018 compared to 96.7%
for the same period in 2017.
Our net losses recorded for the third quarter of 2018 in
relation to the combined risk and natural catastrophe events noted
above, excluding the impact of inwards and outwards reinstatement
premiums, were $57.3 million. While reserves have been recorded,
uncertainty exists on the eventual ultimate losses in relation to
the hurricane and typhoons as loss information after these types of
events can take some time to obtain. The Group's reserve estimate
for these natural catastrophe events was derived from a combination
of market data and assumptions, a limited number of provisional
loss advices, limited client loss data and modeled loss
projections. As additional information emerges, the Group's actual
ultimate loss may vary, perhaps materially, from the current
reported reserves. The final settlement of all these claims is
likely to take place over a considerable period of time.
The total estimated net loss, excluding the impact of inwards
and outwards reinstatement premiums and our share of losses from
Kinesis, for the 2017 catastrophe losses hurricanes Harvey, Irma
and Maria plus the two earthquakes in Mexico, was $138.5 million at
30 September 2018 compared to $153.8 million at 30 September
2017.
There were no other significant net losses for the quarter or
first nine months of either year.
Excluding the impact of foreign exchange evaluations, the
following table shows the impact of the current accident year
events noted above on the Group's loss ratio:
QTD 2018 YTD 2018
Losses Loss ratio Losses Loss ratio
$m % $m %
----------------------------------- ------- ------------- ------- -------------
Reported at 30 September 2018 68.6 77.2% 101.5 33.1%
Absent natural catastrophe events 29.2 33.4% 62.1 20.3%
Absent large marine losses 50.7 50.6% 83.6 26.3%
Absent these combined events 11.3 11.5% 44.2 14.0%
----------------------------------- ------- -------- ------- --------
Note: The table does not sum to a total due to the impact of
reinstatement premiums.
As reported in the Group's results for the third quarter of
2017, excluding the impact of foreign exchange evaluations, the
following table shows the impact of prior year catastrophe events
on the Group's loss ratio:
QTD 2017 YTD 2017
Losses Loss ratio Losses Loss ratio
$m % $m %
------------------------------- ------- ------------- ------- -------------
Reported at 30 September 2017 208.7 175.4% 264.8 79.2%
Absent hurricane Harvey 157.6 135.5% 213.7 64.4%
Absent hurricane Irma 151.2 129.3% 207.3 62.4%
Absent hurricane Maria 175.1 146.5% 231.2 69.0%
Absent Mexico earthquakes 197.1 165.6% 253.2 75.7%
Absent all catastrophe events 54.9 47.9% 111.0 33.6%
------------------------------- ------- -------- ------- --------
Note: The table does not sum to a total due to the impact of
reinstatement premiums.
Prior year favourable development for the third quarter of 2018
was $35.2 million, compared to $19.9 million for the third quarter
of 2017, and $87.0 million for the first nine months of 2018
compared to $57.7 million for the same period in 2017. The
favourable development in all periods was primarily due to general
IBNR releases across most lines of business due to a lack of
reported claims. The first nine months of 2018 also included a
reduction on some prior accident year property and energy
reserves.
The table below provides further detail of the prior years' loss
development by class, excluding the impact of foreign exchange
valuations.
Q3 YTD
2018 2017 2018 2017
$m $m $m $m
---------- ---------- --------- ---------- ------------
Property 18.6 7.5 37.0 17.7
Energy 6.4 5.9 36.3 16.1
Marine 2.4 3.1 7.4 14.6
Aviation 0.2 0.7 1.2 2.4
Lloyd's 7.6 2.7 5.1 6.9
----------
Total 35.2 19.9 87.0 57.7
---------- ---------- --------- ---------- ----------
Note: Positive numbers denote favourable development.
Excluding the impact of foreign exchange revaluations, previous
accident years' ultimate losses developed as follows during the
nine months to 30 September 2018 and 2017:
Nine months Nine months
ended ended
30 September 30 September
2018 2017
$m $m
------------------------------ ------------- ---------------
2008 accident year and prior 2.5 0.7
2009 accident year 10.8 0.2
2010 accident year 1.7 2.0
2011 accident year 4.7 8.8
2012 accident year 6.8 3.4
2013 accident year 3.0 2.6
2014 accident year 2.5 4.5
2015 accident year 4.6 18.7
2016 accident year 26.3 16.8
2017 accident year 24.1 -
-------------
Total 87.0 57.7
------------------------------ ------------- -------------
Note: Positive numbers denote favourable development.
