Lancashire Hld Ltd LRE 3rd Quarter Results

  Lancashire Hld Ltd (LRE) - 3rd Quarter Results

RNS Number : 6038Q
Lancashire Holdings Limited
08 November 2012




                                      

                                      

                         LANCASHIRE HOLDINGS LIMITED

                                      

         GROWTH IN FULLY CONVERTED BOOK VALUE PER SHARE, ADJUSTED FOR

              DIVIDENDS, OF 5.7% IN Q3 2012, 13.2% YEAR TO DATE

            COMBINED RATIO OF 48.9% IN Q3 2012, 61.1% YEAR TO DATE

      FULLY CONVERTED BOOK VALUE PER SHARE OF $8.47 AT 30 SEPTEMBER 2012

  SPECIAL DIVIDEND AND EQUIVALENTS OF $173 MILLION OR $0.90 PER COMMON SHARE

                                      

                               8 November 2012

                              Hamilton, Bermuda



Lancashire Holdings Limited ("Lancashire" or "the Group") today announces  its 
results for the  third quarter  of 2012  and the  nine month  period ended  30 
September 2012.



Financial highlights:

    As
                                at As at

                                 30 Sept 2012 30 Sept 2011
Fully converted book value per share     $8.47        $8.20
Return on equity* - Q3                    5.7%         3.6%
Return on equity* - YTD                  13.2%        10.4%
Operating return on average equity - Q3   5.0%         6.2%
Operating return on average equity - YTD 12.4%        13.3%
Special dividend per common share**      $0.90        $0.80



^* Return on equity is defined as  growth in fully converted book value  per 
share, adjusted for dividends.

^** See "Dividends" below for Record Date and Dividend Payment Date.





                            Three months ended Ninemonthsended    
                      30 Sept 2012     30 Sept    30 Sept 2012 30 Sept 2011 
                                          2011
                                                                            
Highlights ($m)                                                         
Gross        premiums        113.5       142.9           628.3        522.7 
written
Net premiums written         109.8       133.6           475.4        462.7 
Profit before tax             78.0        79.0           185.1        178.4 
Profit after tax              78.8        75.7           182.5        173.2 
Comprehensive income          89.1        60.3           204.3        161.8 
Net operating profit          74.1        87.7           176.7        180.9 
                                                                       
Per share data                                                          
Diluted earnings per share   $0.42       $0.42           $1.00        $0.98 
Diluted earnings per share   $0.40       $0.49           $0.97        $1.02 
- operating
                                                                       
Financial ratios                                                        
Total      investment         1.1%      (0.6)%            2.8%         1.2% 
return
Net loss ratio               14.6%       12.2%           26.0%        29.3% 
Combined ratio               48.9%       43.5%           61.1%        60.7% 
Accident  year   loss        14.2%       27.7%           35.8%        57.5% 
ratio
                                                                             









Richard Brindle, Group Chief Executive Officer, commented:





"Sandy has caused tragic loss of  life and significant damage in its  progress 
from the Caribbean through North America.  Our thoughts at Lancashire go  out 
to all those affected.



Thankfully,  the  third  quarter  has  been  relatively  quiet  in  terms   of 
catastrophes and we have  not suffered significant  risk losses so  Lancashire 
has produced  another strong  set of  results. The  third quarter  return  on 
equity of  5.7%, and  13.2% for  the year  to date,  continues our  record  of 
consistent increase in book value per share, including dividends. We have  now 
generated a  compound annual  return  of 19.4%  since  inception, and  with  a 
combined ratio for the quarter of 48.9%, our inception to date combined  ratio 
now stands at 58.3%.



In our view, the market  outlook in our lines  of business is stable.  Premium 
rates will come under pressure for the January renewals with more than  enough 
capacity in the great majority of our lines, but we believe that our  emphasis 
on risk selection helps  us to produce superior  results across the cycle.  We 
are surprised with the over positive note  which we have seen from some  about 
rate increases, as we do not believe  that this will carry into 2013 for  most 
classes.



