REG-Lancashire Holdings Ltd: Q2 2024 Earnings Release
08/08/2024 07:15
LANCASHIRE HOLDINGS LIMITED
RECORD HALF-YEAR PERFORMANCE WITH EXCELLENT
PROFIT GROWTH OF 26% TO $200 MILLION
8 August 2024
Hamilton, Bermuda
Lancashire Holdings Limited (“Lancashire” or “the Group”) today
announces its results for the six months ended 30 June 2024.
Highlights:
• Profit after tax of $200.8 million resulting in a change
in DBVS of 14.0%.
• Gross premiums written increased 8.3% year-on-year to
$1,282.2 million. Insurance revenue increased 18.5% year-on-year to $854.1
million.
• Insurance service result of $222.8 million, discounted
combined ratio of 73.0%, undiscounted combined ratio of 82.2%.
• Total investment return of 2.3%, including unrealised
gains and losses.
• Interim dividend of 7.5 cents per common share.
For the six months ended 30 June 2024 30 June 2023
$m $m
Highlights
Gross premiums written 1 1,282.2 1,184.0
Insurance revenue 854.1 720.9
Insurance service result 222.8 188.8
Net investment return 75.2 63.2
Profit after tax 200.8 159.2
Financial ratios
Net insurance ratio 1 65.2% 62.8%
Combined ratio (discounted) 1 73.0% 71.4%
Combined ratio (undiscounted) 1 82.2% 79.2%
Total investment return 1 2.3% 2.2%
Per Share data
Diluted book value per share 1 $6.35 $6.05
Change in diluted book value per share 1 14.0% 12.2%
Dividends per common share paid in the financial year to date 2 $0.65 $0.10
Diluted earnings per share $0.82 $0.66
1. Please refer to the end of this release for details of how these
Alternative Performance Measures (APMs) are calculated.
2. Includes special dividend of 50 cents per share paid in April 2024 in
respect of the year ended 31 December 2023 financial results.
Alex Maloney, Group Chief Executive Officer, commented:
“Lancashire has delivered its best ever half-year performance in the first
six months of 2024.
This outstanding result demonstrates the continued success of our long-term
strategy to manage the market cycle and further strengthen our business
through diversification.
We have continued to take advantage of favourable market conditions while
holding true to our principles of disciplined underwriting and optimised
capital allocation.
For the first six months of the year, we continued to grow ahead of rate with
gross premiums written increasing 8.3% year-on-year and insurance revenue
increasing 18.5% to $854.1 million. We have also reported a combined ratio of
73.0% or 82.2% on an undiscounted basis.
We have continued to see rates remain positive across our product suite with a
Group RPI for the period of 102%. Our strategic focus has always been to adapt
to the market cycle and grow the business when the environment is right, while
actively managing our capital to support those underwriting opportunities.
This includes our new U.S. operation, which has made a fantastic start with an
extremely strong team across our underwriting and support functions.
The loss environment in the first half of 2024 was relatively active for the
industry with significant insured market events including the MV Dali
Baltimore bridge collision disaster. None of these events were individually
material for the Group and we delivered a strong underwriting performance.
Our results have also been supported by our growing investment portfolio,
which is now approaching $3 billion in size. We have continued to benefit from
the higher yield environment with positive net returns of 2.3% or $75.2
million.
With our strong balance sheet and capital base, we remain in excellent health
going into the second half of the year.
Based on our strong performance in the first six months of the year, we are
well on track to deliver on our full year guidance for an average loss year
undiscounted combined ratio in the mid-80% range, and an RoE, as measured by
change in diluted book value per share, of around 20%.
In March, we announced a change to our regular final and interim dividend
policy to increase returns to our shareholders. For the first half of 2024,
the Board has declared an ordinary interim dividend of 7.5 cents per common
share consistent with this policy.
Across Lancashire we have committed people who are the foundation of our
strong, positive culture and commercial success. We place value on maintaining
our distinct ways of working and collaborative approach, which make us an
extremely attractive employer that is able to recruit and retain the very best
talent in the sector. We also continue to support the important work of the
Lancashire Foundation and, due to the strong operational performance of the
Group in 2023, the Board has approved the maximum level of funding to aid its
charitable work this year.
