Lancashire Holdings Ltd - Final Results
EXCELLENT PERFORMANCE ENABLES FURTHER CAPITAL RETURNS
Highlights:
-- Profit after tax of$321.5 million resulting in Change in DBVS of 24.7%.
-- Excellent operating performance drives an additional special dividend of$0.50 per common share.
-- A 50% increase in our ordinary dividend policy reflecting a more diversified business model.
-- Gross premiums written increased 16.9% year-on-year to$1.9 billion . Insurance revenue increased 23.9% year-on-year to$1.5 billion . Group Renewal Price Index (RPI) of 115%.
-- Insurance service result of$382.1 million and combined ratio (undiscounted) of 82.6% and combined ratio (discounted) of 74.9%.
-- Net investment return, including unrealised gains and losses, of 5.7%.
31 December 2023 31 December 2022 For the year ended $m $m Highlights Gross premiums written 1,931.7 1,652.3 Insurance revenue 1,519.9 1,226.5 Insurance service result 382.1 141.6 Net investment return 160.5 (76.7) Profit (loss) after tax 321.5 (15.5) Financial ratios Net insurance ratio 65.1% 83.4% Combined ratio (discounted)1 74.9% 90.2% Combined ratio (undiscounted)1 82.6% 98.7% Net investment return 5.7% (3.5%) Per Share data Diluted book value per share$6.17 $5.48 Change in diluted book value per share 24.7% (1.2%) Dividends per common share paid in the$0.65 $0.15 financial year Diluted earnings (loss) per share$1.32 ($0.06 )
1. The combined ratio (discounted and undiscounted) is the ratio, in per cent, of the sum of net insurance expense plus all other operating expenses to net insurance revenue.
“Lancashire delivered an outstanding performance in 2023. We continued to focus on writing profitable business in the best market conditions we have seen for a decade.
Aligned to our belief in managing the market cycle, we have built a better balanced and more diverse underwriting portfolio over the past five years, which is generating more profit against our capital base. This has been one of our core strategic goals and will continue to be a focus going forwards.
Gross premiums written increased by 16.9%, and insurance revenue increased by 23.9%, during the year, due to a combination of new business and rate rises across our portfolio.
This focus on profitable growth has resulted in an excellent underwriting performance with a combined ratio (undiscounted) of 82.6%, or 74.9% on a discounted basis, with a net insurance services result of
Our investment portfolio also had a strong year and benefited from higher interest rates. The portfolio returned 5.7%, resulting in a net investment return of
Lancashire is always led by the underwriting opportunity. We believe there are significant opportunities going into 2024 and we are well capitalised to be able to fund these through existing resources and internal earnings growth.
In light of the excellent financial performance in 2023, we are returning the majority of our earnings to shareholders.
While we did not complete the share buyback of up to
Additionally, given the increased resilience of our business model, we are announcing a change to our regular final and interim dividend policy. Our Board has declared a final dividend of
Lancashire remains focused on delivering its strategic objectives and continuing the growth and momentum we have built during 2023. Our franchise remains strong and we have fantastic teams across the Group who are dedicated to achieving our goals.
I would like to thank everyone at Lancashire for their hard work and commitment during 2023, and our shareholders, brokers, clients and other stakeholders for their continued support for our business.”
Business update
Momentum continues for 2024
The market showed continued discipline at the 1 January renewals and we are happy with the outcome. From the supply side, we have seen no significant new entrants coming into the market and existing participants have shown willingness to support good quality business at the right level after a strong year in 2023. We are continuing to see growth in demand from clients due to inflationary pressures, helping mitigate some of the increased supply. Importantly, for catastrophe exposed reinsurance, attachment levels have remained a focus for the market, with sustained reluctance for low attaching layers. Within our non-catastrophe exposed products, almost all product lines remain in a very strong position from a rating adequacy perspective. Overall, for 2024 the market appears to be more stable, at healthier levels of profitability. We continue to remain disciplined in our underwriting, while taking advantage of the stronger market conditions.