As ever, Lancashire will  focus on servicing its  core portfolio of  insurance 
and reinsurance clients,  who make up  the majority of  our portfolio,  whilst 
looking for opportunistic areas of dislocation, or new demand, to leverage the
Lancashire brand. With  the ever growing  flow of alternative  funds into  our 
market place, we also continue to explore opportunities to build  partnerships 
with capital  market participants  seeking underwriters  with a  proven  track 
record for building shareholder value."













Elaine Whelan, Group Chief Financial Officer, commented:





"With the third quarter producing little in the way of major losses, and  with 
solid investment performance in choppy markets,  we are pleased to report  our 
5.7% return on equity. As we watch the U.S recovering from the massive  amount 
of damage wreaked by Sandy, we will undoubtedly see some impact on our  fourth 
quarter results. It is,  however, simply too early  to provide any  meaningful 
estimate for reserves.



The announcement of our special  dividend and dividend equivalent payments  of 
$172.7 million  brings  our  total  capital return  since  inception  to  $1.5 
billion, or 84.0% of  total comprehensive income -  or 98.6% of  comprehensive 
income for the year to date. Market conditions in 2013 look stable overall for
our portfolio  - reasonable,  if  not spectacular,  markets. Our  recent  debt 
issuance should allow us  to absorb Sandy's impact  and still carry more  than 
normal excess headroom into the January 1 renewal season to take advantage  of 
any unforeseen opportunities that  may arise. As ever,  if we can't find  good 
ways to put our capital  to work, we will re-assess  our needs and return  any 
surplus."















Lancashire Renewal Price Index for major classes



Lancashire's Renewal Price Index ("RPI")  is an internal tool that  management 
uses to  track  trends  in premium  rates  on  a portfolio  of  insurance  and 
reinsurance contracts.  The RPI  is calculated  on a  per contract  basis  and 
reflects  Lancashire's  assessment  of  relative  changes  in  price,   terms, 
conditions and  limits on  like for  like renewals  only, and  is weighted  by 
premium volume (see "Note Regarding RPI Tool" at the end of this  announcement 
for further guidance). The  RPI does not include  new business. The  following 
RPIs are expressed as an approximate percentage of pricing achieved on similar
contracts written in 2011:



Class                                 YTD 2012 Q3 2012 Q2 2012 Q1 2012
                                                                 
Aviation (AV52)                            95%     96%     98%     92%
Gulf of Mexico energy                     100%    103%    100%    100%
Energy offshore worldwide                 103%    104%    104%    102%
Marine                                    110%    100%    130%    103%
Property retrocession and reinsurance     120%    104%    145%    112%
Terrorism                                  98%     99%     98%     96%
Combined                                  105%    101%    109%    103%









Underwriting results



Gross premiums written





                             Q3                                YTD
            2012   2011         Change  Change    2012   2011  Change  Change
              $m     $m             $m       %      $m     $m      $m       %
                                                               
Property     46.4   64.9         (18.5)  (28.5)   322.9  230.1    92.8    40.3
Energy       47.8   53.7  (5.9)   (11.0)   215.6  205.8     9.8     4.8
Marine       11.7   13.6          (1.9)  (14.0)    65.6   57.8     7.8    13.5
Aviation      7.6   10.7          (3.1)  (29.0)    24.2   29.0   (4.8)  (16.6)
Total       113.5  142.9         (29.4)  (20.6)   628.3  522.7   105.6    20.2



Gross premiums  written  decreased by  20.6%  in  the third  quarter  of  2012 
compared to the third quarter of 2011. In the first nine months of 2012  gross 
premiums written increased by 20.2% compared to the first nine months of 2011.
For both  the quarter  and the  year to  date, in  dollar terms,  the  changes 
compared to the  prior year  periods were driven  by the  property book.  The 
Group's four principal classes, and the key market factors impacting them, are
noted below.



