Lancashire Holdings Limited (LCSHF) Q4 2024 Earnings Call Transcript

2025-03-06 10:46:41 ET

Lancashire Holdings Limited (LCSHF)

Q4 2024 Earnings Conference Call

March 06, 2025, 08:00 AM ET

Company Participants

Alex Maloney - Group CEO

Paul Gregory - Group Chief Underwriting Officer and LCM CEO

Natalie Kershaw - Group CFO

Jelena Bjelanovic – Investor Relations

Conference Call Participants

Kamran Hossain – JPMorgan

Anthony Young - Goldman Sachs

William Hawkins - KBW

Joseph Theuns - Autonomous

Derald Goh - RBC

Emanuele Musio - Citi

Nick Johnson - Deutsche Numis

Faizan Lakhani - HSBC

Daniel Wilson - Morgan Stanley

Abid Hussain - Panmure Liberum

Presentation

Operator

Hello, and welcome to the Lancashire Full Year 2024 Earnings Conference Call.

The speakers today will be Alex Maloney, Group CEO; Natalie Kershaw, Group CFO; and Paul Gregory, Group Chief Underwriting Officer.

I’ll now turn over the call to Alex. Please go ahead.

Alex Maloney

Good afternoon, everyone. Thank you for joining our call today. We are going to do the things a bit differently today. I'd like to a moment first of all to reiterate our strategy. I’ll then follow on with some brief highlights from 2024 and then priorities for our business for 2025. Paul will then. Paul will then focus on the underwriting trends, Natalie will cover the financials and then we'll go to Q&A.

We adopt our strategy to where we are in the cycle, that’s how our DNA remains the same. We leave with underwriting, looking to maximize growth opportunities at this stage of the cycle. And we actively manage our capital and risk exposures to deliver attractive returns through cycle. We do that with fantastic people where we look to attract and retain the best talent that fits within our culture. Some of you may remember me saying five or so years ago that we will look to grow materially as the cycle started to improve that we will use our capital more efficiently and we will diversify our underwriting portfolios to reduce volatility.

If I now turn to 2024, you can see this is exactly what we have done. In another year of high industry insured losses, both natural catastrophe and large risk losses, we've delivered a fantastic ROE of 23.4%. We grew our premiums by another 11% in 2024. To put this into context, since the end of 2017, which was the softest point in the underwriting cycle, we have now more than tripled our premiums and added over 20 different subproducts to our underwriting portfolio. We've delivered a strong underwriting result. The benefits of the successful execution of our strategy is evident in our combined ratio of 80% on a discounted basis or 89.1% on an undiscounted basis. This includes over $200 million of weather and large risk losses, but the broader business we now have is better able to absorb large loss events.

And although underwriting noise comes first for us, as a broader business, we are also benefiting from a larger investment portfolio. This gives us a bigger stock of profits that ultimately help the bottom line. And we've delivered all of this without dramatically increasing our capital base. In fact, we were able to return the vast majority of our 2024 profits in regular and special dividends. And we have reached $294 million and still remain with a very healthy strong balance sheet. 2024 is exactly what we set out to do as the market started to improve in 2018.

As I look into 2025, the plan is to do more of the same. The external environment remains uncertain. So far this year we're seeing a lot of geopolitical change and a number of highly publicized large events, particularly in the aviation space. And of course, we have seen the devastating impact of the wildfires in Los Angeles. Lancashire's strategy remains unchanged. The products we sell are designed to respond to the uncertain environment. And as already announced, we expect the LA wildfires to result in a net loss in the range of $145 million to $165 million.

As Paul and Natalie will outline, we anticipate delivering an ROE in the mid-teens for 2025, assuming a similar level of catastrophe and large losses as we saw in 2024 in addition to the wildfire loss....

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