Lancashire Holdings Limited · LSE:LRE
Lancashire — H1 2023 Earnings Presentation
26 slides from Lancashire's earnings presentation, Aug 10, 2023
Slide 1: Investor Presentation: H1 2023 - Strong forward momentum
Investor Presentation: H1 2023 Strong forward momentum I lancashiregroup.com
Slide 2: Safe harbour statements
Safe harbour statements NOTE REGARDING FORWARD-LOOKING STATEMENTS: NOTE REGARDING ALTERNATIVE PERFORMANCE MEASURES: Certain statements and indicative projections (which may include modelled loss scenarios) made in The Group uses alternative performance measures to help explain this presentation or o
Slide 3: Contents
Contents Highlights Financials Outlook Appendix Investor Presentation H1 2023 I lancashiregroup.com 3
Slide 4: Highlights
Highlights Investor Presentation H1 2023 I lancashiregroup.com 4
Slide 5: H1 2023 highlights
H1 2023 highlights Continuing to take advantage of market conditions • Gross premiums written increased by 26.2% to $1,184.0 million, insurance revenue $720.9 million. • Insurance service result of $188.8 million; profit after tax $159.2 million. Our long-term strategy • Discounted combined ratio 71
Slide 6: Delivering on our strategy to grow and diversify our underwriting footprint
Delivering on our strategy to grow and diversify our underwriting footprint to maximise the market opportunity Gross premiums written ($m) and cumulative RPI (%) for the first half: 2019 to 2023 1,400.0 160% 1,200.0 150% 1,000.0 140% • Gross premiums written increased 26.2% year-on-year in the first
Slide 7: Strong premium growth in H1 2023: Reinsurance segment
Strong premium growth in H1 2023: Reinsurance segment Gross premiums written ($m) and cumulative RPI (%) for the first half: 2019 to 2023 700.0 170% • Growth primarily driven by the 600.0 160% continued build out of casualty 500.0 150% reinsurance lines. 400.0 140% • Strong new business growth in 30
Slide 8: Strong premium growth in H1 2023: Insurance segment
Strong premium growth in H1 2023: Insurance segment Gross premiums written ($m) and cumulative RPI (%) for the first half: 2019 to 2023 600.0 145% 140% • Growth primarily driven by property 500.0 insurance with substantial rate 135% increases in property D&F. 400.0 130% 125% • New business written a
Slide 9: Financials
Financials Investor Presentation H1 2023 I lancashiregroup.com 9
Slide 10: H1 2023 financial results summary
H1 2023 financial results summary For the six months ended 30 June 2023 2022 Variance $m $m $m Insurance revenue 720.9 579.8 141.1 Insurance servi ce expenses (288.5) (293.8) 5.3 Insurance service expenses ratio 432.4 286.0 146.4 Al l ocati on of rei nsurance premi ums (212.7) (183.8) (28.9) Amounts
Slide 11: Insurance revenue
Insurance revenue H1 2023 H1 2022 $m $m Gross premiums written 1,184.0 938.1 • Insurance revenue under IFRS 17 is gross earned premium less reinstatements and commissions. Gross earned premium 826.4 637.6 • Currently insurance revenue is 60-62% of gross premiums written. Less reinstatements (4.2) (7
Slide 12: Net claims environment
Net claims environment Prior year development • Prior year favourable ultimate loss development for the period was • Net losses (undiscounted, including reinstatement premiums) from catastrophe $46.3 million, compared to $64.6 million in H1 2022. and large loss events of $49.5 million. • Favourable
Slide 13: Investments: conservative portfolio structure – quality focus
Investments: conservative portfolio structure – quality focus Asset Allocation Credit Quality total investment portfolio and managed cash fixed maturities and managed cash Private investment Other government funds bonds and debt 4% 3% Hedge Funds AA, 39% 4% A, 23% US government bonds and agency debt
Slide 14: H1 2023 IFRS 4 to IFRS 17 bridge (Income)