Property gross premiums written decreased by 28.5% for the quarter compared to
the same period in  2011 and increased  by 40.3% in the  first nine months  of 
2012 compared to the first nine months of 2011. In 2012 the Japanese  property 
catastrophe book  renewals  were included  in  the second  quarter.  In  2011, 
following the Tohoku earthquake  and tsunami, these had  been deferred to  the 
third quarter, resulting in additional premium of $8.6 million in that quarter
as compared to  the current  year. The decrease  in property  premiums in  the 
third quarter of 2012 compared  to the same period  in 2011 also reflects  the 
decision to cease writing property direct and facultative business from 1 July
2012 given current pricing  conditions for this class.  For the year to  date, 
the increase  in  property  premiums  is largely  due  to  increased  property 
retrocession writings  at 1  January  2012. In  anticipation of  a  declining 
trading environment through the rest of  the year, we increased our  exposures 
at 1  January  2012  significantly,  utilising the  Accordion  sidecar  for  a 
sizeable  portion  of  this  business.  Year  to  date  property   catastrophe 
excess-of-loss premiums are also higher than the prior year. Within this class
we replaced one significant contract, plus some 2011 post event back-up deals,
with better priced new business, largely on loss affected contracts. 2012 year
to date has also  seen an increase  in premium written  in the political  risk 
class compared to the same period of 2011. The political risk market tends  to 
be more unpredictable than  other classes of business  and there is a  limited 
amount of  renewal  business as  policies  often relate  to  specific  one-off 
projects. Slightly, offsetting these increases, premium volumes were lower for
our property direct and facultative book throughout the year as we reduced our
appetite for this line of business prior to our formal exit on 1 July 2012.

Energy gross premiums written decreased in the third quarter of 2012 by  11.0% 
compared to the same period  in 2011 and increased by  4.8% in the first  nine 
months of 2012 compared to the first nine months of 2011. In the third quarter
of 2011 a number  of non-annual deals were  written in the worldwide  offshore 
and Gulf of  Mexico books  which were  not yet due  for renewal  in the  third 
quarter of 2012. This  impact was somewhat offset  by new multi-year  business 
written in the  construction energy class.  The increase in  premiums year  on 
year was driven primarily  by new business plus  premium flow from prior  year 
risks attaching in the offshore worldwide book. Due to a number of multi-year
deals in 2011, we had anticipated a  reduction in our Gulf of Mexico  premiums 
this year. However, the expected reduction  in renewing business for 2012  was 
almost entirely offset by new premium from prior underwriting year  multi-year 
contracts which  renewed  in  the  second  quarter  of  2012  ahead  of  their 
expiration, as clients sought to lock-in wind cover beyond the original term.



Marine gross premiums written decreased by  14.0% for the quarter compared  to 
the same period in  2011 and increased  by 13.5% in the  first nine months  of 
2012 compared to the first nine months of 2011. For the third quarter of  2012 
pricing was broadly  stable compared  to the same  period in  2011. The  small 
decrease in quarter to date premium volumes  was largely due to the timing  of 
risks attaching  on  multi-year builders  risk  contracts. The  year  to  date 
increase was largely  driven by  the timing of  multi-year contract  renewals, 
which  included  significant  price  increases  on  loss  affected   contracts 
following the first quarter Costa Concordia marine loss.



Aviation gross premiums written decreased by 29.0% for the quarter compared to
the same period in  2011 and decreased  by 16.6% in the  first nine months  of 
2012 compared to  the first  nine months of  2011. While  pricing and  renewal 
rates remain under some pressure, the first three quarters of the year are not
major renewal  periods for  the  aviation sector  and volumes  are  relatively 
light.



                                   *******

Ceded reinsurance  premiums  decreased by  $5.6  million, or  60.2%,  for  the 
quarter and increased by $92.9 million,  or 154.8%, for the nine-month  period 
ending 30 September 2012, as compared to  the same periods in 2011. The  third 
quarter ceded premium decreased due to opportunistic programs written in  2011 
which were not renewed  in 2012. Cessions to  the Accordion sidecar were  $3.9 
million for the quarter compared to $5.4 million in the third quarter of 2011,
bringing the total cession to Accordion for the year to date to $64.8  million 
versus $12.2 million for the first nine months of 2011.



                                   *******

Net premiums earned as a proportion of net premiums written were 131.0% in the
third quarter of 2012 compared to 111.4% in the same period in 2011 and  91.6% 
in the nine months  ending 30 September  2012, compared to  94.3% in the  same 
period in 2011. The higher earnings percentage in the current quarter compared
to the same period in  2011 reflects the lower  premiums written in the  third 
quarter of 2012, as we front loaded our business to the first half of the year
to take advantage of more favourable pricing conditions.