Lancashire
During 2023, we announced the launch of Lancashire Insurance
Delivering for our people
We are fundamentally a people business, and we believe that focusing on our people as part of our strategy is crucial to our ongoing success. We instil high expectations in our people and aim to offer a culture that is diverse, unique and special. The growth we have seen over the past few years has increased the scope of the opportunities available. We also want to reward people for their hard work and during 2023 we made 46 internal promotions across the Group.
Our 2023 employee survey showed strong support for our culture and the experience we offer our people. Our highest scores were for being proud to work at Lancashire at 94%, while 92% of people said they are motivated to do their best work and would recommend Lancashire as a great place to work.
Delivering for our communities
Since it was founded in 2007, the
During 2024, the Group will continue to assess the potential impact of the Economic Transition Adjustment introduced by the recent Bermuda Corporate Income Tax legislation. Based on its current plans, the Group does not anticipate that it will become subject to
Underwriting results
For the year ended 31 December 2023 31 December 2022 Reinsurance Insurance Total Reinsurance Insurance Total $m $m $m $m $m $m Gross premium 967.5 964.2 1,931.7 842.1 810.2 1,652.3 written RPI% 122% 110% 115% 108% 108% 108% Insurance revenue 714.9 805.0 1,519.9 560.4 666.1 1,226.5 Insurance service (254.2) (442.0) (696.2) (528.3) (466.3) (994.6) expenses Insurance service result before 460.7 363.0 823.7 32.1 199.8 231.9 reinsurance contracts held Allocation of (174.6) (250.2) (424.8) (152.7) (219.1) (371.8) reinsurance premium Amounts recoverable (78.2) 61.4 (16.8) 140.0 141.5 281.5 from reinsurers Net expense from reinsurance (252.8) (188.8) (441.6) (12.7) (77.6) (90.3) contracts held Insurance service 207.9 174.2 382.1 19.4 122.2 141.6 result Net insurance ratio 61.5% 68.6% 65.1% 95.2% 72.7% 83.4%
Gross premiums written
Gross premiums written increased by
Reinsurance segment
The increase in the reinsurance segment was primarily driven by new business in the casualty reinsurance classes as well as the continued successful build out of our specialty reinsurance classes in a strong rating environment. The property reinsurance classes also benefited from strong RPIs and new business, albeit these were somewhat offset by a lower level of reinstatement premiums than in 2022 due to higher catastrophe losses in that year. Overall, the RPI was 122% for the reinsurance segment up from 108% in the prior year.
Insurance segment
The increase in the insurance segment was primarily due to strong growth in our property insurance lines of business, which include property direct and facultative and also property construction. In these classes we are seeing the benefit of a strong rating environment and also a more mature book of business following the decision to add new teams in recent years. Gross premiums written in the energy and marine lines also increased meaningfully with new business across all lines of business and rate and exposure increases in power and energy liabilities classes. To a lesser extent, new business contributed to growth across all of our casualty insurance lines of business. Rate and exposure increases were the driver of growth in aviation insurance. Overall, the RPI was 110% for the insurance segment.
Insurance revenue
Insurance revenue comprises gross premiums earned less inwards reinstatement premium, and is net of commission costs. Insurance revenue increased by
Allocation of reinsurance premiums
Allocation of reinsurance premiums comprises ceded earned premium less outward reinstatement premiums, and is net of outward commission costs. Allocation of reinsurance premiums increased
Net claims
During 2023, the Group experienced net losses (undiscounted, including reinstatement premiums) from catastrophe, weather and large loss events totalling
In comparison, during 2022, the Group experienced net losses (undiscounted, including reinstatement premiums) from catastrophe, weather and large loss events of
Prior year development comprises the undiscounted movement in loss reserves, expense provisions and reinstatement premiums. Favourable development was
Net
discounting benefit
The table below shows the total net impact of discounting under IFRS 17, by financial statement line item.
