Q1 Trading Statement

Lancashire Holdings Limited (“Lancashire” or “the Group”) today announces its trading statement for the three months ended 31 March 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 at 31 December 2023.

Alex Maloney, Group Chief Executive Officer, commented:

“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 $422 million.

We continue to see strong opportunities for profitable growth across our portfolio with a Group RPI for the quarter of 104%.

Our new U.S. operation, Lancashire Insurance U.S., has now begun underwriting excess and surplus lines business in the property and energy casualty classes. We are very pleased with the strong team we have built and we believe that there are significant long-term opportunities for Lancashire in this market.

In terms of the loss environment, the market impact of the tragic Baltimore bridge disaster late in the quarter is still being assessed, however our potential exposure will be within our expectations for an event of this type.

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 months ended

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 U.S. operation, growth from the Lancashire Australia office, as well as positive RPIs. We also continued to write new business across the other insurance classes, somewhat offset by exposure decreases.

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 Baltimore bridge disaster, it will be within expectations for this type of event. We do not expect to change our undiscounted combined ratio guidance for the year.

Investments

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 1:00pm UK time / 9:00am Bermuda time / 8:00am EDT on Thursday 2 May 2024. The conference call will be hosted by Lancashire management and a presentation will be made available on the Group’s website prior to the call.

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