                                   *******

The Group's net loss ratio for the third quarter of 2012 was 14.6% compared to
12.2% for the same period in 2011 and 26.0% for the nine month period ended 30
September 2012 compared to 29.3% for  the same period in 2011. Both  quarters 
reflect a low number of reported losses during the period.

The nine month period ended 30  September 2012 included a total estimated  net 
loss of  $59.0  million,  after  reinsurance  and  reinstatement  premium,  in 
relation to the total loss of  the Costa Concordia. This compares to  specific 
event net  losses of  $148.6  million in  the first  nine  months of  2011  in 
relation to the Tohoku and  Christchurch earthquakes and the Gryphon  Floating 
Production Storage and Offloading ("FPSO") loss.

Prior year  adverse  development  for  the third  quarter  was  $1.0  million, 
compared to favourable development of $21.1  million for the third quarter  of 
2011. The third quarter of 2012 included small amounts of adverse  development 
across a number of claims and some newly reported prior year risk losses.  The 
third quarter of 2011 benefited from  $3.0 million of positive development  on 
Hurricane Ike. Favourable development was $42.5  million for the 2012 year  to 
date, compared to $118.0 million for the same period in 2011. In early 2011 an
independent external reserve  study was commissioned  in order to  incorporate 
the Group's  own loss  experience with  industry factors  previously used.  On 
completion, net reserves of $36.9 million were released. Both years  otherwise 
experienced releases due  to lower  than expected reported  losses, with  2011 
experiencing exceptionally low reported prior year losses.

The following tables  show the impact  of prior year  development and  current 
accident year large losses on the Group's loss ratio:



                                   Q3 2012           YTD 2012
                              Losses Loss Ratio Losses Loss Ratio
                                   $m          %     $m          %
At 30 September 2012             21.0       14.6  113.4       26.0
Absent Costa Concordia           20.9       14.5   67.6       15.1
Absent prior year development    20.0       13.9  155.9       35.8
Adjusted losses and ratio        19.9       13.8  110.1       24.5

Note: Adjusted loss ratio  excludes large losses  and prior year  development. 
The table does not sum to a total due to the impact of reinstatement premiums.



                               Q3 2011  YTD 2011
                               Losses Loss Ratio Losses Loss Ratio 
                                   $m          %      $m          % 
                                                                    
At 30 September 2011             18.1       12.2   127.9       29.3 
Absent Tohoku & Christchurch     11.5        7.7    26.1        6.1 
Absent Gryphon FPSO              18.1       12.2    79.8       18.1 
Absent prior year development    39.2       26.3   245.9       56.4 
Adjusted losses and ratio        32.6       21.9    96.0       22.1 

Note: Adjusted loss ratio excludes  large losses plus prior year  development. 
The table does not sum to a total due to the impact of reinstatement premiums.



The table below provides further detail  of the prior year's loss  development 
by class, excluding the impact of foreign exchange revaluations.



          Q3  YTD
           2012 2011       2012     2011
             $m   $m         $m       $m
Property  (1.8)  4.9     (10.3)     40.2
Energy      1.2 11.6       29.8     47.0
Marine    (0.4)  4.5       22.9     25.2
Aviation      -  0.1        0.1      5.6
Total     (1.0) 21.1       42.5    118.0

Note: Positive numbers denote favourable development.



The accident year  loss ratio  for the third  quarter of  2012, including  the 
impact of foreign exchange revaluations, was  14.2% compared to 27.7% for  the 
same period in  2011. The  year to  date accident  year loss  ratio was  35.8% 
compared to 57.5% for the nine months to 30 September 2011. The 2012  accident 
year loss ratio for the  nine months to 30  September 2012 included 11.3%  for 
the Costa Concordia loss.



The 2011 accident year loss ratio for the nine months to 30 September 2011
included:



· 17.3% for the Tohoku earthquake;

· 11.4% for the Gryphon FPSO loss; and

· 5.3% for the Christchurch earthquake.



Otherwise, both years experienced relatively low levels of reported losses.