As we head into the remainder of 2024, building on this record half-year
performance, we look with confidence to 2025 and beyond. I would like to thank
everyone at Lancashire for their hard work, and our clients, brokers and
shareholders for their support.”
Underwriting results
For the six months ended 30 June 2024 30 June 2023
Reinsurance Insurance Total Reinsurance Insurance Total
$m $m $m $m $m $m
Gross premium written 734.6 547.6 1,282.2 658.0 526.0 1,184.0
RPI 101% 103% 102% 123% 111% 117%
Insurance revenue 407.6 446.5 854.1 336.6 384.3 720.9
Insurance service expenses (182.3) (289.9) (472.2) (88.1) (200.4) (288.5)
Insurance service result before reinsurance contracts held 225.3 156.6 381.9 248.5 183.9 432.4
Allocation of reinsurance premium (82.3) (131.4) (213.7) (89.3) (123.4) (212.7)
Amounts recoverable from reinsurers 9.0 45.6 54.6 (66.0) 35.1 (30.9)
Net expense from reinsurance contracts held (73.3) (85.8) (159.1) (155.3) (88.3) (243.6)
Insurance service result 152.0 70.8 222.8 93.2 95.6 188.8
Net insurance ratio 53.3% 77.5% 65.2% 62.3% 63.4% 62.8%
Gross premiums written
Gross premiums written increased by $98.2 million, or 8.3% during the first
six months of 2024 compared to the equivalent period in 2023. Excluding the
impact of reinstatement premiums and multi-year contracts, underlying growth
in gross premiums written was 9.8%. The Group’s two principal segments, and
the key market factors impacting them, are discussed below.
Reinsurance segment
Gross premiums written for the first six months of 2024 increased by $76.6
million, or 11.6% when compared to the same period in 2023. The property
reinsurance and specialty reinsurance lines were the significant drivers of
growth.
Insurance segment
Gross premiums written for the first six months of the year increased by $21.6
million, or 4.1% when compared to the same period in 2023. This increase was
primarily driven by new business within the property segment, including
business written through both our Lancashire U.S. and Lancashire Australia
distribution channels, as well as the continued build-out of the property
construction class. These increases were partly offset by the timing of
multi-year renewals in the political risk and marine classes.
Insurance revenue
Insurance revenue increased by $133.2 million, or 18.5% for the first six
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
premiums earned, which is a major driver of insurance revenue, as a percentage
of gross premiums written was 76.9% for the first six months of 2024 compared
to 69.8% in the first six months of 2023.
Allocation of reinsurance premiums
Allocation of reinsurance premiums increased by $1.0 million, or 0.5% during
the first six months of 2024 compared to same period in 2023. The allocation
of reinsurance premiums as a percentage of insurance revenue for the Group was
25.0%, down from 29.5% in the prior period, reflecting more efficient
reinsurance purchasing and increased risk retention in the strong market
environment.
Net claims
During the first six months of 2024, the Group experienced net losses
(undiscounted, including reinstatement premiums) from large loss events
totalling $45.5 million. None of these events were individually material for
the Group, with the MV Dali Baltimore bridge collision loss being the most
significant.
In comparison, during the first six months of 2023, the Group experienced net
losses (undiscounted, including reinstatement premiums) from catastrophe and
large loss events totalling $49.5 million. None of these loss events were
individually material for the Group.
Favourable prior accident year loss development, including reinstatement
premiums and expense provisions, was $52.0 million during the first six months
of 2024. This was primarily due to better attritional loss experience than
expected in the 2023 accident year, along with catastrophe event reserve
releases, most notably on the 2021 accident year. In comparison, favourable
development of $72.1 million for the equivalent period in 2023 was driven by
loss reserve releases on the 2022 and 2021 accident years.