The ratio of IBNR to total net loss reserves was 45.0% at 30
September 2018 compared to 53.9% at 30 September 2017.
Investments
Net investment income, excluding realised and unrealised gains
and losses, was $8.9 million for the third quarter of 2018, an
increase of 11.3% from the third quarter of 2017. Net investment
income was $24.8 million for the first nine months of 2018, an
increase of 9.3% compared to the same period in 2017. 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 a gain of $8.9
million for the third quarter of 2018 compared to a gain of $11.3
million for the third quarter of 2017 and a gain of $14.3 million
for the first nine months of 2018 compared to a gain of $38.4
million for the same period in 2017.
The investment portfolio returned 0.5% during the quarter as
coupon returns and corporate credit spread narrowing offset the
increase in treasury yields on our fixed maturity portfolios.
Portfolio returns were supported by strong returns in our bank
loan, structured note and equity portfolios. Our short-treasury
futures position also helped mitigate some of the impact of rising
interest rates. During the third quarter of 2017, the Group's
investment portfolio generated a return of 0.6% as the Group's
fixed maturity portfolio generated modest returns as the slight
increase in treasury yields was offset by the narrowing of credit
spreads and coupon income. The portfolio return also benefited from
strong returns from the hedge fund, bank loan and equity
portfolios.
Despite the negative impact on our fixed maturity returns from
the increase in treasury yields and the modest widening of
investment grade credit spreads, the portfolio has returned 0.9% on
a year-to-date basis. Investment returns have been supported by the
Group's risk assets and our short treasury futures position, which
has lessened the impact of the increase in interest rates
throughout 2018. The investment portfolio produced a return of 2.1%
for the first nine months of 2017 despite the increase in treasury
yields due to the narrowing of credit spreads, coupon income and
strong returns in the Group's risk asset portfolios.
The corporate bond allocation represented 28.5% of managed
invested assets at 30 September 2018 compared to 32.1% at 30
September 2017.
The managed portfolio was as follows:
As at As at As at
30 September 30 September
2018 31 December 2017 2017
--------------------------- -------------- ------------------ --------------
Fixed maturity securities 84.6% 80.1% 80.7%
Cash and cash equivalents 5.3% 10.2% 9.6%
Hedge funds 8.8% 8.4% 8.5%
Equity securities 1.3% 1.3% 1.2%
Total 100.0% 100.0% 100.0%
--------------------------- --------- ------------ --- ---------
Key investment portfolio statistics were:
As at As at As at
30 September 30 September
2018 31 December 2017 2017
Duration 1.6 years 1.7 years 1.8 years
Credit quality AA- AA- A+
Book yield 2.4% 2.0% 2.0%
Market yield 2.9% 2.1% 2.0%
---------------- -------- --- ---------- ----- -------- ---
Lancashire Third Party Capital Management
The total contribution from third party capital activities
consists of the following items:
Q3 YTD
2018 2017 2018 2017
$m $m $m $m
------------------------------------- -------- ----------- ------------ ------------
Kinesis underwriting fees 2.7 2.2 4.7 3.6
Kinesis profit commission - 0.5 - 5.9
Lloyd's fees & profit commission 0.5 0.4 1.3 1.5
------------------------------------- -------- ---------- -------- ---------
Total other income 3.2 3.1 6.0 11.0
------------------------------------- -------- ---------- -------- ---------
Share of profit (loss) of associate 2.3 (13.1) (0.1) (11.7)
------------------------------------- -------- ---------- -------- ---------
Total net third party capital
managed income 5.5 (10.0) 5.9 (0.7)
------------------------------------- -------- ---------- -------- ---------
The Kinesis profit commission is driven by the timing of loss
experience and collateral release and therefore varies from quarter
to quarter. Following the significant catastrophe activity during
the second half of 2017, and resulting trapped collateral, there
was no recognition in the first nine months of 2018 of any profit
commission for the 2017 underwriting cycles. The higher Kinesis
underwriting fees in 2018 reflect the higher level of premiums
under management compared to 2017. The share of profit (loss) of
associate reflects Lancashire's 10% equity interest in the Kinesis
vehicle. The loss during the third quarter of 2017 was entirely
driven by the significant catastrophe activity in that quarter. The
Lloyd's fees and profit commission is driven by the relative
profitability of the underwriting years impacting each period.