Excluding the impact of foreign exchange revaluations, previous accident
years' ultimate losses developed as follows during the first nine months of
2012 and 2011:

                    Nine months  Nine months

                          ended        ended

                   30 Sept 2012 30 Sept 2011
                             $m           $m
2006 accident year          0.4          1.1
2007 accident year          2.3         10.2
2008 accident year        (1.4)         20.0
2009 accident year          6.2         30.4
2010 accident year          9.5         56.3
2011 accident year         25.5            -
Total                      42.5        118.0

Note: Positive numbers denote favourable development.

The ratio of IBNR to  total net loss reserves was  29.2% at 30 September  2012 
compared to 31.9% at 30 September 2011.



Investments



Net investment income, excluding realised and unrealised gains and losses, was
$7.4 million for the third quarter of 2012, a decrease of 29.5% from the third
quarter of 2011.  Overall lower yields  and a reduction  in both the  emerging 
market debt and equity  portfolios contributed to  the decrease in  investment 
income for  the quarter  compared to  the  third quarter  of 2011.  The  Group 
liquidated its  equity  position  in  the third  quarter  of  2011  given  the 
increasing volatility in  the markets at  that point. In  addition, the  Group 
disposed of virtually all  of its non  USD emerging market  debt in the  third 
quarter of 2011.



Currently 4.1%  of the  portfolio is  allocated to  the emerging  market  debt 
portfolio with an  overall average  credit quality of  BBB. The  Group has  no 
exposure  to  European  peripheral   sovereign  debt.  Exposure  to   European 
peripheral corporate debt is approximately $2.7 million consisting of  Spanish 
and Italian  non-financial  corporate  debt. The  corporate  bond  allocation, 
excluding Federal Deposit Insurance Corporation guaranteed bonds,  represented 
28.4% of managed invested assets at 30 September 2012 compared to 30.6% at  30 
September 2011. During the  third quarter of 2012  the Group invested a  small 
portion of the portfolio, 0.4%, to bank loans. It is expected that this  will 
increase to approximately  2.5% of  total managed invested  assets. The  bank 
loan portfolio  will  consist of  highly  rated  floating rate  notes  and  is 
expected to help manage interest rate risk.



Total investment return, including net  investment income, net realised  gains 
and losses, impairments  and net change  in unrealised gains  and losses,  was 
$21.7 million for the third quarter of 2012 compared to a loss of $4.8 million
for the third quarter of 2011, and was $55.7 million for the 2012 year to date
versus $28.0 million for the  same period in 2011.  The losses from the  third 
quarter of 2011 resulted primarily from  the currency exposure in the non  USD 
emerging market debt portfolio  and the equity portfolio,  both of which  have 
since been  liquidated. The  2012 quarter  to date  and year  to date  returns 
benefited from  significant  credit  spread tightening,  particularly  in  the 
emerging market debt portfolio.



The managed portfolio was invested as follows:





                                 As at       As at        As at

                          30 Sept 2012 31 Dec 2011 30 Sept 2011
Fixed income securities          84.8%       86.8%        85.2%
Cash and cash equivalents        15.2%       13.2%        14.8%
Total                           100.0%      100.0%       100.0%



Key investment portfolio statistics are:



 As at As at As at
                                                                         30    31    30
                                                                       Sept   Dec  Sept
                                                                       2012  2011  2011
Duration                                                                1.6   1.8   1.7
                                                                      years years years
Credit quality                                                           AA   AA-    AA
Book yield                                                             1.7%  1.9%  2.0%
Market yield                                                           0.9%  1.5%  1.5%



Accordion



The share of profit of associate of $2.9 million for the third quarter of 2012
and the $4.4  million for the  year to date  reflects Lancashire's 20%  equity 
interest in the vehicle. Share of profit of associate was $0.3 million for the
same periods in 2011.



Other operating expenses



Operating expenses consist of the following items:



                          Q3  YTD
                            2012    2011     2012    2011
                              $m      $m       $m      $m
Employee remuneration       11.0    10.2     38.8    31.7
Other operating expenses    10.0     7.5     23.7    24.6
Total                       21.0    17.7     62.5    56.3



In the  first  quarter of  2012  employment remuneration  included  a  one-off 
national insurance charge of $6.9 million, incurred as a result of the Group's
tax residency move to the UK effective  from 1 January 2012. During the  third 
quarter of 2012, other operating expenses included a charge of $2.8 million in
relation to  the  timing of  certain  IT software  expenses.  Excluding  these 
expenses other operating expenses are $3.8 million lower in 2012 than the same
period of 2011,  reflecting the  Group's commitment  to a  low cost  operating 
structure.



