Lancashire Holdings Limited –Q3 2018 Results

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.”

The full press release can be found by using the following link:

https://www.lancashiregroup.com/en/investors/results-reports-and-presentations.html