For the year ended 31 Insurance contracts Reinsurance contracts Total$m December 2023 issued$m held$m Initial discount included 101.9 (17.2) 84.7 in insurance service result Unwind of discount (84.2) 28.4 (55.8) Impact of change in (14.1) 3.3 (10.8) assumptions Finance (expense) income (98.3) 31.7 (66.6) . Total net discounting 3.6 14.5 18.1 income
For the year ended 31 Insurance contracts Reinsurance contracts Total$m December 2022 issued$m held$m Initial discount included 109.1 (36.6) 72.5 in insurance service result Unwind of discount (39.7) 13.7 (26.0) Impact of change in 59.8 (20.4) 39.4 assumptions Finance income (expense) 20.1 (6.7) 13.4 Total net discounting 129.2 (43.3) 85.9 income (expense)
In 2023 discount rates across all our major currencies were at a relatively high level throughout the year with a small decrease in the fourth quarter. This drove the high initial discount impact and relatively low change in assumption impact.
In comparison, 2022 began in a relatively low discount rate environment, which then experienced significant increases across all currencies throughout the year. This increase in rates resulted in a favourable
Investments
For the year ended 31 December 2023$m 2022$m Total net investment return 160.5 (76.7)
Net investment income, excluding realised and unrealised gains and losses, was
In a year of continued volatility, the investment portfolio generated an investment return of 5.7%. The returns were driven primarily from investment income given the higher yields during the year. While the
In 2022, the investment portfolio generated a negative return of 3.5%. The returns were driven primarily from interest rate increases and the widening of credit spreads, resulting in losses in all asset classes, most of which were unrealised.
The managed portfolio was invested as follows:
As at 31 December 2023 31 December 2022 Fixed maturity securities 2,280.1 1,964.9 Managed cash and cash equivalents 263.8 260.8 Private investment funds 165.6 108.1 Hedge funds 9.9 103.9 Index linked securities — 28.2 Other investments (0.1) (0.2) Total 2,719.3 2,465.7
Key investment portfolio statistics for our fixed maturity securities and managed cash and cash equivalents were:
As at 31 December 2023 31 December 2022 Duration 1.6 years 1.6 years Credit quality AA- AA- Book yield 4.0% 2.9% Market yield 5.3% 5.0%
Other operating expenses
For the year ended 31 December 2023$m 2022$m Operating expenses - fixed 147.9 118.9 Operating expenses - variable 41.7 9.8 Total operating expenses 189.6 128.7 Directly attributable expenses allocated to insurance service (82.2) (70.4) expenses Other operating expenses 107.4 58.3
A significant driver of the increase in operating expenses is the increase in variable costs related to remuneration of
For the year ended
Capital
As at 31 December 2023, total capital available to Lancashire was approximately $2.0 billion, comprising shareholders’ equity of $1.5 billion and $0.5 billion of long-term debt. Tangible capital was approximately $1.8 billion. Leverage was 22.8% on total capital and 25.2% on tangible capital. Total capital and total tangible capital as at 31 December 2022 were $1.8 billion and $1.6 billion respectively.
Share repurchases
During the period commencing
No other share repurchase programmes were conducted during the year ended
Dividends
The Lancashire Board declared the following dividends during 2023:
-- A final dividend relating to 2022 of$0.10 per common share;
-- An interim dividend of$0.05 per common share; and
-- A special dividend of$0.50 per common share.
Lancashire’s Board of Directors has declared a special dividend of
Lancashire also announces that its Board of Directors has declared a final dividend of
Shareholders interested in participating in the dividend reinvestment plan (“DRIP”), or other services including international payment, are encouraged to contact the Group’s registrars,
Financial Information
The Audited Consolidated Financial Statements for the year ended
The 2023 Annual Report and Accounts is expected to be circulated to shareholders from
Analyst and Investor Earnings Conference Call
There will be an analyst and investor conference call on the results at
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For further information, please contact:
Lancashire Holdings Limited Christopher Head +44 20 7264 4145chris.head@lancashiregroup.comJelena Bjelanovic +44 20 7264 4066jelena.bjelanovic@lancashiregroup.com FTI ConsultingEdward Berry Edward.Berry@FTIConsulting.comTom Blackwell Tom.Blackwell@FTIConsulting.com
About Lancashire
Lancashire, through its
FinancialStrengthRating1 FinancialStrengthOutlook1 Long Term IssuerRating2 A.M. Best A (Excellent) Stable bbb+ S&P Global A- Stable BBB Ratings Moody’s A3 Stable Baa2
1. Financial Strength Rating and Financial Strength Outlook apply to
2. Long Term Issuer Rating applies to