The first six months of 2024 and 2023 also both benefited from the release of
expense provisions and net reductions in reinstatement premiums. This
reduction was more pronounced in the prior period.
Net discounting benefit
The table below shows the total net impact of discounting in respect of both
insurance contracts issued, and reinsurance contracts held, by financial
statement line item.
Six months ended 30 June 2024 Six months ended 30 June 2023
Insurance contracts issued $m Reinsurance contracts held $m Total $m Insurance contracts issued $m Reinsurance contracts held $m Total $m
Initial discount included in insurance service result 73.6 (14.6) 59.0 46.5 (7.1) 39.4
Unwind of discount (47.1) 13.7 (33.4) (40.1) 14.3 (25.8)
Impact of change in assumptions 18.8 (4.4) 14.4 2.4 (0.2) 2.2
Finance (expense) income (28.3) 9.3 (19.0) (37.7) 14.1 (23.6)
Total net discounting income (expense) 45.3 (5.3) 40.0 8.8 7.0 15.8
The total impact of discounting for the first six months of 2024 was a net
benefit of $40.0 million, compared to a net benefit of $15.8 million in
2023. The higher initial discount in the first six months of 2024 compared to
the same period in 2023 is due to the growing insurance portfolio increasing
the quantum of initial loss reserves being established within a higher
discount rate environment. This higher discount rate environment also results
in an increasing net expense through the unwind of discount relative to the
prior year. Interest rates have generally increased since 31 December 2023
generating a positive impact from the change in assumptions. In the prior
period, the impact of the change in yield curve assumptions was relatively
minor given a more stable discount rate environment.
Investments
For the six months ended 30 June 2024 $m 30 June 2023 $m
Total net investment return 75.2 63.2
The total investment return, including realised and unrealised gains and
losses, was 2.3% for the first six months of 2024. The positive returns were
driven by investment income as our portfolio continues to benefit from higher
yields on a growing portfolio. Treasury yields rose throughout the first and
second quarter of 2024, with most of the increase in yields occurring during
the first quarter. This resulted in higher returns in the second quarter, with
coupon income helping to mitigate the increase in treasury yields and slight
spread widening. In addition to the higher investment income, the private
investment funds and remaining hedge fund had strong returns throughout the
six months.
The Group’s investment portfolio, including unrealised gains and losses,
returned 2.2% for the first six months of 2023. The majority of the gains were
generated in the first quarter as treasury rates declined. In the second
quarter, investment income mitigated negative returns from the upward shift in
the yield curve. All asset classes performed positively, with most of the
returns in the second quarter driven by the alternative assets.
The managed portfolio was invested as follows:
As at 30 June 2024 $m 31 December 2023 $m
Fixed maturity securities 2,415.7 2,280.1
Managed cash and cash equivalents 310.8 263.8
Private investment funds 201.7 165.6
Hedge funds 10.7 9.9
Other investments — (0.1)
Total 2,938.9 2,719.3
Key investment portfolio statistics for our fixed maturity securities and
managed cash and cash equivalents were:
As at 30 June 2024 31 December 2023
Duration 1.9 years 1.6 years
Credit quality AA- AA-
Book yield 4.7% 4.0%
Market yield 5.6% 5.3%
Other operating expenses
For the six months ended 30 June 2024 $m 30 June 2023 $m
Operating expenses - fixed 89.3 68.6
Operating expenses - variable 12.3 14.5
Total operating expenses 101.6 83.1
Directly attributable expenses allocated to insurance service expenses (51.8) (39.3)
Other operating expenses 49.8 43.8
The most significant driver of the increase in operating expenses for the
first six months of 2024, compared to the equivalent period in 2023, was an
increase in fixed costs of $20.7 million. This increase is primarily in
relation to employment related expenses given the recent growth in headcount
for the Group. The strengthening U.S. dollar exchange rate against GBP
sterling also contributed to an increase in operating expenses.
For the first six months of 2024, $51.8 million of operating expenses were
considered directly attributable to the fulfillment of insurance contracts
issued, and have therefore been re-allocated to insurance service expenses and
form part of the insurance service result. This compares to $39.3 million for
the equivalent six month period in 2023, and is reflective of the increase
within the Group's overall expense base as discussed above.
