Update on Ike Estimate, Comments on Trading Con...
LANCASHIRE HOLDINGS LIMITED
LANCASHIRE UPDATES ESTIMATE OF THE FINANCIAL IMPACT OF HURRICANE IKE, COMMENTS
ON TRADING CONDITIONS
8 April 2009
Hamilton, Bermuda
Lancashire Holdings Limited ("Lancashire" or "the Company") today announced
that it has increased its estimated financial impact of Hurricane Ike.
Lancashire currently estimates that Hurricane Ike will have a net negative
impact on its financial results of approximately US$189.2 million, an increase
of US$38.4 million from the previous estimate of US$150.8 million. Net negative
impact includes the sum of gross claims and claims expenses, reinsurance
recoveries, reinstatement premiums, taxes and other adjustments.
The updated loss estimate is driven by Gulf of Mexico offshore energy
contracts. Reasons for the increase include updated loss notifications from
insureds of additional operational and weather-related delays in repair of
damaged assets, and increased costs associated with removal of wreckage.
This estimate is based on management's assessment of impacted contracts, a
review of the Company's potential exposures and discussions with certain
counterparties, including brokers. Lancashire's actual ultimate net losses from
these events may vary materially from this estimate.
Richard Brindle, Group Chief Executive Officer, commented:
"Hurricane Ike was one of the most powerful storms ever to hit the Gulf of
Mexico. Industry measures point to Ike being in the top three most damaging
hurricanes to the offshore energy sector since records began.
Market capacity available to write this class in 2009 is estimated to have
dropped by approximately half since 2008. As anticipated, early indications are
that pricing is up dramatically while coverage is significantly reduced. These
factors have led to what is presently a highly dislocated market, with a
correspondingly later renewal season than normal. Lancashire, as one of the
major energy leaders, continues to shape this market. We exercised patience in
the utilisation of our balance sheet in the first quarter, writing an
insignificant amount of Gulf of Mexico energy risks. We took a similar approach
in other capacity-constrained classes where we believe pricing will improve as
the year progresses. We expect a surge in demand during the second quarter as
we approach the onset of hurricane season.
Overall, we expect to achieve moderate growth in book value per share in the
first quarter. We believe we are extremely well placed to take advantage of
highly compelling opportunities in both the energy market and across our
portfolio."
For further information, please contact:
Lancashire Holdings + 44 (0)20 7264 4000
Jonny Creagh-Coen
Financial Dynamics +44 (0)20 7269 7114
Robert Bailhache
Nick Henderson
Investor enquiries and questions can also be directed to
investors@lancashiregroup.com or by accessing the Company's website
www.lancashiregroup.com.
About Lancashire
Lancashire, through its UK and Bermuda-based insurance subsidiaries, is a
global provider of specialty insurance products. Its insurance subsidiaries
carry the Lancashire group rating of A minus (Excellent) from A.M. Best with a
stable outlook. Lancashire has capital in excess of $1 billion dollars and its
Common Shares trade on the main market of the London Stock Exchange under the
ticker symbol LRE. Lancashire is headquartered at Mintflower Place, 8
Par-La-Ville Road, Hamilton HM 08, Bermuda. The mailing address is Lancashire
Holdings Limited, P.O. Box HM 2358, Hamilton HM HX, Bermuda. For more
information on Lancashire, visit the Company's website at
www.lancashiregroup.com.
NOTE REGARDING FORWARD-LOOKING STATEMENTS:
CERTAIN STATEMENTS AND INDICATIVE PROJECTIONS MADE IN THIS ANNOUNCEMENT THAT
ARE NOT BASED ON CURRENT OR HISTORICAL FACTS ARE FORWARD-LOOKING IN NATURE
INCLUDING WITHOUT LIMITATION, STATEMENTS CONTAINING WORDS 'BELIEVES',
'ANTICIPATES', 'PLANS', 'PROJECTS', 'FORECASTS', 'GUIDANCE', 'INTENDS',
'EXPECTS', 'ESTIMATES', 'PREDICTS', 'MAY', 'CAN', 'WILL', 'SEEKS', 'SHOULD',
OR, IN EACH CASE, THEIR NEGATIVE OR COMPARABLE TERMINOLOGY. ALL STATEMENTS
OTHER THAN STATEMENTS OF HISTORICAL FACTS INCLUDING, WITHOUT LIMITATION, THOSE
REGARDING THE GROUP'S FINANCIAL POSITION, RESULTS OF OPERATIONS, LIQUIDITY,
PROSPECTS, GROWTH, CAPITAL MANAGEMENT PLANS, BUSINESS STRATEGY, PLANS AND OBJECTIVES
OF MANAGEMENT FOR FUTURE OPERATIONS (INCLUDING DEVELOPMENT PLANS AND OBJECTIVES
RELATING TO THE GROUP'S INSURANCE BUSINESS)ARE FORWARD-LOOKING STATEMENTS. 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 ACHIEVMENTS
EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS.