Other operating expenses
Other operating expenses consist of the following items:
Q3 YTD
2018 2017 2018 2017
$m $m $m $m
----------------------------- ---------- --------- ---- ------
Employee remuneration costs 11.0 2.8 41.9 31.0
Other operating expenses 10.0 10.2 29.9 32.0
Total 21.0 13.0 71.8 63.0
----------------------------- ---------- --------- ---- ----
Employee remuneration costs for the third quarter and for the
first nine months of 2018 were $8.2 million and $10.9 million
higher than the respective periods in 2017. The increase was
primarily the result of unusually low variable compensation charges
in 2017 due to the significant catastrophe losses in the third
quarter of 2017.
Other operating expenses for the third quarter and for the first
nine months of 2018 were $0.2 million and $2.1 million lower than
the respective periods in 2017. The reduction for the nine months
to 30 September 2018 was primarily due to lower software costs
offset somewhat by higher consulting fees incurred during the first
quarter of 2018.
Equity based compensation
The equity based compensation expense was $2.0 million in the
third quarter of 2018 compared to a credit of $2.9 million in the
same period last year and $5.8 million for the first nine months of
2018 compared to a credit of $0.1 million in the same period last
year. The equity based compensation charge was driven by
anticipated vesting levels of active awards based on current
performance expectations. A lower equity based compensation charge
was recorded in the third quarter and first nine months of 2017
primarily due to incorporating the third quarter loss into the
performance estimates combined with the lapsing of awards of former
Cathedral employees on departure from the Group.
Capital
As at 30 September 2018, total capital available to Lancashire
was $1.447 billion, comprising shareholders' equity of $1.122
billion and $324.9 million of long-term debt. Tangible capital was
$1.293 billion. Leverage was 22.5% on total capital and 25.1% on
total tangible capital. Total capital and total tangible capital as
at 30 September 2017 were $1.441 billion and $1.288 billion
respectively.
The Group will continue to review the appropriate level and
composition of its capital with the intention of managing capital
to enhance risk-adjusted returns on equity.
Dividends
During the third quarter of 2018, the Lancashire Board of
Directors declared an interim dividend in respect of 2018 of $0.05
(approximately GBP0.03) per common share. The dividend, totalling
$10.1 million, was paid on 12 September 2018 to shareholders of
record on 17 August 2018.
Lancashire announces that its Board of Directors has declared a
special dividend for 2018 of $0.20 per common share (approximately
(GBP0.15) per common share at the current exchange rate), which
will result in an aggregate payment of approximately $40.0 million.
The dividend will be paid in Pounds Sterling on 12 December 2018
(the "Dividend Payment Date") to shareholders of record on 9
November 2018 (the "Record Date") using the GBP / $ 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/shareholder-services-uk
Financial information
The 2018 third quarter Financial Supplement is published on
Lancashire's website at www.lancashiregroup.com.
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 EDT on Thursday 1 November 2018.
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 /
Freephone: 0800 358 6377
United Kingdom - Local: +44 (0)330 336 9127
United States / Canada - Toll
free / Freephone: 888-220-8451
United States - Local: +1 646-828-8193
Canada - Local: +1 647 484 0475
Confirmation Code: 4396709
The call can also be accessed via webcast, please go to our
website at:
https://www.lancashiregroup.com/en/investors.html or
https://edge.media-server.com/m6/p/cw5jr5n3
to register and access.
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
Haggie Partners
David Haggie +44 20 7562 4444
david@haggie.co.uk
About Lancashire
Lancashire, through its UK and Bermuda-based operating
subsidiaries, is a global provider of 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.
Cathedral benefits from Lloyd's ratings: A.M. Best: A
(Excellent); S&P Global Ratings: A+ (Strong); and Fitch: AA-
(Very Strong).
Lancashire has capital in excess of $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 corporate headquarters and mailing address at 29th Floor, 20
Fenchurch Street, London EC3M 3BY, United Kingdom and its
registered office at Power House, 7 Par-la-Ville Road, Hamilton HM
11, Bermuda.
For more information on Lancashire and Lancashire's subsidiary
and Lloyd's segment, Cathedral Capital Limited ("Cathedral"), visit
Lancashire's website at www.lancashiregroup.com.