Equity based  compensation was  $6.6  million in  the  third quarter  of  2012 
compared to  $0.4 million  in the  same  period last  year. During  the  third 
quarter of 2011 there was an adjustment of $5.6 million to the estimated  fair 
value of  our  existing RSS  plan  across  all years,  reflecting  some  minor 
revisions to underlying assumptions. For the nine months to 30 September  2012 
and 2011 the equity  compensation charge was $12.5  million and $12.6  million 
respectively. The charge in the third quarter  of 2011 and for the first  nine 
months of  2011  included  $0.3  million and  $3.5  million  respectively,  in 
relation to dividend strike price revisions on option awards under the Group's
2005 Long  Term Incentive  Plan Option  Scheme, which  was closed  to  further 
awards in 2008. By the first quarter of 2012 the majority of these  previously 
issued option awards had been exercised and the remaining charges on them were
negligible.





Capital



At  30  September   2012,  total  capital   was  $1.636  billion,   comprising 
shareholders' equity of $1.508 billion  and $127.9 million of long-term  debt. 
Leverage was 7.8%. Total capital was  $1.562 billion at 30 September 2011  and 
$1.455 billion at 31 December 2011.



On 5 October 2012 the  Group launched and priced  an offering of $130  million 
5.70% senior unsecured notes due in  2022 (the "Notes") pursuant to a  private 
offering to U.S.  Qualified Institutional Buyers  and elsewhere, according  to 
applicable restrictions. The Notes were listed and admitted to trading on  the 
London Stock Exchange on  16 October 2012. Lancashire  expects to use the  net 
proceeds of the offering for general corporate purposes.





Dividends



Lancashire announces that its Board has  declared a special dividend for  2012 
of $0.90 per common share (approximately £0.56 per common share at the current
exchange rate), which  will result  in an aggregate  payment of  approximately 
$145 million. The dividend will be paid in Pounds Sterling on 19 December 2012
(the "Dividend Payment Date")  to shareholders of record  on 30 November  2012 
(the "Record Date")  using the  £ /  $ spot market  exchange rate  at 12  Noon 
London time on the Record Date.



In addition to the special dividend payment to shareholders, approximately $28
million in aggregate will be paid on  the Dividend Payment Date to holders  of 
share warrants issued by the Company pursuant to the terms of the warrants.



The Group will  continue to review  the appropriate level  and composition  of 
capital for  the Group  with  the intention  of  managing capital  to  enhance 
risk-adjusted returns on equity.



Financial information



Further details of  our 2012 third  quarter results can  be obtained from  our 
Financial  Supplement.   This   can   be   accessed   via   our   website   at 
www.lancashiregroup.com.



Analyst and Investor Earnings Conference Call

There will be an analyst and investor conference call on the results at 1:00pm
UK time / 8:00am EST on Thursday 8 November 2012. The conference call will  be 
hosted by Lancashire management.

The call can be accessed by dialling +44  208 817 9301 / +1 718 354 1226  with 
the confirmation code  8805130#. The call  can also be  accessed via  webcast, 
please go to our website (www.lancashiregroup.com) to access.



A replay facility will be available  for two weeks until Thursday 22  November 
2012. The dial  in number for  the replay facility  is +44 207  769 6425  with 
passcode  8805130#  .The   replay  facility   will  also   be  accessible   at 
www.lancashiregroup.com





For further information, please contact:

Lancashire Holdings Limited 

Christopher Head           +44 20 7264 4145

                            chris.head@lancashiregroup.com

                            

                            
Jonny Creagh-Coen           +44 20 7264 4066

                           jcc@lancashiregroup.com
Haggie Financial            +44 20 7417 8989
Peter Rigby                 (Peter Rigby mobile +44 7803851426)





Investor   enquiries    and    questions    can   also    be    directed    to 
info@lancashiregroup.com   or   by   accessing   the   Group's   website    at 
www.lancashiregroup.com.