Capital
As at 30 June 2024, total capital available to Lancashire was approximately
$2.0 billion, comprising shareholders’ equity of $1.6 billion and $0.4
billion of long-term debt. Tangible capital was approximately $1.8 billion.
Leverage was 22.2% on total capital and 24.5% on tangible capital. Total
capital and total tangible capital as at 31 December 2023 were $2.0 billion
and $1.8 billion respectively.
Dividends
On 7 August 2024, Lancashire’s Board of Directors declared an interim
dividend of $0.075 (approximately £0.06) per common share, which will result
in an aggregate payment of approximately $18 million. The dividend will be
paid in Pounds Sterling on 13 September 2024 (the “Dividend Payment Date”)
to shareholders of record on 16 August 2024 (the “Record Date”) using the
£ / $ spot market exchange rate at 12 noon London time on the Record Date.
Financial Information
The Unaudited Condensed Interim Consolidated Financial Statements for the six
months ended 30 June 2024 are published on Lancashire’s website at
www.lancashiregroup.com.
Analyst and Investor Earnings Conference Call
There will be an analyst and investor conference call on the results at 1pm UK
time / 9am Bermuda time / 8am EDT on Thursday 8 August 2024. The conference
call will be hosted by Lancashire management.
Participant Registration and Access Information:
Audio conference call access:
https://emportal.ink/3xuGeqi
Please register at this link to obtain your personal audio conference pin and
call details.
Webcast access:
https://onlinexperiences.com/Launch/QReg/ShowUUID=D955D147-C5EE45A9-9CAB-B3A4352B1089
Please use this link to register and access the call via webcast.
A webcast replay facility will be available for 12 months and accessible at:
https://www.lancashiregroup.com/en/investors/results-reports-and-presentations.html
For further information, please contact:
Lancashire Holdings Limited
Christopher Head +44 20 7264 4145 chris.head@lancashiregroup.com
Jelena Bjelanovic +44 20 7264 4066 jelena.bjelanovic@lancashiregroup.com
FTI Consulting
Edward Berry Edward.Berry@FTIConsulting.com
Tom Blackwell Tom.Blackwell@FTIConsulting.com
About Lancashire
Lancashire, through its operating subsidiaries, is a provider of global
specialty insurance and reinsurance products. The Group companies carry the
following ratings:
Financial Strength Rating 1 Financial Strength Outlook 1 Long Term Issuer Rating 2
A.M. Best A (Excellent) Stable bbb+
S&P Global Ratings A- Positive BBB
Moody’s A3 Stable Baa2
1. Financial Strength Rating and Financial Strength Outlook apply to
Lancashire Insurance Company Limited and Lancashire Insurance Company (UK)
Limited.
2. Long Term Issuer Rating applies to Lancashire Holdings Limited.
Lancashire Syndicates Limited benefits from Lloyd’s ratings: A.M. Best: A
(Excellent); S&P Global Ratings: AA- (Very Strong); and Fitch: AA- (Very
Strong).
Lancashire’s common shares trade in the equity shares (commercial companies)
category of the Main Market of the London Stock Exchange under the ticker
symbol LRE. Lancashire has its head office and registered office at Power
House, 7 Par-la-Ville Road, Hamilton HM 11, Bermuda.
The Bermuda Monetary Authority is the Group Supervisor of the Lancashire
Group.
For more information, please visit Lancashire’s website at
www.lancashiregroup.com.
Alternative Performance Measures (APMs)
As is customary in the insurance industry, the Group also utilises certain
non-GAAP measures in order to evaluate, monitor and manage the business and to
aid users’ understanding of the Group. Management believes that the APMs
included in the unaudited condensed interim consolidated financial statements
are important for understanding the Group’s overall results of operations
and may be helpful to investors and other interested parties who may benefit
from having a consistent basis for comparison with other companies within the
industry. However, these measures may not be comparable to similarly labelled
measures used by companies inside or outside the insurance industry. In
addition, the information contained herein should not be viewed as superior
to, or a substitute for, the measures determined in accordance with the
accounting principles used by the Group for its unaudited condensed interim
consolidated financial statements or in accordance with GAAP.