Lancashire’s common shares trade on the premium segment of the Main Market of the
The
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
Alternative Performance Measures (APMs)
As is customary in the insurance industry, the Group also 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 the Financial Statements 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
Effective from
All amounts, excluding share data, ratios, percentages, or where otherwise stated, are in millions of
Net insurance ratio:
Ratio, in per cent, of net insurance expenses to net insurance revenue. Net insurance expenses represent the insurance service expenses less amounts recoverable from reinsurers. Net insurance revenue represents insurance revenue less allocation of reinsurance premium. This ratio gives an indication of the underlying profitability per
Restated For the year ended 31 December 2023 2022 Insurance service expense 696.2 994.6 Amounts recoverable from reinsurers 16.8 (281.5) Net insurance expense 713.0 713.1 Insurance revenue 1,519.9 1,226.5 Allocation of reinsurance premium (424.8) (371.8) Net insurance revenue 1,095.1 854.7 Net insurance ratio 65.1% 83.4%
Operating expense ratio:
Ratio, in per cent, of other operating expenses, excluding restricted stock expenses, to net insurance revenue. This ratio gives an indication of the amount of operating expenses expected to be paid out per
Restated For the year ended 31 December 2023 2022 Other operating expenses 107.4 58.3 Net insurance revenue 1,095.1 854.7 Operating expense ratio 9.8% 6.8%
Combined ratio (discounted):
Ratio, in per cent, of the sum of net insurance expenses plus other operating expenses to net insurance revenue.
Restated For the year ended31 December 2023 2022 Net insurance ratio 65.1% 83.4% Net operating expense ratio 9.8% 6.8% Combined ratio (discounted) 74.9% 90.2%
Combined ratio (undiscounted) (KPI):
Ratio, in per cent, of the sum of net insurance expense plus other operating expenses to net insurance revenue. This ratio excludes the impact of the discounting recognised within net insurance expenses. The Group aims to price its business, to ensure that the combined ratio (undiscounted) across the cycle is less than 100%.
Restated For the year ended 31 December 2023 2022 Combined ratio 74.9% 90.2% Discount included in net insurance expense 84.7 72.5 Net insurance revenue 1,095.1 854.7 Discounting impact on combined ratio 7.7% 8.5% Combined ratio (undiscounted) 82.6% 98.7%
Diluted book value per share ('DBVS') 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. This shows the Group net asset value on a diluted per share basis for comparison to the market value per share.
Restated As at 31 December 2023 31 December 2022 Shareholders’ equity attributable to the Group 1,507,869,627 1,326,124,728 Common voting shares outstanding* 239,037,977 238,333,570 Shares relating to dilutive restricted stock 5,355,909 3,700,547 Fully converted book value denominator 244,393,886 242,034,117 Diluted book value per share$6.17 $5.48
*Common voting shares outstanding comprise issued share capital less amounts held in trust.
Change in DBVS (KPI):
The internal rate of return of the change in DBVS 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.
Restated As at 31 December 2023 31 December 2022 Opening DBVS$5.48 $5.70 Q1 dividend per share — — Q2 dividend per share$0.10 $0.10 Q3 dividend per share$0.05 $0.05 Q4 dividend per share$0.50 — Closing DBVS$6.17 $5.48 Change in DBVS* 24.7% (1.2%)
*Calculated using the internal rate of return
Total investment return (KPI):
Total investment return in percentage terms is calculated by dividing the total investment return by the investment portfolio net asset value, including managed cash on a daily basis. These daily returns are then annualised 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, the Group aims for a degree of investment portfolio return.
For the year ended 31 December 2023 2022 Total investment return 160.5 (76.7) Average invested assets* 2,592.5 2,387.0 Approximate total investment return 6.2% (3.2%) Reported total investment return 5.7% (3.5%)
*Calculated as the average between the opening and closing investments and our externally managed cash.
Total shareholder return (KPI) :
The increase/(decrease) in share price in the period, measured on a total return basis, which assumes the reinvestment of dividends. The Group’s aim is to maximise the Change in DBVS over the longer term, and we would expect that to be reflected in our share price and multiple. This is a long-term goal, recognising that the cyclicality and volatility of both the insurance market and the financial markets in general will impact management’s ability to maximise the Change in DBVS in the immediate term. The total return measurement basis used will generally approximate the simple method of calculating the increase/(decrease) in share price adjusted for dividends as recalculated below.