About Lancashire

Lancashire, through  its UK  and Bermuda-based  operating subsidiaries,  is  a 
global provider of  specialty insurance  and reinsurance  products. The  Group 
companies carry the following ratings:



                  Financial Strength Long Term Issuer

                  Rating ^(1)        Rating ^(2)      Outlook
A.M. Best         A                  bbb           Stable
Standard & Poor's A-                 BBB              Stable
Moody's           A3                 Baa2             Stable

^(1)Financial Strength Rating applies to Lancashire Insurance Company  Limited 
and Lancashire Insurance Company (UK) Limited

^(2) Long Term Issuer Rating applies to Lancashire Holdings Limited



Lancashire has capital in excess of $1 billion and its common shares trade  on 
the Main Market  of the  London Stock Exchange  under the  ticker symbol  LRE. 
Lancashire has its  corporate headquarters  and mailing address  at Level  11, 
Vitro, 60 Fenchurch Street, London EC3M 4AD, United Kingdom and its registered
office at Power House, 7 Par-la-Ville Road, Hamilton HM 11, Bermuda.



For  more  information   on  Lancashire,  visit   the  Company's  website   at 
www.lancashiregroup.com



Lancashire Insurance  Company Limited  is regulated  by the  Bermuda  Monetary 
Authority in Bermuda.

Lancashire Insurance  Company  (UK)  Limited is  regulated  by  the  Financial 
Services Authority in the UK.





NOTE REGARDING RPI TOOL



LANCASHIRE'S RENEWAL  PRICE  INDEX  ("RPI")  IS  AN  INTERNAL  TOOL  THAT  ITS 
MANAGEMENT USES TO TRACK TRENDS IN  PREMIUM RATES OF A PORTFOLIO OF  INSURANCE 
AND REINSURANCE CONTRACTS. THE RPI IS CALCULATED ON A PER CONTRACT BASIS  AND 
REFLECTS  LANCASHIRE'S  ASSESSMENT  OF  RELATIVE  CHANGES  IN  PRICE,   TERMS, 
CONDITIONS AND  LIMITS AND  IS WEIGHTED  BY PREMIUM  VOLUME. THE  CALCULATION 
INVOLVES A DEGREE OF JUDGEMENT IN  RELATION TO COMPARABILITY OF CONTRACTS  AND 
THE ASSESSMENT NOTED ABOVE. TO ENHANCE THE RPI TOOL, MANAGEMENT OF LANCASHIRE
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 LANCASHIRE'S PORTFOLIO. 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 MODELED  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',   '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  ACHIEVEMENTS  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  LOW 
FREQUENCY OF LARGE EVENTS; UNUSUAL LOSS FREQUENCY; 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;  THE  EFFECTIVENESS  OF  OUR  LOSS 
LIMITATION METHODS;  LOSS  OF  KEY  PERSONNEL;  A  DECLINE  IN  OUR  OPERATING 
SUBSIDIARIES' RATING  WITH A.M.  BEST,  STANDARD &  POOR'S, MOODY'S  OR  OTHER 
RATING AGENCIES;  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 FOR  ISSUERS OF  FIXED  INCOME 
INVESTMENTS; THE  IMPACT OF  SWINGS IN  MARKET INTEREST  RATES AND  SECURITIES 
PRICES; A  RATING DOWNGRADE  OF, OR  A MARKET  DECLINE IN,  SECURITIES IN  OUR 
INVESTMENT PORTFOLIO;  CHANGES  IN GOVERNMENTAL  REGULATIONS  OR TAX  LAWS  IN 
JURISDICTIONS WHERE LANCASHIRE CONDUCTS BUSINESS; LANCASHIRE HOLDINGS  LIMITED 
OR ITS BERMUDIAN SUBSIDIARY  BECOMING SUBJECT TO INCOME  TAXES IN THE  UNITED 
STATES OR THE  BERMUDIAN SUBSIDIARY BECOMING  SUBJECT TO INCOME  TAXES IN  THE 
UNITED KINGDOM; THE UK TEMPORARY PERIOD EXEMPTION UNDER THE CFC REGIME FAILING
TO REMAIN IN  FORCE FOR THE  PERIOD INTENDED;  THE OMISSION FROM  THE NEW  CFC 
REGIME OF A SUITABLE EXCLUSION (E.G.  RELATING TO INSURANCE OR REINSURANCE  OF 
THIRD PARTY RISKS WRITTEN IN  THE INTERNATIONAL INSURANCE MARKET); ANY  CHANGE 
IN THE UK GOVERNMENT  OR THE UK  GOVERNMENT POLICY WHICH  IMPACTS THE NEW  CFC 
REGIME.