The UK Prudential Regulation Authority ("PRA") is the Group
Supervisor of the Lancashire Group.
Lancashire Insurance Company Limited is regulated by the Bermuda
Monetary Authority ("BMA") in Bermuda.
Lancashire Insurance Company (UK) Limited is authorised by the
PRA and regulated by the Financial Conduct Authority ("FCA") and
the PRA in the UK.
Kinesis Capital Management Limited is regulated by the BMA in
Bermuda.
Cathedral Underwriting Limited is authorised by the PRA and
regulated by the FCA and the PRA in the UK. It is also authorised
and regulated by Lloyd's.
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 1
November 2018.
NOTE REGARDING RPI METHODOLOGY
LANCASHIRE'S RENEWAL PRICE INDEX ("RPI") IS AN INTERNAL
METHODOLOGY THAT ITS MANAGEMENT USES TO TRACK TRS IN PREMIUM RATES
OF A PORTFOLIO OF INSURANCE AND REINSURANCE CONTRACTS. THE RPI
WRITTEN BY 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 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 LANCASHIRE'S PORTFOLIO. 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
MODELED 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", "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
GROUP'S FINANCIAL POSITION, 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
HURRICANE FLORENCE, THE TYPHOONS AND MARINE LOSSES THAT OCCURRED IN
THE THIRD QUARTER OF 2018, HURRICANE MICHAEL WHICH OCCURRED IN THE
FOURTH 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 THE
FOURTH QUARTER OF 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 ESTIMATION; 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' RATING 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
OR ANY OF THE GROUP'S BERMUDIAN SUBSIDIARIES BECOMING SUBJECT TO
INCOME TAXES IN THE UNITED STATES OR THE BERMUDIAN SUBSIDIARIES
BECOMING SUBJECT TO INCOME TAXES IN THE UNITED KINGDOM; THE
INAPPLICABILITY TO THE GROUP OF SUITABLE EXCLUSIONS FROM THE UK CFC
REGIME; ANY CHANGE IN UK GOVERNMENT POLICY WHICH IMPACTS THE CFC
REGIME OR OTHER TAX CHANGES; AND THE IMPACT OF "BREXIT" (FOLLOWING
THE UK'S NOTIFICATION TO THE EUROPEAN COUNCIL UNDER ARTICLE 50 OF
THE TREATY ON EUROPEAN UNION ON 29 MARCH 2017) AND FUTURE
NEGOTIATIONS REGARDING THE UK'S RELATIONSHIP WITH THE EU 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 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 (loss) income
Q3 Q3 YTD YTD
2018 2017 2018 2017
$m $m $m $m
--------------------------------------- ---------- ---------- ------------ ----------
Gross premiums written 115.2 143.0 507.7 524.2
Outwards reinsurance premiums (28.9) (36.9) (187.4) (178.3)
Net premiums written 86.3 106.1 320.3 345.9
--------------------------------------- ------ ------ -------- ------
Change in unearned premiums 34.9 36.4 (52.6) (46.9)
Change in unearned premiums
on premiums ceded (32.3) (23.5) 39.3 35.4
Net premiums earned 88.9 119.0 307.0 334.4
--------------------------------------- ------ ------ -------- ------
Net investment income 8.9 8.0 24.8 22.7
Net other investment (losses)
income (0.6) 0.4 2.5 (1.5)
Net realised (losses) gains
and impairments (0.3) 0.5 (2.3) 8.6
Share of profit (loss) of associate 2.3 (13.1) (0.1) (11.7)
Other income 3.2 3.1 6.0 11.0
Net foreign exchange (losses)
gains (0.6) 1.2 (2.0) 3.1
Total net revenue 101.8 119.1 335.9 366.6
--------------------------------------- ------ ------ -------- ------
Insurance losses and loss adjustment
expenses 117.2 336.7 168.3 413.8
Insurance losses and loss adjustment
expenses recoverable (48.6) (128.0) (66.8) (149.0)
Net insurance acquisition expenses 30.6 32.1 93.3 95.0
Equity based compensation 2.0 (2.9) 5.8 (0.1)
Other operating expenses 21.0 13.0 71.8 63.0
Total expenses 122.2 250.9 272.4 422.7
--------------------------------------- ------ ------ -------- ------