In compliance with the Guidelines on APMs of the European Securities and
Markets Authority and as suggested by the Financial Reporting Council, as
applied by the Financial Conduct Authority, information on APMs which the
Group uses is described below. This information has not been audited.
All amounts, excluding share data, ratios, percentages, or where otherwise
stated, are in millions of U.S. dollars.
Net insurance ratio:
Ratio, in per cent, of net insurance expenses to net insurance revenue. Net
insurance expenses represent the insurance service expenses less amounts
recoverable from reinsurers. Net insurance revenue represents insurance
revenue less allocation of reinsurance premium.
For the six months ended 30 June 2024 2023
Insurance service expense 472.2 288.5
Amounts recoverable from reinsurers (54.6) 30.9
Net insurance expense 417.6 319.4
Insurance revenue 854.1 720.9
Allocation of reinsurance premium (213.7) (212.7)
Net insurance revenue 640.4 508.2
Net insurance ratio 65.2% 62.8%
Operating expense ratio:
Ratio, in per cent, of other operating expenses, excluding restricted stock
expenses, to net insurance revenue.
For the six months ended 30 June 2024 2023
Other operating expenses 49.8 43.8
Net insurance revenue 640.4 508.2
Operating expense ratio 7.8% 8.6%
Combined ratio (discounted):
Ratio, in per cent, of the sum of net insurance expenses plus other operating
expenses to net insurance revenue.
For the six months ended 30 June 2024 2023
Net insurance ratio 65.2% 62.8%
Net operating expense ratio 7.8% 8.6%
Combined ratio (discounted) 73.0% 71.4%
Combined ratio (undiscounted) (KPI):
Ratio, in per cent, of the sum of net insurance expense plus other operating
expenses to net insurance revenue. This ratio excludes the impact of the
discounting recognised within net insurance expenses.
For the six months ended 30 June 2024 2023
Combined ratio (discounted) 73.0% 71.4%
Discount included in net insurance expense 59.0 39.4
Net insurance revenue 640.4 508.2
Discounting impact on combined ratio 9.2% 7.8%
Combined ratio (undiscounted) 82.2% 79.2%
Diluted book value per share ('DBVS') attributable to the Group:
Calculated based on the value of the total shareholders’ equity attributable
to the Group and dilutive restricted stock units as calculated under the
treasury method, divided by the sum of all shares and dilutive restricted
stock units, assuming all are exercised.
As at 30 June 2024 31 December 2023
Shareholders’ equity attributable to the Group 1,561,515,931 1,507,869,627
Common voting shares outstanding* 240,046,749 239,037,977
Shares relating to dilutive restricted stock 5,772,029 5,355,909
Fully converted book value denominator 245,818,778 244,393,886
Diluted book value per share $6.35 $6.17
*Common voting shares outstanding comprise issued share capital less amounts
held in trust.
Change in DBVS (KPI):
The internal rate of return of the change in DBVS in the period plus accrued
dividends. Sometimes referred to as RoE.
As at 30 June 2024 31 December 2023
Opening DBVS $6.17 $5.48
Q1 dividend per share $0.50 —
Q2 dividend per share $0.15 $0.10
Q3 dividend per share — $0.05
Q4 dividend per share — $0.50
Closing DBVS $6.35 $6.17
Change in DBVS* 14.0% 24.7%
*Calculated using the internal rate of return
Total investment return (KPI):
Total investment return in percentage terms is calculated by dividing the
total net investment return excluding interest income on non-managed cash and
cash equivalents, by the investment portfolio net asset value including
managed cash and cash equivalents, on a daily basis. These daily returns are
then geometric linked to provide a total return for the period. The total
investment return can be approximated by dividing the total net investment
return excluding interest on non-managed cash and cash equivalents by the
average portfolio net asset value, including managed cash and cash
equivalents.
