17th May 2006 07:02
Lancashire Holdings Limited17 May 2006 Lancashire Holdings Limited Hamilton, Bermuda, 17 May 2006 LANCASHIRE REPORTS CONTINUED STRONG TRADING CONDITIONS Lancashire Holdings Limited ("Lancashire" or "the Company") today released astatement on current trading conditions and on operations. Lancashire, which writes a diversified portfolio of insurance, reinsurance andretrocession business, is continuing to experience strong overall tradingconditions. Lancashire's worldwide underwriting focus is on short-tail property,energy, marine and aviation classes. Lancashire's largest single class is offshore energy, having quickly establisheditself as one of the leading writers of this line in the market. Tradingconditions for offshore energy have been significantly better than anticipatedand are continuing to improve further as market capacity decreases. In the Gulfof Mexico, pricing has increased by several hundred percent while coverage hasbeen severely restricted. In the direct facultative property market, pricing hasbeen steadily improving and Lancashire's writings are accelerating. Propertyretrocession has experienced excellent conditions to date, while propertycatastrophe reinsurance is becoming more attractive in select areas. Lancashirehas the flexibility to allocate capacity between property retrocession andproperty catastrophe reinsurance to best take advantage of availableopportunities. The Marine classes have been inconsistent. January saw adisappointing renewal season for marine reinsurance however we have seenstronger renewals more recently in certain direct classes. Aviation business ismodestly ahead of plan so far, with a major renewal date still to come in thelast quarter of the year. Richard Brindle, Chief Executive Officer and Chief Underwriting Officer,commented: "Lancashire has made an excellent start. Broker support for our clean capitaland strong management team has been broad, the quality of bound deals has beenhigh, and the pricing and terms in our focus areas have been extremelyencouraging. However, underwriting discipline has been and always will be ourfirst priority and where we have found risks to be unacceptable, we havedeclined them. We continue to keep our powder dry in key classes where capacityis increasingly limited. Since our previous trading statement, we are pleased tohave recruited five senior personnel to our team: Simon Burton as Deputy ChiefUnderwriting Officer, Bryan Bumsted as Property Retrocession Underwriter, SimonThurgood as Terrorism Specialist, Vince Lombardi as Marine Specialist and ColinAlexander as Operations Director. Each new team member brings with them deepexperience in their respective fields." Richard Brindle continued: "Looking forward, we are very optimistic that Lancashire will develop into aworld-class specialty insurer which will stand the test of time. While wecontinue to build out our front and back office functions, we are committed toremaining a nimble organization, capable of right-sizing our business throughhard and soft cycles. We will maintain underwriting discipline throughout, andour top line and capital levels across the cycle will naturally reflect thevolume of business which meets our return criteria. We believe that this provenstrategy will generate superior returns for shareholders over the long term." Gross written premium bound and expected to be bound for the six months through30 June is projected at between $320 and $350 million. Based on current tradingconditions, it is anticipated that gross premium for 2006 on an underwritingyear basis will be between $675 and $800 million compared with an illustrativeprojection of $822 million at the time of the IPO. On a GAAP basis, we expect2006 gross premium of between $615 million and $725 million. The updated premiumprojections primarily relate to disappointing conditions in marine businesswhere we have declined a high number of submissions together with a slow startin the terrorism class, partially offset by better than expected conditions