Results of operating activities (20.4) (131.8) 63.5 (56.1)
Financing costs 4.9 4.6 13.9 13.6
(Loss) profit before tax (25.3) (136.4) 49.6 (69.7)
Tax credit 1.3 2.3 2.1 4.4
(Loss) profit after tax (24.0) (134.1) 51.7 (65.3)
------ ------ ------
Non-controlling interests (0.2) (0.1) (0.1) (0.4)
------ ------
(Loss) profit after tax attributable
to Lancashire (24.2) (134.2) 51.6 (65.7)
--------------------------------------- ------ ------ -------- ------
Net change in unrealised gains/losses
on investments 0.9 2.4 (10.7) 8.6
Tax (charge) credit on net change
in unrealised gains/losses on
investments - 0.1 0.2 -
------ ------ -------- ------
Other comprehensive (loss) income 0.9 2.5 (10.5) 8.6
--------------------------------------- ------ ------ -------- ------
Total comprehensive (loss) income
attributable to Lancashire (23.3) (131.7) 41.1 (57.1)
--------------------------------------- ------ ------ -------- ------
Net loss ratio 77.2% 175.4% 33.1% 79.2%
Net acquisition cost ratio 34.4% 27.0% 30.4% 28.4%
Administrative expense ratio 23.6% 10.9% 23.4% 18.8%
Combined ratio 135.2% 213.3% 86.9% 126.4%
--------------------------------------- ------ ------ -------- ------
Basic (loss) earnings per share $(0.12) $(0.67) $ 0.26 $(0.33)
Diluted (loss) earnings per
share $(0.12) $(0.67) $ 0.26 $(0.33)
Change in fully converted book
value per share (1.9)% (10.4)% 3.9% (5.1)%
Consolidated balance sheet
As at As at As at
30 September 30 September 31 December
2018 2017 2017
$m $m $m
------------------------------------------- ------------- ------------- --------------
Assets
Cash and cash equivalents 170.7 280.0 256.5
Accrued interest receivable 6.4 7.1 6.1
Investments 1,741.8 1,702.3 1,654.6
Inwards premiums receivable from insureds
and cedants 310.0 361.8 297.9
Reinsurance assets
- Unearned premiums on premiums ceded 80.5 69.3 41.2
- Reinsurance recoveries 266.4 251.5 284.1
- Other receivables 19.5 12.7 20.7
Other receivables 34.3 43.3 42.4
Corporation tax receivable 0.3 - -
Interest rate swap 0.3 - -
Investment in associate 38.8 12.8 59.4
Property, plant and equipment 1.6 3.0 2.6
Deferred acquisition costs 77.2 86.9 76.7
Intangible assets 153.8 153.8 153.8
Total assets 2,901.6 2,984.5 2,896.0
------------------------------------------- ------------ ------------ -----------
Liabilities
Insurance contracts
- Losses and loss adjustment expenses 862.6 890.9 933.5
- Unearned premiums 403.5 420.4 350.9
- Other payables 33.2 55.2 40.7
Amounts payable to reinsurers 77.9 83.0 65.5
Deferred acquisition costs ceded 4.0 1.1 2.5
Other payables 59.1 71.4 48.0
Corporation tax payable - 0.4 2.8
Deferred tax liability 14.4 17.0 16.5
Interest rate swap - 3.0 2.0
Long-term debt 324.9 325.4 326.3
Total liabilities 1,779.6 1,867.8 1,788.7
------------------------------------------- ------------ ------------ -----------
Shareholders' equity
Share capital 100.7 100.7 100.7
Own shares (4.9) (13.2) (12.1)
Other reserves 862.7 867.7 866.2
Accumulated other comprehensive loss (12.0) 2.2 (1.5)
Retained earnings 175.1 159.0 153.6
Total shareholders' equity attributable
to equity
shareholders of Lancashire 1,121.6 1,116.4 1,106.9
------------------------------------------- ------------ ------------ -----------
Non-controlling interest 0.4 0.3 0.4
Total shareholders' equity 1,122.0 1,116.7 1,107.3
Total liabilities and shareholders'
equity 2,901.6 2,984.5 2,896.0
------------------------------------------- ------------ ------------ -----------
Basic book value per share $5.59 $5.58 $5.53
Fully converted book value per share $5.54 $5.53 $5.48
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
QRTDMMFGGMRGRZZ
(END) Dow Jones Newswires
November 01, 2018 03:00 ET (07:00 GMT)
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