H1 2023 IFRS 4 to IFRS 17 bridge (Income) * IFRS 4 includes FX on all components of insurance contracts issued and reinsurance contracts held • Undiscounted combined ratio of 79.2%, Discounted combined ratio of 71.4%. • The improved performance under IFRS 17 is driven by the IFRS 17 discount benefit
Slide 15: H1 2023 IFRS 4 to IFRS 17 bridge (Discounting)
H1 2023 IFRS 4 to IFRS 17 bridge (Discounting) • Higher yield curves than equivalent period in prior year on higher fulfilment cashflows. • Offset by unwind of previous recognised discount. • Limited impact from change in yield curve assumptions. Investor Presentation H1 2023 I lancashiregroup.com 1
Slide 16: No change to full year guidance – restated to IFRS 17 basis
No change to full year guidance – restated to IFRS 17 basis • Underlying IFRS 4 combined ratio ex catastrophe/large losses 74%-79%. • Equates to IFRS 17 underlying undiscounted combined ratio guidance of 73%-78%. • Approximate prior year ultimate loss development $100 million-$110 million. Illustrat
Slide 17: Remaining strongly capitalised
Remaining strongly capitalised Decrease Increase Note: The Q2 BSCR Coverage Ratio is estimated and not the final result. Applying a stress scenario which incorporates a net loss catastrophe event (representative of our 1 in 100 Gulf of Mexico wind PML at $300.4 million) at 30 June 2023 our ECR ratio
Slide 18: Outlook
Outlook Investor Presentation H1 2023 I lancashiregroup.com 18
Slide 19: Outlook: continued momentum
Outlook: continued momentum • We see strong opportunities for the remainder of 2023. We will continue to grow while the opportunity persists in an attractive rating There is no change to our long environment. term strategy. • We remain strongly capitalised to deliver on our long-term strategy. Disci
Slide 20: Appendix
Appendix Investor Presentation H1 2023 I lancashiregroup.com 20
Slide 21: 2022 financial performance: IFRS 4 compared to IFRS 17
2022 financial performance: IFRS 4 compared to IFRS 17 IFRS 17 2022 IFRS 4 2022 $m $m Insurance revenue 1,226.5 Gross premi um wri tten 1,652.3 Insurance servi ce expenses (994.6) Outwards rei nsurance premi ums (464.3) Insurance service result before reinsurance contracts held 231.9 Net premiums wr
Slide 22: 2022 financial performance: IFRS 4 compared to IFRS 17
2022 financial performance: IFRS 4 compared to IFRS 17 The discount benefit is primarily driven by the discount applied to catastrophe and large loss events in the second half of 2022 and also an increasing discount rate environment throughout 2022. Income Expense Income Expense Investor Presentatio
Slide 23: 2022 combined ratio: IFRS 4 compared to IFRS 17
2022 combined ratio: IFRS 4 compared to IFRS 17 IFRS 4 Combined ratio Insurance Reinsurance Total IFRS 17 Combined ratio Insurance Reinsurance Total Loss ratio 45.5% 71.0% 58.3% Net insurance ratio 72.4% 95.2% 83.3% Acquisition ratio 26.4% 26.4% 26.4% Operating expense ratio 6.9% Operating expense r
Slide 24: Our ESG themes and progress
Our ESG themes and progress • ESG Insurance underwriting guidelines implemented by reference to Lloyd’s ESG Sustainable Responsible • 95.6% of the Group’s principal investment underwriting guidelines. insurance investment managers are signatories to the UN Principles for • We underwrite renewable en
Slide 25: ESG in action
ESG in action 2023 year to date Project Transform 2023 • Since the first donation in 2007, the Foundation has given more than $22 million • Total donations of more In November 2023 staff to charitable organisations across an ever than £250,000 including will be taking part in increasing range of cau
Slide 26: For more information
For more information Investor Relations Media Jelena Bjelanovic FTI Consulting Peter Krinks Lancashire Holdings Limited 200 Aldersgate, Lancashire Holdings Limited 29th Floor, Aldersgate Street, 29th Floor, 20 Fenchurch Street, London, EC1A 4HD 20 Fenchurch Street, London, EC3M 3BY E Tom.Blackwell@f