Lancashire Holdings Limited · LSE:LRE
Lancashire — Investor Presentation (2019)
20 slides from Lancashire's investor presentation, 2019
Slide 1: Investor Presentation Q4 2018
Investor Presentation Q4 2018 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 RELEASE OR OTHERWISE THAT ARE NOT BASED ON CURRENT OR HISTORICAL FACTS ARE FORWARD-LOOKING IN NATURE INCLUDING, WITHOUT LIMITATION
Slide 3: Lancashire is a global specialty P&C re-insurer
Lancashire is a global specialty P&C re-insurer Active portfolio construction and risk management will continue to support our performance irrespective of market conditions. Our business model centres around our “Underwriting comes first” principle: 1. We aim to maximise risk-adjusted returns over t
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 (0.6 pts outperformance) 5 years (10.2 pts outperformance) and 10 years (23.2 pts outperformance).
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% 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Lancashire Sector average Lancashire 10 year average Sector 10 year average • Delivering strong combined ratios in spec
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 allows for better risk selection and portfolio construction • Supports our “underwriting comes first” principle: senior management and underwriters are on the call, allowing for more
Slide 7: 3. Operate nimbly through the cycle: Three market-leading platforms
3. Operate nimbly through the cycle: Three market-leading platforms drive our long-term success Better broker relationships; better cross-selling and referral opportunities; and better reinsurance purchasing power. Lancashire 2018 We insure predominantly ‘front page of a newspaper’ risks. High layer
Slide 8: 4. Proven superior risk/return profile over the long run
4. Proven superior risk/return profile over the long run Ten Year Standard Deviation(1) in TVC (total value creation) 20.0% 18.0% Lancashire 16.0% Beazley 14.0% Arch Everest Ren Re 12.0% Hiscox Axis Ten year RoE 10.0% Hanover 8.0% Argo 6.0% 4.0% Third Point Re 2.0% Greenlight Re 0.0% 0.0% 5.0% 10.0%
Slide 9: 5. Active use of capital management further helps deliver shareholder returns
5. Active use of capital management further helps deliver shareholder returns 500 300% 450 18.0% 250% 400 15.2% 17.8% 350 12.3% 17.3% 200% 18.1% 300 ($m) 250 150% 8.3% 200 8.4% 10.5% 100% 150 100 4.5% N/A 50% 50 1.6% 0 0% 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 (1) Share repurcha
Slide 10: Focus on delivering total shareholder return
Focus on delivering total shareholder return Lancashire shareholder return vs. major index returns 800% 750% 700% 650% Total Shareholder Return 600% 550% 500% 450% 400% 350% 300% 250% 200% 150% 100% 50% 0% (50%) (100%) S&P 500 FTSE 250 FTSE 350 Insurance S&P Financials S&P Banking Lancashire (1) Lan
Slide 11: Outlook
Outlook Lancashire shareholder return vs. major index returns • Rating levels likely to stabilise or improve for 2019: • Catastrophe rates are overall ‘flattish’; awaiting April 1 renewals: Insured catastrophe losses of 2018 for the market were outsize relative to history, but below 2017 levels • Sp
Slide 12: Appendix
ings Limited Appendix
Slide 13: Overview of Lancashire: our 14 year history
Overview of Lancashire: our 14 year history 2005: LHL Incorporated; AM Best assigns A- rating; IPO & listing on AIM 2005 2006 2007 2008 2009 2010 2011 GPW ($m) 626 753 638 528 689 632 Combined ratio n/a 44.3% 46.3% 86.3% 44.6% 54.4% 63.7% (1) Dividend yield n/a n/a 15.2% n/a 18.1% 18.0% 8.4% Return
Slide 14: Overview of Lancashire: our 14 year history
Overview of Lancashire: our 14 year history 2012 2013 2014 2015 2016 2017 2018 GPW ($m) 724 680 908 641 634 592 639 Combined ratio 63.9% 70.2% 68.7% 72.1% 76.5% 124.9% 92.2% (1) Dividend yield 8.3% 12.3% 17.8% 17.3% 10.5% 1.6% 4.5% (2) Return on Equity 17.1% 18.9% 14.7% 13.5% 13.5% -5.9% 2.4% Tangib
Slide 15: Our long-term performance is one of the most consistent in our peer group
Our long-term performance is one of the most consistent in our peer group (1) 10 year Compound Annual RoE (2) 20.0% 18.0% 16.0% 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% Lancashire Beazley Arch Ren Re Everest Hiscox Average Hanover Axis Argo Third Point Greenlight -2.0% Re Re (1) Peer group as defi
Slide 16: Exposure management – PML reductions
Exposure management – PML reductions Lancashire Property Cat & Retro Worldwide Wind 100 Year PML 120 Group WW AP 100y net PML index GC US Cat RoL Index 100 80 60 40 20 0 01-Jul-12 01-Oct-12 01-Jul-13 01-Oct-13 01-Jul-14 01-Oct-14 01-Jul-15 01-Oct-15 01-Jul-16 01-Oct-16 01-Jul-17 01-Oct-17 01-Jul-18
Slide 17: Third-party capital - fee income
Third-party capital - fee income 35 30 25 20 15 ($m) 10 5 0 (5) (10) (15) 2011 2012 2013 2014 2015 2016 2017 2018 Associate underwriting fees Profit commissions from associates Equity pick-up on investment in associates Lloyd's profit commission Lloyd's fees Accordion overrider • Kinesis profit comm
Slide 18: 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 prior Accident Year • Reserving record has demonstrated conservative reserving (1) • Favourable development
Slide 19: Conservative portfolio structure – quality
Conservative portfolio structure – quality asset allocation credit quality non agency cash and structured short term agency AA, 40% products, 9% securities, structured 18% products, 5% other hedge funds, government 9% bonds, 3% A, 19% other, 1% (1) duration 1.5 years U.S. government bonds and agency
Slide 20: For more information
For more information: Investor Relations Media Contacts Jelena Bjelanovic Haggie Partners Lancashire Holdings Limited 4 Sun Court 29th Floor, 66-67 Cornhill 20 Fenchurch Street, London EC3V 3NB London, EC3M 3BY Email: Becky.Young@haggie.co.uk Telephone: +44 (0) 20 7264 4066 Fax: +44 (0) 20 7264 4077