inoffshore energy. As the year progresses and the level of bound deals continue tobuild, we expect to narrow this range of projected premium. For the business bound, rates and terms have been better than anticipated andexpected profitability on the deals written is higher overall than Lancashireexpected at the time of its launch. Returns on equity in this first year ofbusiness are projected at between 16 and 20% after tax, in line with thebusiness plan for 2006. This range assumes a normal level of loss activityacross the portfolio. Neil McConachie, Chief Financial Officer and Chief Operating Officer, commented: "Capital levels remain appropriate and Lancashire is operating well within riskmanagement tolerances at this time. Our shareholder funds are now fullyinvested, with a primary focus on limiting the downside potential. On theoperational front, the development of Lancashire's infrastructure continuesapace. We are steadily adding to our team with 27 employees now recruited. Aswell as additional front office personnel, we have expanded in the finance,modeling and operations departments." Lancashire's next trading update will incorporate the announcement of interimresults for the six month period ended 30 June 2006. There will be a conference call on Wednesday 17 May at 1600 UK time (BST) on +44 (0)20 7365 1854. This conference call will be hosted by Richard Brindle,Chief Executive Officer and Chief Underwriting Officer; Neil McConachie, ChiefFinancial Officer and Chief Operating Officer; and Simon Burton, Deputy ChiefUnderwriting Officer. A replay of the conference call will be available for twoweeks until 31 May 2006. The dial in number for replay is +44 (0)20 7806 1970and the pass code is 3344385#. The replay facility can also be accessed atwww.lancashire.bm. For further information, please contact: Lancashire Holdings +1 441 278 8950Neil McConachie Financial Dynamics +44 20 7269 7200Rob BailhacheNick Henderson www.lancashire.bm About Lancashire Lancashire was established in 2005 as a new insurance and reinsurance businessto take advantage of the favourable underwriting conditions expected to arisefrom the large insured losses incurred in 2004 and 2005. The Company has an A.M.Best rating of A- (Excellent) with a stable outlook. Lancashire was admitted to AIM on 16 December 2005 following an Offer of CommonShares to investors. The Common Shares trade on AIM under the ticker symbol LRE. NOTE REGARDING FORWARD-LOOKING STATEMENTS CERTAIN STATEMENTS MADE IN THIS ANNOUNCEMENT OR ON THE CONFERENCE CALL THAT ARENOT BASED ON CURRENT OR HISTORICAL FACTS ARE FORWARD-LOOKING IN NATUREINCLUDING, WITHOUT LIMITATION, STATEMENTS CONTAINING WORDS "BELIEVES","ANTICIPATES", "PLANS", "PROJECTS", "INTENDS", "EXPECTS", "ESTIMATES","PREDICTS", "MAY", "WILL", "SEEKS", "SHOULD" OR, IN EACH CASE, THEIR NEGATIVE ORCOMPARABLE TERMINOLOGY. ALL STATEMENTS OTHER THAN STATEMENTS OF HISTORICAL FACTSINCLUDING, WITHOUT LIMITATION, THOSE REGARDING THE GROUP'S FINANCIAL POSITION,RESULTS OF OPERATIONS, LIQUIDITY, PROSPECTS, GROWTH, BUSINESS STRATEGY, PLANSAND OBJECTIVES OF MANAGEMENT FOR FUTURE OPERATIONS (INCLUDING DEVELOPMENT PLANSAND OBJECTIVES RELATING TO THE GROUP'S INSURANCE BUSINESS) ARE FORWARD-LOOKINGSTATEMENTS. 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 FUTURERESULTS, PERFORMANCE OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCHFORWARD-LOOKING STATEMENTS. THESE FORWARD-LOOKING STATEMENTS SPEAK ONLY AS ATTHE DATE OF THIS ANNOUNCEMENT OR OTHER INFORMATION CONCERNED. LANCASHIREHOLDINGS LIMITED EXPRESSLY DISCLAIMS ANY OBLIGATION OR UNDERTAKING (SAVE ASREQUIRED TO COMPLY WITH ANY LEGAL OR REGULATORY OBLIGATIONS (INCLUDING THE AIMRULES)) TO DISSEMINATE ANY UPDATES OR REVISIONS TO ANY FORWARD-LOOKINGSTATEMENTS CONTAINED HEREIN TO REFLECT ANY CHANGES IN THE GROUP'S EXPECTATIONSWITH REGARD THERETO OR ANY CHANGE IN EVENTS, CONDITIONS OR CIRCUMSTANCES ONWHICH ANY SUCH STATEMENT IS BASED. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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