THESE FACTORS INCLUDE, BUT ARE NOT LIMITED TO: THE NUMBER AND TYPE OF INSURANCE
AND REINSURANCE CONTRACTS THAT WE WRITE; THE PREMIUM RATES AVAILABLE AT THE
TIME OF SUCH RENEWALS WITHIN OUR TARGETED BUSINESS LINES; THE ABSENCE OF LARGE
OR UNUSUALLY FREQUENT LOSS EVENTS; THE IMPACT THAT OUR FUTURE OPERATING
RESULTS, CAPITAL POSITION AND RATING AGENCY AND OTHER CONSIDERATIONS HAVE ON
THE EXECUTION OF ANY CAPITAL MANAGEMENT INITIATIVES; THE POSSIBILITY OF GREATER
FREQUENCY OR SEVERITY OF CLAIMS AND LOSS ACTIVITY THAN OUR UNDERWRITING,
RESERVING OR INVESTMENT PRACTICES HAVE ANTICIPATED; THE RELIABILITY OF, AND
CHANGES IN ASSUMPTIONS TO, CATASTROPHE PRICING, ACCUMULATION AND ESTIMATED LOSS
MODELS; LOSS OF KEY PERSONNEL; A DECLINE IN OUR OPERATING SUBSIDIARIES' RATING
WITH A.M. BEST COMPANY; INCREASED COMPETITION ON THE BASIS OF PRICING,
CAPACITY, COVERAGE TERMS OR OTHER FACTORS; A CYCLICAL DOWNTURN OF THE INDUSTRY;
THE IMPACT OF A DETERIORATING CREDIT ENVIRONMENT CREATED BY THE FINANCIAL
MARKETS AND CREDIT CRISIS; A RATING DOWNGRADE OF, OR A MARKET DECLINE IN,
SECURITES IN OUR INVESTMENT PORTFOLIO; CHANGES IN GOVERNMENTAL REGULATIONS OR
TAX LAWS IN JURISDICTIONS WHERE LANCASHIRE CONDUCTS BUSINESS; LANCASHIRE OR ITS
BERMUDIAN SUBSIDIARY BECOMING SUBJECT TO INCOME TAXES IN THE UNITED STATES OR
THE UNITED KINGDOM; AND THE EFFECTIVENESS OF OUR LOSS LIMITATION METHODS. ANY
ESTIMATES RELATING TO LOSS EVENTS INVOLVE THE EXERCISE OF CONSIDERABLE JUDGMENT
AND REFLECT A COMBINATION OF GROUND-UP EVALUATIONS, INFORMATION AVAILABLE TO
DATE FROM BROKERS AND INSUREDS, MARKET INTELLIGENCE, INITIAL TENTATIVE LOSS
REPORTS AND OTHER SOURCES. JUDGMENTS IN RELATION TO FLOOD LOSSES INVOLVE COMPLEX
FACTORS POTENTIALLY CONTRIBUTING TO THIS TYPE OF LOSS, AND WE CAUTION AS TO THE
PRELIMINARY NATURE OF THE INFORMATION USED TO PREPARE ANY SUCH ESTIMATES.
THESE FORWARD-LOOKING STATEMENTS SPEAK ONLY AS AT THE DATE OF PUBLICATION OF
THIS ANNOUNCEMENT. LANCASHIRE HOLDINGS LIMITED 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 ANYFORWARD-LOOKING STATEMENTS TO
REFLECT ANY CHANGES IN THE GROUP'S EXPECTATIONS OR CIRCUMSTANCES ON WHICH ANY
SUCH STATEMENT IS BASED.
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