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Lancashire Holdings Limited – Q1 2018 LHL Earnings Release

03 May 2018

Hamilton, Bermuda: May 3, 2018 – In a filing with the Bermuda Stock Exchange (“BSX”), Lancashire Holdings Limited (“Lancashire” or “the Company”; Ticker: LHL BH) announced its results for the three months ended 31 March 2018. The full filing stated:

GROWTH IN FULLY CONVERTED BOOK VALUE PER SHARE, ADJUSTED FOR

DIVIDENDS, OF 2.9% IN Q1 2018

COMBINED RATIO OF 65.2% IN Q1 2018

FULLY CONVERTED BOOK VALUE PER SHARE OF $5.54 AS AT 31 MARCH 2018

3 May 2018

London, UK

Lancashire Holdings Limited (“Lancashire” or “the Group”) today announces its results for the three months ended 31 March 2018.

Financial highlights
	31 March 2018	31 March 2017
Fully converted book value per share	$5.54	$6.04
Return on equity¹ – Q1	2.9%	2.7%
Return on tangible equity² – Q1	3.4%	3.1%
Operating return on average equity – Q1	3.6%	2.1%
Dividends per common share³	$0.10	$0.10

¹Return 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
	31 March	31 March
	2018	2017

*Highlights ($m)*
Gross premiums written	215.8	196.5
Net premiums written	87.8	76.3
Profit before tax	42.4	28.7
Profit after tax¹	42.2	30.3
Comprehensive income¹	32.9	34.1
Net operating profit¹	40.5	25.2
*Per share data*
Diluted earnings per share	$0.21	$0.15
Diluted earnings per share - operating	$0.20	$0.13
*Financial ratios*
Total investment return including internal currency hedging	(0.1%)	0.7%
Net loss ratio	12.0%	37.7%
Combined ratio	65.2%	85.6%
Accident year loss ratio	34.3%	46.5%

¹These amounts are attributable to Lancashire and exclude non-controlling interest

Alex Maloney, Group Chief Executive Officer, commented:

“I am pleased with an ROE of 2.9% for the first quarter which is a product of a strong underwriting result, helped by a relatively benign loss quarter, whilst successfully limiting the impact of a challenging investment environment.

We have also seen an improved rating environment following the major catastrophe losses of 2017 with rate increases across a high proportion of our product lines, so we are in a slightly more interesting trading environment than we have been for a number of years. Whilst that is pleasing, the demand supply dynamic has not shifted sufficiently to bring about fundamental rate change across the board. In this environment the Group has continued to focus on the underwriting discipline of matching risk and return. The Group has written new business where the risk reward dynamics make sense; there were opportunities to do this during the first quarter with both existing and new clients. The rate improvements are very much in line with our communicated expectations following the experience of 1 January renewals. Although moving in the right direction, the rates have not yet improved enough to warrant a material increase in the Group's level of overall risk which currently remains broadly similar to that of 2017.

In addition to rate improvements the energy sector is starting to show the first green shoots of recovery thanks to a more sustained period of stable oil prices. This should help bring demand, and therefore premium, back to the energy insurance market through 2018 and into 2019; the Group is very well placed to benefit from this should recovery in the sector continue.

Overall we are pleased with our first quarter: The underwriting result is strong; our 2017 catastrophe loss reserves remain robust; and our investment portfolio performed in line with expectations given the environment.”

Elaine Whelan, Group Chief Financial Officer, commented:

“With volatile equity markets, and a further rate increase by the Federal Reserve, our investment portfolio incurred a loss of 14 basis points. Our risk assets, short duration and interest rate hedging protected the portfolio from further downside and, while we expect further interest rate increases this year, we will obviously benefit from the higher rates going forward.

Despite the investment losses, we produced an RoE of 2.9% for the quarter. There were no significant losses in the quarter and we had strong reserve releases due to a lack of reported claims coming through, plus a small release on our 2017 cat event reserves.”

The fully press release can be vuewed by using the following link:

https://www.lancashiregroup.com/en/media/press-releases/2018/q1-2018-results.html