Lancashire Holdings Ltd – Announces its results for the year ended 31 December 2015.

Hamilton, Bermuda – 24 December, 2015 – Lancashire Holdings Limited (“Lancashire” or “the Company”; Ticker: LHL BH) today announced its results for the year ended 31 December 2015.  The filing stated:

Lancashire Holdings Limited (“Lancashire” or “the Group”) today announces its results for the fourth quarter of 2015 and the year ended 31 December 2015.

Financial highlights:

¹  Return on equity excluding the impact of warrants exercised in the period.

²   Return on equity is defined as growth in fully converted book value per share, adjusted for dividends.

³   Return on equity excluding goodwill and other intangible assets.

⁴   See “Dividends” section below for Record Date and Dividend Payment Date.

Financial highlights:

⁵  These amounts are attributable to Lancashire and exclude non-controlling interests.

Martin Thomas, Chairman of Lancashire, commented:

“As we have announced separately today, having served as a director on the Lancashire board for over nine years, and as Chariman since 2007, I will step down from both roles following this year’s annual general meeting (“AGM”) on 4 May 2016 in accordance with good governance practice. It has also been decided that Peter Clarke will assume the role of Chairman from that date.

It is a great pleasure to see the Group deliver another set of strong financial results for 2015 as I come towards the end of my tenure and I look forward to working with Alex, Elaine and other collegues until I step down.”

Alex Maloney, Group Chief Executive Officer, commented:

“Within the context of one of the most difficult trading environments during the last twenty years, I am pleased to be able to announce what is an excellent set of results. The return on equity is 3.5% for the fourth quarter and 13.5% for the full year, on a warrant adjusted basis. As a business, we pride ourselves on our underwriting expertise and our ability to react nimbly to the challenges of the market so as to moderate our risk appetite and adjust our capital base to provide a good risk-adjusted return to our shareholders. The last year has witnessed a dramatic fall in the oil price, which severely shocked the whole energy sector, as well as volatility in the investment markets. Neither of these aspects of the world economy seems likely to stabilise in the near future. Furthermore, the over-accumulation of capital has continued to generate downwards pressure on the pricing of insurance and reinsurance risk over an extended period. Against this background, our industry witnessed a wave of mergers and acquisitions which we view as an attempt by some of the larger and more complex businesses in our sector to rationalise back office costs and achieve capital efficiencies.

Lancashire is not immune to the pressures faced by the market, but our strategic approach is distinctive  because, rather than seeking top line premium growth, our focus continues to be on remaining relevant to our clients and brokers. In my view, this is the key to trading through the underwriting cycle. Our underwriters have worked hard to maintain and defend our excellent core book of business. In certain lines, such as the energy book, this means sharing to a degree our clients’ pain and settling for an acceptable lower return on less risk. In other lines, such as our property catastrophe and terror books, we have continued to produce decent returns, partly due to low loss ratios – a product of yet another year of few major catastrophe losses within the most well developed insurance markets.  

We have been particularly active this year in managing our overall risk levels through the purchase of well-priced reinsurance.  Our excellent combined ratio of 72.1% for the full year is testament to the discipline and hard work carried out in this very challenging market to moderate our overall risk exposures. We do not consider top line premium growth to be a prudent objective for its own sake and we have endeavoured to avoid involvement in both broker underwriting facilities and the rapid growth in certain untried and untested lines of coverage. These are dangerous distractions. Our priority has been, and will remain to be, sticking to our stated strategy.

Part of that strategy is keeping our headcount small and nimble. That means everyone does their bit. I would therefore like to thank all our people, whether they are working for our Cathedral Lloyd’s platform, our Lancashire London and Bermuda operations or our Kinesis third party reinsurance capital manager. This strong set of results is a tribute to their hard work and the exceptional expertise within our Group. 

Finally, I look forward to continuing to work with Martin over the coming months, but for the time being I would like to thank him for his constructive challenge, his strategic insight, his diplomatic skills and on a personal level for his support and encouragement over many years.”

Elaine Whelan, Group Chief Financial Officer, commented:

“In a challenging year, I am happy to report a very respectable result for the fourth quarter due to strong underwriting performance, assisted in part by further favourable development in prior year reserves. Our warrant adjusted RoE of 3.5% and combined ratio of 67.1% represent an excellent result for the quarter in the current environment. All of our platforms contributed as expected to our warrant adjusted RoE of 13.5% for the year, with Cathedral contributing 3.4%, Kinesis 0.8% and the traditional Lancashire platform 9.3%. With our first decade of operations behind us, our compound annual return, after adjusting for the impact of warrants, is 18.8%.

Our outlook for 2016 remains to be a continuation of current market trends, with more pricing pressure, albeit at a slower rate. That said, we have been able to further reduce our exposure levels with additional reinsurance purchases, so we continue to believe we are well positioned for the current phase of the cycle. We are comfortable that at our current capital level we are able to write the business we want to and be ready for any opportunities that may materialise. We are therefore pleased to announce our standard final ordinary dividend of 10 cents per share. Including our interim and special dividend for 2015, we have returned 128.6% of comprehensive income for the year. Including all forms of capital return, we have now returned 103.6% of comprehensive income from inception.”

The complete Earnings Release can be found using the following link:

http://www.lancashiregroup.com/en/media/press-releases/2016/q4-2015-results.html

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