Lancashire Holdings Ltd - Q1 Trading Statement
2 May 2024
Trading statement highlights
-- Gross premiums written increased by 7.8% year-on-year to$631.7 million .
-- Insurance revenue increased by 24.6% year-on-year to$422.0 million .
-- Group Renewal Price Index (RPI) of 104%.
-- Total investment return, including unrealised gains and losses, of 0.9%.
-- Regulatory ECR ratio of 328% as at31 December 2023 .
“Lancashire has had a very strong start to 2024, reporting a record quarter.
The positive underwriting environment allowed us to grow our business further with gross premiums written increasing nearly 8% year-on-year to $631.7 million. Insurance revenue increased by nearly 25% year-on-year to
We continue to see strong opportunities for profitable growth across our portfolio with a Group RPI for the quarter of 104%.
Our new
In terms of the loss environment, the market impact of the tragic
We affirm the guidance we gave for the 2024 financial year for an undiscounted combined ratio around the mid-80% range, and a return on equity, as measured by the change in diluted book value per share, of around 20%.
On investments, our portfolio delivered a positive return of 0.9% for the quarter. The market yield of 5.4% was offset by mark to market movements on fixed maturities.
I am excited by the prospects for Lancashire as we move through 2024. Our strong balance sheet, with a regulatory ECR ratio of 328%, gives us the flexibility to achieve our goals. We remain focused on writing profitable business across our diversified product suite, offering relevant solutions to our clients, and fully delivering on our strategic priorities.”
Business update
Gross premiums written and insurance revenue
Three monthsended 31 March 2024 31 March 2023 Change Change RPI $m $m $m % % Reinsurance 399.7 369.3 30.4 8.2 % 103 % Insurance 232.0 216.9 15.1 7.0 % 105 % Gross premiums written 631.7 586.2 45.5 7.8 % 104 % Reinsurance 201.8 155.1 46.7 30.1 % Insurance 220.2 183.6 36.6 19.9 % Insurance revenue 422.0 338.7 83.3 24.6 %
Gross premiums written
Gross premiums written increased by $45.5 million, or 7.8%, in the first three months of 2024 compared to the same period in 2023. The Group’s two principal segments, and the key market factors impacting them, are discussed below.
Reinsurance segment
The most significant contributor to growth in this segment was in property reinsurance, with new business written across all lines as well as positive RPIs. Offsetting this somewhat, RPIs were flat in the casualty reinsurance class and there were some exposure reductions on contracts written in prior years.
Insurance segment
Property insurance was the main driver of growth in the insurance segment. This class of business benefited from the recent addition of the new Lancashire
Insurance revenue
Insurance revenue increased by $83.3 million, or 24.6%, in the first three months of 2024 compared to the same period in 2023. Growth was more substantial for insurance revenue than gross premiums written as we continue to benefit from earnings coming through from prior underwriting years. Gross premium earned, which is a major driver of insurance revenue, as a percentage of gross premiums written was 76.6% for the first quarter of 2024 compared to 69.1% in 2023. This increase was largely driven by the casualty treaty book.
Loss environment
The loss environment during the first quarter of 2024 was relatively benign with no natural catastrophe losses of note. Whilst the Group has some exposure to the
Investments
As at 31 March 2024 31 March 2023 Duration 1.7 years 1.6 years Credit quality A+ AA- Book yield 4.3% 3.3% Market yield 5.4% 5.0% Managed investments ($m)$2,824.9 $2,542.0
The investment portfolio generated a positive return of 0.9% in the first quarter of 2024. While the market yield remained elevated at 5.4%, generating strong investment income, interest rates increased across the yield curve outside the 6-month maturity. The negative return from interest rate increases was somewhat negated by credit spread tightening. The bank loan and private credit portfolios generated strong returns in the quarter.
Analyst and Investor Conference Call
There will be an analyst and investor conference call on the trading statement at
Participant Access
Please note that conference call participants are required to register in advance to access either the audio conference call or webcast, the full registration and access details are set out below.
Audio https://url.uk.m.mimecastprotect.com/s/n6bwCGZA9IA55o0I1zdSz?domain=emportal.ink access: Please register to obtain your personal audio conference pin and call details. Webcast https://url.uk.m.mimecastprotect.com/s/blj7CBgvnT8553MHjgheg?domain=onlinexperien access: ces.com Please use this link to register and access the call via webcast.
A webcast replay facility will be available for 12 months and accessible at: https://www.lancashiregroup.com/en/investors/results-reports-and-presentations.html
Contact information
Lancashire Holdings Limited +44 20 7264 4145Christopher Head chris.head@lancashiregroup.com +44 20 7264 4066Jelena Bjelanovic jelena.bjelanovic@lancashiregroup.com FTI Consulting +44 20 37271046Edward Berry Edward.Berry@FTIConsulting.comTom Blackwell Tom.Blackwell@FTIConsulting.com
About Lancashire
Lancashire, through its
Lancashire 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
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 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 2023.
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”, “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