Lancashire Holdings Limited · LSE:LRE
Lancashire — Investor Presentation (2020)
21 slides from Lancashire's investor presentation, 2020
Slide 1: Investor Presentation
Investor Presentation www.lancashiregroup.com
Slide 2: Safe harbour statements
Safe harbour statements NOTE REGARDING FORWARD-LOOKING STATEMENTS: CERTAIN STATEMENTS AND INDICATIVE PROJECTIONS (WHICH MAY INCLUDE MODELLED LOSS SCENARIOS) MADE IN THIS PRESENTATION OR OTHERWISE THAT ARE NOT BASED ON CURRENT OR HISTORICAL FACTS ARE FORWARD-LOOKING IN NATURE INCLUDING, WITHOUT LIMIT
Slide 3: Lancashire is a global specialty P&C reinsurer
Lancashire is a global specialty P&C reinsurer Active portfolio construction and risk management will continue to support our performance irrespective of market conditions Our business model centers around our “Underwriting comes first” principle: 1. We aim to maximise risk-adjusted returns over the
Slide 4: Why invest in Lancashire
Why invest in Lancashire: 1. Underwriting comes first, whatever the market environment. This core principle has helped us deliver a market-leading track record, with better combined ratios over 3 years (0.3 pts outperformance) 5 years (9.1 pts outperformance) and 10 years (21.7 pts outperformance) t
Slide 5: 1. Underwriting comes first: Delivering better returns, even in heavier loss years
1. Underwriting comes first: Delivering better returns, even in heavier loss years Combined Ratio (1) 120% 100% 80% 60% 40% 20% 0% 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 (2) Lancashire Sector average Lancashire 10 year average Sector 10 year average • Delivering strong combined ratios in
Slide 6: 2. Actively balancing risk and return: Robust risk management process
2. Actively balancing risk and return: Robust risk management process 1. Daily Underwriting Marketing Conference Call for the Lancashire Insurance companies allows for better risk selection and portfolio construction • Supports our “underwriting comes first” principle: senior management and underwri
Slide 7: 3. We use three different platforms to access opportunities
3. We use three different platforms to access opportunities Better broker relationships; better cross-selling and referral opportunities; and better reinsurance purchasing power Lancashire Insurance Companies • We insure predominantly ‘front page of a newspaper’ risks. High layers with high deductib
Slide 8: 4. We aim to maximise returns across the cycle
4. We aim to maximise returns across the cycle As shareholders ourselves, we care about: 1. Delivering a superior underwriting performance 2. Maintaining a strong balance sheet 3. Actively managing our capital base to support healthy shareholder returns whatever the operating environment We are less
Slide 9: 5. Proven superior risk/return profile over the long run
5. Proven superior risk/return profile over the long run Ten Year Standard Deviation(1) in TVC 18.0% 16.0% Beazley Lancashire 14.0% Arch 12.0% 10.0% Everest RenRe Average Ten year RoE 8.0% Hanover Hiscox 6.0% Argo Third Point 4.0% 2.0% 0.0% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 16.0% 18.0% 20.0
Slide 10: 6. Active use of capital management further helps deliver shareholder returns
6. Active use of capital management further helps deliver shareholder returns 500 350% 450 18.0% 300% 400 15.2% 17.8% 250% 350 12.3% 17.3% 18.1% 300 200% ($m) 250 8.3% 150% 200 8.4% 10.5% 150 100% 100 4.5% N/A 50% 50 1.6% 1.5% 0 0% 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 (1)
Slide 11: Focus on delivering total shareholder return
Focus on delivering total shareholder return Total shareholder return Source: FactSet 500 450 400 Value (£) (rebased) 350 300 250 200 150 100 50 0 31/12/2009 31/12/2010 31/12/2011 31/12/2012 31/12/2013 31/12/2014 31/12/2015 31/12/2016 31/12/2017 31/12/2018 31/12/2019 Lancashire Holdings FTSE 250 • T
Slide 12: Outlook
Outlook • Rates across most of our portfolio are improving, albeit from a low base: • Specialty insurance rates are benefiting from dislocation in the London market: Lancashire’s starting point is a position of strength: 60+% of our premiums are in specialty lines and low 80s average combined ratio
Slide 13: Appendix
(.) Lancashire Appendix
Slide 14: Overview of Lancashire: our 14 year history
Overview of Lancashire: our 14 year history 2005: LHL incorporated; AM Best assigns A- rating; IPO & listing on AIM 2005 2006 2007 2008 2009 2010 2011 2012 GPW ($m) 626 753 638 528 689 632 724 Combined ratio n/a 44.3% 46.3% 86.3% 44.6% 54.4% 63.7% 63.9% (1) Dividend yield n/a n/a 15.2% n/a 18.1% 18.
Slide 15: Overview of Lancashire: our 14 year history (continued)
Overview of Lancashire: our 14 year history (continued) 2013 2014 2015 2016 2017 2018 2019 GPW ($m) 680 908 641 634 592 639 707 Combined ratio 70.2% 68.7% 72.1% 76.5% 124.9% 92.2% 80.9% (1) Dividend yield 12.3% 17.8% 17.3% 10.5% 1.6% 4.5% 1.5% (2) Return on Equity 18.9% 14.7% 13.5% 13.5% -5.9% 2.4%
Slide 16: Our long-term performance is one of the most consistent in our peer group
Our long-term performance is one of the most consistent in our peer group (1) 10 year Compound Annual RoE (2) 16.0% 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% Beazley Lancashire Arch RenRe Everest Average Axis Hanover Hiscox Argo Third Point Greenlight -2.0% -4.0% (1) Peer group as defined by the Bo
Slide 17: Exposure management – PML movements
Exposure management – PML movements Group all peril 100 Year net PML 120 Group WW AP 100y net PML index GC US Cat RoL Index 100 80 60 40 20 0 01-Jul-12 01-Jul-13 01-Jul-14 01-Jul-15 01-Jul-16 01-Jul-17 01-Jul-18 01-Jul-19 01-Oct-12 01-Oct-13 01-Oct-14 01-Oct-15 01-Oct-16 01-Oct-17 01-Oct-18 01-Oct-1
Slide 18: Third-party capital - fee income
Third-party capital - fee income 35 30 25 20 15 ($m) 10 5 0 (5) (10) (15) 2012 2013 2014 2015 2016 2017 2018 2019 Associate underwriting fees Profit commissions from associates Equity pick-up on investment in associates Lloyd's profit commission Lloyd's fees Accordion overrider • Lancashire Capital
Slide 19: Reserve adequacy - consistent favourable reserve development
Reserve adequacy - consistent favourable reserve development Favourable Reserve Development 70.0% 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0% 2008 and 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 prior Accident Year • Reserving record has demonstrated consistent overall prior year releases (1) • F
Slide 20: Conservative portfolio structure – quality
Conservative portfolio structure – quality asset allocation credit quality total investment portfolio fixed maturities and managed cash non agency structured private debt 1% cash and short term products securities 8% AA, 30% agency structured 16% products A, 30% 6% other government bonds and debt he
Slide 21: For more information
For more information: Investor Relations Media Contacts Jelena Bjelanovic FTI Consulting Lancashire Holdings Limited 200 Aldersgate, 29th Floor, Aldersgate Street, 20 Fenchurch Street, London, EC3M 3BY London, EC1A 4HD Telephone: +44 (0) 20 7264 4066 Email: Tom.Blackwell@fticonsulting.com Fax: +44 (