1st May 2007 18:27
Lancashire Holdings Limited01 May 2007 LANCASHIRE HOLDINGS LIMITED Lancashire reports excellent results for the first quarter of 2007 Fully converted book value grows 7.2% Combined ratio of 47.3% Hamilton, Bermuda, 1 May 2007 Lancashire Holdings ("Lancashire" or "the Company") today announces its firstquarter results for the three month period ended 31 March 2007. Financial Highlights • Fully converted book value per share of $6.09 for the end of the first quarter of 2007, reflecting growth of $0.41, or 7.2%, over the quarter. • Growth in fully converted book value per share of 24.3% in the twelve months to March 31, 2007. • For the three months ended March 31, 2007, the Company generated operating income(1) of $88.1 million, or $0.43 diluted operating earnings per common share. • Net income after tax was $87.9 million or $0.43 diluted earnings per common share in the quarter, compared to net income of $9.3 million or $0.05 diluted earnings per common share for the same quarter of 2006. The Company's first quarter 2007 results benefited from light loss activity inthe majority of classes. The first quarter of 2006 was the Company's firstoperational quarter after its formation in late 2005 and, as such, year on yearcomparisons should be viewed in that context. Richard Brindle, Group Chief Executive Officer, commented: "We are very pleased with the results that Lancashire achieved in the firstquarter of 2007. Since our launch in December 2005, we have become a majorplayer in the insurance industry by maintaining clear operating principles,executing a sound business strategy, exploiting competitive advantages, andactively managing the cycle. "Our UK underwriting platform, which was launched in the fourth quarter of 2006,has made a notable contribution to our growing market position over the pastseveral months. The increase in submissions in the first quarter of 2007compared to the same period in 2006 has been very strong, resulting in 60%growth in our gross written premiums year on year. As always, we will remaincommitted to strong underwriting discipline. "Substantial premium growth, combined with better than expected loss experience,was the primary driver behind Lancashire's ROE of 7.2% for the first quarter.Year on year premium growth in subsequent quarters will likely be lower than60%; however, our previously stated 2007 ROE estimate of between 20% and 25%,assuming a normal level of losses, and premium growth estimate of at least 20%,based on anticipated pricing and terms, remain unchanged. "Going forward, we remain reasonably optimistic about trading conditionsthroughout 2007. In the majority of classes of risks written by Lancashire, withthe exception of marine, favourable 2006 pricing and terms are largely expectedto continue throughout 2007. In classes not exposed to natural catastrophes,there may be some modest weakening of trading conditions, but pricing isexpected to remain broadly acceptable in most classes. We have also seen areduction in demand and rate levels for property catastrophe retrocession.Overall, the outlook for 2007 trading conditions for Lancashire is attractive. We believe our business plan, as a diversified direct specialty insurancewriter, lends itself to strong performance through hard and soft cycles. Weunderwrite a diverse worldwide portfolio of short-tail property risks. Programsare mostly written on a direct basis, and the majority of the 2007 book is notexpected to be significantly exposed to natural catastrophes. We believe thisstrategy will generate above average returns for shareholders over time." Lancashire Holdings Limited summary consolidated income statements ($ millions, except per share amounts) q1 q1 2007 2006 (unaudited) (unaudited) gross premiums written $ 180.7 $ 112.4outwards reinsurance premiums (6.1) - net premiums written 174.6 112.4 change in unearned premiums (27.6) (93.6)change in unearned premiums on premium ceded (6.8) - net premiums earned 140.2 18.8 net investment income 16.7 11.5other investment income (0.1) -share of profit of associate 1.3 - total net revenue 158.1 30.3 insurance losses and loss adjustment expenses 32.0 4.0insurance losses and loss adjustment expenses recoverable - -net insurance acquisition expenses 20.3 1.9finance costs 3.0 2.5equity based compensation - share options 0.7 2.2other operating expenses 14.0 5.9 total expenses 70.0 16.5 net operating income 88.1 13.8 equity based compensation - warrants 3.0 3.8net foreign exchange gains (losses) 1.4 (0.6)net realised gains (losses) and impairments 1.8 (0.1) profit before tax 88.3 9.3 tax 0.4 - profit after tax for the period attibutable to equity shareholders $ 87.9 $ 9.3 insurance ratios: net loss ratio 22.8% 21.3%net acquisition cost ratio 14.5% 10.1%administrative expense ratio 10.0% 31.4%combined ratio 47.3% 62.8% earnings per share: basic earnings per share $ 0.45 $ 0.05 diluted earnings per share $ 0.43 $ 0.05 Lancashire Holdings Limited summary consolidated balance sheets ($ millions, except per share amounts) march 31, 2007 december 31, 2006 (unaudited) (audited)assets cash & cash equivalents $ 366.6 $ 400.1accrued interest receivable 9.5 7.5investments- fixed income securities 1,109.7 896.3 - equity securities 65.2 70.3- other investments 11.1 11.5reinsurance assets - reinsurance balances receivable 0.6 -- unearned premium on premium ceded 12.2 19.1deferred acquisition costs 55.7 51.5inwards premium receivable from insureds and cedants 179.5 173.7 investment in associate 23.6 23.2other assets 16.4 9.5total assets $ 1,850.1 $ 1,662.7 liabilities insurance contracts - loss and loss adjustment expenses $ 70.1 $ 39.1 - unearned premiums 353.3 325.7 - other payables 6.7 3.6amounts payable to reinsurers 5.1 2.4deferred acquisition costs ceded 2.5 2.5other payables 49.9 23.2long-term debt 129.0 128.6total liabilities 616.6 525.1 shareholders' equity share capital 97.9 97.9share premium 37.2 33.6contributed surplus 849.7 849.7fair value and other reserves 13.1 8.7retained earnings 235.6 147.7total shareholders' equity attributable to equity shareholders $ 1,233.5 $ 1,137.6 total liabilites and shareholders' equity $ 1,850.1 $ 1,662.7 basic book value per share $ 6.30 $ 5.81 fully converted book value per share $ 6.09 $ 5.68 Further detail of our 2007 first quarter results can be obtained from ourFinancial Supplement. This can be accessed via our websitewww.lancashiregroup.com. Lancashire will be hosting an analyst and investor conference call at 1:30 UKtime / 8:30 EDT on 2 May 2007 to discuss our trading update. The conference callwill be hosted by Richard Brindle, Group Chief Executive Officer, Simon Burton,Deputy Chief Executive Officer and Neil McConachie, Chief Financial Officer. The call can be accessed by dialing +44 (0) 20 7138 0816 / +1 718 354 1171. Areplay facility will be available for two weeks until Wednesday 16 May. The dialin number for the replay facility is +44 (0) 20 7806 1970 / +1 718 354 1112 andthe passcode is 4900982#. For further information, please contact: Lancashire Holdings +1 441 278 8950Neil McConachie Financial Dynamics +44 20 7269 7114Robert BailhacheNick Henderson Kekst & Company Inc.Michael Herley (1) 212 521 4897Mark Semer (1) 212 521 4802 Investor enquiries and questions can also be directed to [email protected] by accessing the Company's website