For the six months ended 30 June 2024 2023
Net investment return 75.2 63.2
Less interest income on non-managed cash and cash equivalents (7.2) (4.7)
Net investment return excluding interest on non-managed cash and cash equivalents 68.0 58.5
Average invested assets including managed cash and cash equivalents* 2,829.1 2,527.0
Approximate total investment return 2.4% 2.3%
Reported total investment return 2.3% 2.2%
*Calculated as the average between the opening and closing investments and our
managed cash and cash equivalents.
Total shareholder return (KPI):
The increase/(decrease) in share price in the period, measured on a total
return basis, which assumes the reinvestment of dividends. The total return
measurement basis used will generally approximate the simple method of
calculating the increase/(decrease) in share price adjusted for dividends as
recalculated below.
As at 30 June 2024 31 December 2023
Opening share price $7.96 $7.86
Q1 dividend per share $0.50 —
Q2 dividend per share $0.15 $0.10
Q2 closing share price $7.76 —
Q3 dividend per share — $0.05
Q4 dividend per share — $0.50
Q4 closing share price — $7.96
Total shareholder return 5.6% 9.5%
Gross premiums written:
The Group adopted IFRS 17 on 1 January 2023. Under IFRS 4, the previous
insurance accounting standard, the Group reported gross premiums written on
the consolidated statement of comprehensive income as amounts payable by the
insured, excluding any taxes or duties levied on the premium, including
brokerage and commission deducted by intermediaries and any inwards
reinstatement premiums. The Group continues to report gross premiums written
as a growth metric and non-GAAP APM.
The table below reconciles gross premiums written on an IFRS 4 basis to
insurance revenue on an IFRS 17 basis.
For the six months ended 30 June 2024 2023
Gross premiums written 1,282.2 1,184.0
Change in unearned premiums (296.2) (357.6)
Gross earned premium 986.0 826.4
Adjust for reinstatement premium and expected premium 0.3 (4.2)
Less commission and non-distinct investment components (132.2) (101.3)
Total insurance revenue 854.1 720.9
Gross premiums written under management (KPI):
The gross premiums written under management equals the total of the Group’s
consolidated gross premiums written, plus the external names portion of the
gross premiums written in Syndicate 2010.
For the six months ended 30 June 2024 2023
Gross premiums written by the Group 1,282.2 1,184.0
LSL Syndicate 2010 - external Names portion of gross premiums written (unconsolidated) 75.7 92.8
Total gross premiums written under management 1,357.9 1,276.8
NOTE REGARDING RPI METHODOLOGY
THE RENEWAL PRICE INDEX (“RPI”) IS AN INTERNAL METHODOLOGY THAT MANAGEMENT
USES TO TRACK TRENDS IN PREMIUM RATES OF A PORTFOLIO OF INSURANCE AND
REINSURANCE CONTRACTS. THE RPI WRITTEN IN THE RESPECTIVE SEGMENTS IS
CALCULATED ON A PER CONTRACT BASIS AND REFLECTS MANAGEMENT’S ASSESSMENT OF
RELATIVE CHANGES IN PRICE, TERMS, CONDITIONS AND LIMITS AND IS WEIGHTED BY
PREMIUM VOLUME. THE RPI DOES NOT INCLUDE NEW BUSINESS, TO OFFER A CONSISTENT
BASIS FOR ANALYSIS. THE CALCULATION INVOLVES A DEGREE OF JUDGEMENT IN RELATION
TO COMPARABILITY OF CONTRACTS AND THE ASSESSMENT NOTED ABOVE. TO ENHANCE THE
RPI METHODOLOGY, MANAGEMENT MAY REVISE THE METHODOLOGY AND ASSUMPTIONS
UNDERLYING THE RPI, SO THE TRENDS IN PREMIUM RATES REFLECTED IN THE RPI MAY
NOT BE COMPARABLE OVER TIME. CONSIDERATION IS ONLY GIVEN TO RENEWALS OF A
COMPARABLE NATURE SO IT DOES NOT REFLECT EVERY CONTRACT IN THE PORTFOLIO OF
CONTRACTS. THE FUTURE PROFITABILITY OF THE PORTFOLIO OF CONTRACTS WITHIN THE
RPI IS DEPENDENT UPON MANY FACTORS BESIDES THE TRENDS IN PREMIUM RATES.