As at 31 December 2023 31 December 2022 Opening share price$7.86 $7.17 Q1 dividend per share — — Q2 dividend per share$0.10 $0.10 Q3 dividend per share$0.05 $0.05 Q4 dividend per share + closing share price$8.46 $7.86 Total shareholder return 9.5% 11.7%
Gross premiums written:
The Group adopted IFRS 17 on
The table below reconciles gross premiums written on an IFRS 4 basis to insurance revenue on an IFRS 17 basis.
For the year ended 31 December 2023 2022 Gross premiums written* 1,931.7 1,652.3 Change in unearned premiums* (207.7) (223.2) Gross earned premium* 1,724.0 1,429.1 Less reinstatement premium and expected premium (7.1) (45.3) Less commission and non-distinct investment components (197.0) (157.3) Total insurance revenue 1,519.9 1,226.5
* Numbers presented in the table above for the comparative period are as previously reported for the year ending
Gross premiums written under management (KPI):
The gross premiums written under management equals the total of the Group’s consolidated gross premiums written, plus the external names portion of the gross premiums written in Syndicate 2010, plus the gross premiums written in
For the year ended 31 December 2023 2022 Gross premiums written by the Group 1,931.71,652.3 LSL Syndicate 2010 - external Names portion of gross premiums 140.5 160.0 written (unconsolidated) LCM gross premiums written (unconsolidated) — 38.4 Total gross premiums written under management 2,072.2 1,850.7
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 RPI DOES NOT INCLUDE NEW BUSINESS, TO OFFER A CONSISTENT BASIS FOR ANALYSIS. THE CALCULATION INVOLVES A DEGREE OF JUDGEMENT IN RELATION TO COMPARABILITY OF CONTRACTS AND THE ASSESSMENT NOTED ABOVE. TO ENHANCE THE RPI METHODOLOGY, MANAGEMENT MAY REVISE THE METHODOLOGY AND ASSUMPTIONS UNDERLYING THE RPI, SO THE TRENDS IN PREMIUM RATES REFLECTED IN THE RPI MAY NOT BE COMPARABLE OVER TIME. CONSIDERATION IS ONLY GIVEN TO RENEWALS OF A COMPARABLE NATURE SO IT DOES NOT REFLECT EVERY CONTRACT IN THE PORTFOLIO OF CONTRACTS. THE FUTURE PROFITABILITY OF THE PORTFOLIO OF CONTRACTS WITHIN THE RPI IS DEPENDENT UPON MANY FACTORS BESIDES THE TRENDS IN PREMIUM RATES.
NOTE REGARDING FORWARD-LOOKING STATEMENTS:
CERTAIN STATEMENTS AND INDICATIVE PROJECTIONS (WHICH MAY INCLUDE MODELLED LOSS SCENARIOS) MADE IN THIS RELEASE OR OTHERWISE THAT ARE NOT BASED ON CURRENT OR HISTORICAL FACTS ARE FORWARD-LOOKING IN NATURE INCLUDING, WITHOUT LIMITATION, STATEMENTS CONTAINING THE WORDS “BELIEVES”, “AIMS”, “ANTICIPATES”, “PLANS”, “PROJECTS”, “FORECASTS”, “GUIDANCE”, “POLICY”, “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
Consolidated statement of comprehensive income
Restated For the year ended 31 December 2023$m 2022$m Insurance revenue 1,519.9 1,226.5 Insurance service expenses (696.2) (994.6) Insurance service result before reinsurance contracts held 823.7 231.9 Allocation of reinsurance premium (424.8) (371.8) Amounts recoverable from reinsurers (16.8) 281.5 Net expense from reinsurance contracts held (441.6) (90.3) Insurance service result 382.1 141.6 Net investment return 160.5 (76.7) Finance (expense) income from insurance contracts issued (98.3) 20.1 Finance income (expense) from reinsurance contracts held 31.7 (6.7) Net insurance and investment result 476.0 78.3 Share of profit (loss) of associate 12.1 (5.4) Other income 2.9 6.5 Net foreign exchange losses (4.1) (0.6) Other operating expenses (107.4) (58.3) Equity based compensation (15.2) (8.6) Financing costs (31.6) (29.2) Profit (loss) before tax 332.7 (17.3) Tax (charge) credit (11.2) 1.8 Profit (loss) after tax 321.5 (15.5) Earnings (loss) per share Basic$1.35 ($0.06 ) Diluted$1.32 ($0.06 )
