Lancashire Holdings Limited · LSE:LRE
Lancashire — Investor Day (2022)
14 slides from Lancashire's investor day presentation, 2022
Slide 1: Investor Day 2022: Strong forward momentum
Investor Day 2022 Strong forward momentum Investor Day 2022 I lancashiregroup.com 1
Slide 2: IFRS17
IFRS17 Jamie Grant Head of Actuarial Reporting & LUK Chief Actuary Investor Day 2022 I lancashiregroup.com 2
Slide 3: Agenda
Agenda This presentation will build on the Deloitte-run market educational session on 27 September 2022. • History What we will cover: • Principles • The application of IFRS 17 to Lancashire Group • Focus on judgements and interpretations • Presentational & • Key outcomes Valuation Impacts What we w
Slide 4: IFRS History
IFRS 17 History May 2017 Key amendments Original IFRS 17 Feb 2018 – Apr 2019 • Two year delay in effective date standard issued • Aggregation of assets and liabilities on the balance sheet IASB Transition Resource Group June 2020 Industry • Treatment of reinsurance held covering onerous contracts (T
Slide 5: No Impact on Strategy and Key Principles
No Impact on Strategy and Key Principles No change to strategy, fundamentals or risk appetite Underwriting Strategy Reserve Strength Investment Strategy Capital Management (“Liability for Incurred Claims”) • Unchanged • Unchanged • Unchanged • Initial prudence on new lines of • Unchanged • Gains/Los
Slide 6: Model Choice: Premium Allocation Approach
Model Choice We intend to apply the Premium Allocation Approach (PAA) as widely as possible Premium Allocation Approach Onerous Loss Component Better aligns with management of business Liability for remaining Unexpired risk coverage = Premium received More comparable to current IFRS 4 basis less
Slide 7: Other Accounting Policy Choices
Other Accounting Policy Choices The IFRS 17 Standard requires a number of accounting policy choices (which may not be consistent with peers)... Accounting Area Decision Alternatives • Bottom-up approach (Risk-Free + Illiquidity Premium) • Top-Down approach Discount Rates • More transparent • based o
Slide 8: Transitional Valuation Impact on Shareholders' Equity
Transitional Valuation Impact on Shareholders’ Equity • Liability for Incurred Claims (Expired Coverage) • Now includes allocation of Directly Attributable Expenses • Discounting for time value of money • Liability for Remaining Coverage (Future Coverage) • Onerous Loss Component We currently expect
Slide 9: P&L Impacts
P&L Impacts • Key additional consideration under IFRS 17 will be impact of discounting on P&L • All Liabilities for Incurred Claims discounted at current rates • Change in Discount Credit on Insurance Liabilities expected to (partially) offset Unrealised Gains/Losses on Investments • Impacts timing
Slide 10: Reconciliation from IFRS 4 to IFRS 17
Reconciliation from IFRS 4 to 17 * Not to scale / For illustrative purposes only Presentational Differences will impact KPIs, notably Combined Operating Ratio Investor Day 2022 I lancashiregroup.com 10
Slide 11: Existing Key Performance Indicators
Existing Key Performance Indicators Change in FCBVS Total investment return Legend Combined ratio □ no change to calculation or result □ result impacted through basis change The internal rate of return of Total investment return □ calculation and result change Ratio, in per cent, of the sum the chan
Slide 12: Net Premium/Revenue: Impact of Basis Change on Net Combined Ratio
Will likely retain a Net CoR but basis will be different (example) Impact of Basis Change on Net Combined Ratio at HY22 90% 450 Millions 80% 400 70% 350 Net Premium/Revenue 60% 300 50% 250 Net CoR 40% 200 30% 150 20% 100 10% 50 0% - IFRS 4 CoR RIPs Separate Acquisition Reclass Directly IFRS 4 CoR In
Slide 13: Next Steps
Next Steps 2022 2023 2024 Today Q3 2022 Q1 2023 Q3 2023 Q1 2024 Trading Trading Trading Trading Statement Statement Statement Statement Q4 2022 Q2 2023 Q4 2023 Audited Unaudited Audited Financial Interim Full Year Statements Financial Financial (IFRS 4 Basis) Statements Statements IAS 8 Disclosure (
Slide 14: Key Takeaways
Key Takeaways No change to strategy, fundamentals or risk appetite Premium Allocation Approach (PAA) to be used as widely as possible Key new consideration on valuation is impact of discounting incurred claims liability … and the movement in this over time Other presentational differences will i