www.lancashiregroup.com. About Lancashire Lancashire, through its UK and Bermuda-based insurance subsidiaries, is a globalprovider of specialty insurance products. Its insurance subsidiaries carry theLancashire group rating of A minus (Excellent) from A.M. Best with a stableoutlook. Lancashire has capital in excess of $1 billion and its Common Sharestrade on AIM under the ticker symbol LRE. Lancashire is headquartered atMintflower Place, 8 Par-La-Ville Road, Hamilton HM 08, Bermuda. The mailingaddress is Lancashire Holdings Limited, P.O. Box HM 2358, Hamilton HM HX,Bermuda. For more information on Lancashire, visit the company's website atwww.lancashiregroup.com NOTE REGARDING FORWARD-LOOKING STATEMENTS: CERTAIN STATEMENTS AND INDICATIVE PROJECTIONS MADE IN THIS ANNOUNCEMENT AND ONTHE CONFERENCE CALL THAT ARE NOT BASED ON CURRENT OR HISTORICAL FACTS AREFORWARD-LOOKING IN NATURE INCLUDING WITHOUT LIMITATION, STATEMENTS CONTAININGWORDS "BELIEVES", "ANTICIPATES", "PLANS", "PROJECTS", "FORECASTS", "INTENDS","EXPECTS", "ESTIMATES", "PREDICTS", "MAY", "WILL", "SEEKS", "SHOULD", OR, INEACH CASE, THEIR NEGATIVE OR COMPARABLE TERMINOLOGY. ALL STATEMENTS OTHER THANSTATEMENTS OF HISTORICAL FACTS INCLUDING, WITHOUT LIMITATION, THOSE REGARDINGTHE GROUP'S FINANCIAL POSITION, RESULTS OF OPERATIONS, LIQUIDITY, PROSPECTS,GROWTH, BUSINESS STRATEGY, PLANS AND OBJECTIVES OF MANAGEMENT FOR FUTUREOPERATIONS (INCLUDING DEVELOPMENT PLANS AND OBJECTIVES RELATING TO THE GROUP'SINSURANCE BUSINESS) ARE FORWARD-LOOKING STATEMENTS. SUCH FORWARD-LOOKINGSTATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER IMPORTANTFACTORS THAT COULD CAUSE THE ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS OF THEGROUP TO BE MATERIALLY DIFFERENT FROM FUTURE RESULTS, PERFORMANCE OR ACHIEVMENTSEXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. THESE FACTORS INCLUDE,BUT ARE NOT LIMITED TO: THE NUMBER AND TYPE OF INSURANCE AND REINSURANCECONTRACTS THAT WE WRITE; THE PREMIUM RATES AVAILABLE AT THE TIME OF SUCHRENEWALS WITHIN OUR TARGETED BUSINESS LINES; THE ABSENCE OF LARGE OR UNUSUALLYFREQUENT LOSS EVENTS; THE IMPACT THAT OUR FUTURE OPERATING RESULTS, CAPITALPOSITION AND RATING AGENCY AND OTHER CONSIDERATIONS HAVE ON THE EXECUTION OF ANYCAPITAL MANAGEMENT INITIATIVES; THE POSSIBILITY OF GREATER FREQUENCY OR SEVERITYOF CLAIMS AND LOSS ACTIVITY THAN OUR UNDERWRITING, RESERVING OR INVESTMENTPRACTICES HAVE ANTICIPATED; THE RELIABILITY OF, AND CHANGES IN ASSUMPTIONS TO,CATASTROPHE PRICING, ACCUMULATION AND ESTIMATED LOSS MODELS; LOSS OF KEYPERSONNEL; A DECLINE IN OUR OPERATING SUBSIDIARIES' RATING WITH A.M. BESTCOMPANY; INCREASED COMPETITION ON THE BASIS OF PRICING, CAPACITY, COVERAGE TERMSOR OTHER FACTORS; A CYCLICAL DOWNTURN OF THE INDUSTRY; CHANGES IN GOVERNMENTALREGULATIONS OR TAX LAWS IN JURISDICTIONS WHERE LANCASHIRE CONDUCTS BUSINESS;LANCASHIRE OR ITS BERMUDIAN SUBSIDIARY BECOMING SUBJECT TO INCOME TAXES IN THEUNITED STATES OR THE UNITED KINGDOM; AND THE EFFECTIVENESS OF OUR LOSSLIMITATION METHODS. THESE FORWARD-LOOKING STATEMENTS SPEAK ONLY AS AT THE DATE OF PUBLICATION OFTHIS DOCUMENT. LANCASHIRE HOLDINGS LIMITED EXPRESSLY DISCLAIMS ANY OBLIGATION ORUNDERTAKING (SAVE AS REQUIRED TO COMPLY WITH ANY LEGAL OR REGULATORY OBLIGATIONS(INCLUDING THE AIM RULES)) TO DISSEMINATE ANY UPDATES OR REVISIONS TO ANYFORWARD-LOOKING STATEMENTS TO REFLECT ANY CHANGES IN THE GROUP'S EXPECTATIONS ORCIRCUMSTANCES ON WHICH ANY SUCH STATEMENT IS BASED. -------------------------- (1) Operating income excludes realized gains and losses, foreign exchange gainsor losses, warrants issued at the IPO and taxes. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Lancashire Holdings