Consolidated statement of financial position
Restated Restated As at 31 December 2023$m 31 December 2022$m 1 January 2022 $m Assets Cash and cash 756.9 548.8 517.7 equivalents Accrued interest 16.7 11.3 7.1 receivable Investments 2,455.5 2,204.9 2,048.1 Reinsurance contract 387.8 474.3 326.5 assets Other receivables 58.4 30.0 18.8 Corporation tax — 1.1 — receivable Investment in associate 16.2 59.7 120.1 Right-of-use assets 19.3 20.3 13.4 Property, plant and 9.8 1.1 0.8 equipment Intangible assets 181.1 172.4 157.9 Total assets 3,901.7 3,523.9 3,210.4 Liabilities Insurance contract 1,823.7 1,673.5 1,302.3 liabilities Other payables 80.6 44.6 37.4 Corporation tax payable 2.0 — 1.6 Deferred tax liability 16.2 10.3 11.6 Lease liabilities 24.7 23.3 17.9 Long-term debt 446.6 446.1 445.7 Total liabilities 2,393.8 2,197.8 1,816.5 Shareholders' equity Share capital 122.0 122.0 122.0 Own shares (29.7) (34.0) (18.1) Other reserves 1,233.2 1,221.9 1,221.6 Retained earnings 182.4 16.2 67.9 Total shareholders’ equity attributable to 1,507.9 1,326.1 1,393.4 equity shareholders of LHL Non-controlling — — 0.5 interests Total shareholders’ 1,507.9 1,326.1 1,393.9 equity Total liabilities and 3,901.7 3,523.9 3,210.4 shareholders’ equity
Consolidated statements of cash flows
Restated For the year ended 31 December 2023$m 2022$m Cash flows from operating activities Profit (loss) before tax 332.7 (17.3) Adjustments for: Tax paid (1.9) (2.1) Depreciation 4.3 3.1 Amortisation on intangible assets 0.2 — Impairment of intangible assets 1.4 — Interest expense on long-term debt 25.8 25.8 Interest expense on lease liabilities 1.5 0.8 Interest income (95.4) (46.1) Dividend income (11.3) (8.1) Net unrealised (gains) losses on investments (53.4) 103.0 Net realised (gains) losses on investments (3.9) 24.7 Equity based compensation 15.2 8.6 Foreign exchange losses (gains) 3.9 (7.9) Share of (profit) loss of associate (12.1) 5.4 Changes in operational assets and liabilities – Insurance and reinsurance contracts 220.4 239.7 – Other assets and liabilities 14.5 (5.8) Net cash flows from operating activities 441.9 323.8 Cash flows used in investing activities Interest income received 90.0 41.9 Dividend income received 11.3 8.1 Purchase of property, plant and equipment (9.6) (0.7) Purchase of underwriting capacity (3.3) (4.2) Internally generated intangible asset (7.0) (10.3) Investment in associate 55.6 55.0 Purchase of investments (1,057.4) (1,130.2) Proceeds on sale of investments 866.1 845.5 Net cash flows used in investing activities (54.3) (194.9) Cash flows used in financing activities Interest paid (25.8) (25.8) Lease liabilities paid (3.8) (3.6) Dividends paid (155.3) (36.2) Share repurchases — (23.3) Distributions by trust (0.5) (0.8) Purchase of shares from non-controlling interest — (1.1) Net cash flows used in financing activities (185.4) (90.8) Net increase in cash and cash equivalents 202.2 38.1 Cash and cash equivalents at beginning of year 548.8 517.7 Effect of exchange rate fluctuations and other items on 5.9 (7.0) cash and cash equivalents Cash and cash equivalents at end of year 756.9 548.8