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,
STATEMENTS CONTAINING THE WORDS “BELIEVES”, “AIMS”, “ANTICIPATES”,
“PLANS”, “PROJECTS”, “FORECASTS”, “GUIDANCE”, “POLICY”,
“INTENDS”, “EXPECTS”, “ESTIMATES”, “PREDICTS”, “MAY”,
“CAN”, “LIKELY”, “WILL”, “SEEKS”, “SHOULD”, OR, IN EACH
CASE, THEIR NEGATIVE OR COMPARABLE TERMINOLOGY. SUCH FORWARD-LOOKING
STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER IMPORTANT
FACTORS THAT COULD CAUSE THE ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS OF
THE GROUP TO BE MATERIALLY DIFFERENT FROM FUTURE RESULTS, PERFORMANCE OR
ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. FOR A
DESCRIPTION OF SOME OF THESE FACTORS, SEE THE GROUP’S ANNUAL REPORT AND
ACCOUNTS FOR THE YEAR ENDED 31 DECEMBER 2023 AND THE GROUP’S UNAUDITED
CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED
30 JUNE 2024. IN ADDITION TO THOSE FACTORS CONTAINED IN THE GROUP’S ANNUAL
REPORT AND ACCOUNTS FOR THE YEAR ENDED 31 DECEMBER 2023 AND THE GROUP’S
UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS FOR THE SIX
MONTHS ENDED 30 JUNE 2024, ANY FORWARD-LOOKING STATEMENTS CONTAINED IN THIS
RELEASE MAY BE AFFECTED BY: THE IMPACT OF THE COLLAPSE OF THE FRANCIS SCOTT
KEY BRIDGE IN BALTIMORE WHICH OCCURRED IN THE FIRST QUARTER OF 2024, AND THE
CONTINUED HOSTILITIES IN THE MIDDLE EAST AND THEIR IMPACT ON THE REGION,
GLOBAL SUPPLY ROUTES AND INSURANCE AND FINANCIAL MARKETS. ALL
FORWARD-LOOKING STATEMENTS IN THIS RELEASE OR OTHERWISE SPEAK ONLY AS AT THE
DATE OF PUBLICATION. LANCASHIRE EXPRESSLY DISCLAIMS ANY OBLIGATION OR
UNDERTAKING (SAVE AS REQUIRED TO COMPLY WITH ANY LEGAL OR REGULATORY
OBLIGATIONS INCLUDING THE RULES OF THE LONDON STOCK EXCHANGE) TO DISSEMINATE
ANY UPDATES OR REVISIONS TO ANY FORWARD-LOOKING STATEMENT TO REFLECT ANY
CHANGES IN THE GROUP’S EXPECTATIONS OR CIRCUMSTANCES ON WHICH ANY SUCH
STATEMENT IS BASED. ALL SUBSEQUENT WRITTEN AND ORAL FORWARD-LOOKING STATEMENTS
ATTRIBUTABLE TO THE GROUP OR INDIVIDUALS ACTING ON BEHALF OF THE GROUP ARE
EXPRESSLY QUALIFIED IN THEIR ENTIRETY BY THIS NOTE. PROSPECTIVE INVESTORS
SHOULD SPECIFICALLY CONSIDER THE FACTORS IDENTIFIED IN THIS RELEASE AND THE
REPORT AND ACCOUNTS NOTED ABOVE WHICH COULD CAUSE ACTUAL RESULTS TO DIFFER
BEFORE MAKING AN INVESTMENT DECISION.
Consolidated statement of comprehensive income
For the six months ended 30 June 2024 $m 2023 $m
Insurance revenue 854.1 720.9
Insurance service expenses (472.2) (288.5)
Insurance service result before reinsurance contracts held 381.9 432.4
Allocation of reinsurance premium (213.7) (212.7)
Amounts recoverable from reinsurers 54.6 (30.9)
Net expense from reinsurance contracts held (159.1) (243.6)
Insurance service result 222.8 188.8
Net investment return 75.2 63.2
Finance expense from insurance contracts issued (28.3) (37.7)
Finance income from reinsurance contracts held 9.3 14.1
Net insurance and investment result 279.0 228.4
Share of profit of associate 7.5 5.2
Other income 4.8 1.1
Net foreign exchange losses (2.0) (1.0)
Other operating expenses (49.8) (43.8)
Equity based compensation (9.6) (7.2)
Financing costs (16.3) (15.5)
Profit before tax 213.6 167.2
Tax charge (12.8) (8.0)
Profit after tax 200.8 159.2
Earnings per share
Basic $0.84 $0.67
Diluted $0.82 $0.66
Consolidated statement of financial position
As at 30 June 2024 $m 31 December 2023 $m
Assets
Cash and cash equivalents 698.2 756.9
Accrued interest receivable 21.5 16.7
Investments 2,628.1 2,455.5
Reinsurance contract assets 449.1 387.8
Other receivables 27.0 58.4
Investment in associate 16.1 16.2
Right-of-use assets 17.7 19.3
Property, plant and equipment 9.4 9.8
Intangible assets 181.7 181.1
Total assets 4,048.8 3,901.7
Liabilities
Insurance contract liabilities 1,936.3 1,823.7
Other payables 51.9 80.6
Corporation tax payable 7.3 2.0
Deferred tax liability 21.5 16.2
Lease liabilities 23.5 24.7
Long-term debt 446.8 446.6
Total liabilities 2,487.3 2,393.8
Shareholders' equity
Share capital 122.0 122.0
Own shares (23.7) (29.7)
Other reserves 1,235.9 1,233.2
Retained earnings 227.3 182.4
Total shareholders’ equity 1,561.5 1,507.9
Total liabilities and shareholders’ equity 4,048.8 3,901.7
Consolidated statements of cash flows
For the six months ended 30 June 2024 $m 2023 $m
Cash flows from operating activities
Profit before tax 213.6 167.2
Adjustments for:
Tax paid (1.8) (0.1)
Depreciation 3.1 1.8
Amortisation of intangible assets 0.3 —
Interest expense on long-term debt 12.9 12.9
Interest expense on lease liabilities 0.8 0.8
Interest income (61.7) (41.4)
Dividend income (8.2) (5.1)
Net realised losses 1.2 3.7
Net unrealised gains on investments (6.9) (18.3)
Equity based compensation 9.6 7.2
Foreign exchange losses 1.0 0.6
Share of profit of associate (7.5) (5.2)
Changes in operational assets and liabilities
Insurance and reinsurance contracts 57.3 44.2
Other assets and liabilities 3.5 18.0
Net cash flows from operating activities 217.2 186.3
Cash flows used in investing activities
Interest income received 56.9 38.7
Dividend income received 8.2 5.1
Purchase of property, plant and equipment (0.8) (3.4)
Internally generated intangible asset (0.9) (5.1)
Investment in associate 7.5 40.6
Purchase of investments (802.0) (551.0)
Proceeds on sale of investments 634.5 398.3
Net cash flows used in investing activities (96.6) (76.8)
Cash flows used in financing activities
Interest paid (12.9) (12.9)
Lease liabilities paid (2.0) (2.0)
Dividends paid (155.9) (23.9)
Distributions by trust (1.3) —
Net cash flows used in financing activities (172.1) (38.8)
Net (decrease) increase in cash and cash equivalents (51.5) 70.7
Cash and cash equivalents at beginning of period 756.9 548.8
Effect of exchange rate fluctuations and other items on cash and cash equivalents (7.2) 0.8
Cash and cash equivalents at end of period 698.2 620.3
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