THESE FORWARD-LOOKING STATEMENTS  SPEAK ONLY  AS AT THE  DATE OF  PUBLICATION. 
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 ANY FORWARD-LOOKING STATEMENTS  TO REFLECT ANY CHANGES IN  THE 
GROUP'S EXPECTATIONS OR CIRCUMSTANCES ON WHICH ANY SUCH STATEMENT IS BASED.











Consolidated statement of comprehensive income

(Unaudited)

                                                                            

                                                              YTD   YTD 2011
                                    Quarter 3  Quarter 3
                                         2012       2011    2012
                                           $m         $m      $m           $m
Gross premiums written                  113.5      142.9    628.3        522.7
Outwards reinsurance premiums           (3.7)      (9.3)  (152.9)       (60.0)
Net premiums written                    109.8      133.6    475.4        462.7
Change in unearned premiums              65.2       20.7   (78.6)       (47.2)
Change in unearned premiums ceded      (31.2)      (5.5)     38.7         20.8
Net premiums earned                     143.8      148.8    435.5        436.3
Net investment income                     7.4       10.5     24.5         34.3
Net   other    investment    income 
(losses)                                  0.2      (0.9)      0.7        (0.9)
Net  realised  gains  (losses)  and 
impairments                               3.8        1.0      8.7          6.0
Share of profit of associate              2.9        0.3      4.4          0.3
Net foreign exchange losses             (0.3)      (9.7)    (0.7)        (8.8)
Total net revenue                       157.8      150.0    473.1        467.2
  Insurance   losses   and   loss 
adjustment expenses                      14.0       17.1    178.8        139.8
Insurance    losses    and     loss 
adjustment expenses recoverable           7.0        1.0   (65.4)       (11.9)
Net insurance acquisition expenses       28.3       28.9     90.3         80.5
Equity based compensation                 6.6        0.4     12.5         12.6
Other operating expenses                 21.0       17.7     62.5         56.3
Total expenses                           76.9       65.1    278.7        277.3
Results of operating activities          80.9       84.9    194.4        189.9
Financing costs                           2.9        5.9      9.3         11.5
Profit before tax                        78.0       79.0    185.1        178.4
Tax (credit) charge                     (0.8)        3.3      2.6          5.2
Profit for the period  attributable 
to equity shareholders                   78.8       75.7    182.5        173.2
Net  change  in  unrealised  gains 
(losses) on investments                  10.5     (15.6)     22.2       (11.2)
Tax on  net change  in  unrealised 
gains (losses) on investments           (0.2)        0.2    (0.4)        (0.2)
Other comprehensive income               10.3     (15.4)     21.8       (11.4)
Total     comprehensive     income 
attributable       to       equity 
shareholders                             89.1       60.3    204.3        161.8
Net loss ratio                          14.6%      12.2%    26.0%        29.3%
Net acquisition cost ratio              19.7%      19.4%    20.7%        18.5%
Administrative expense ratio            14.6%      11.9%    14.4%        12.9%
Combined ratio                          48.9%      43.5%    61.1%        60.7%
Basic earnings per share                $0.49      $0.49    $1.15        $1.13
Diluted earnings per share              $0.42      $0.42    $1.00        $0.98
Change  in  fully  converted  book 
value per share                          5.7%       3.6%    13.2%        10.4%















Consolidated balance sheet



                                             Unaudited   Unaudited     Audited
                                           30 Sep 2012 30 Sep 2011 31 Dec 2011
                                                    $m          $m          $m
Assets
Cash and cash equivalents                        412.4       368.5       311.8
Accrued interest receivable                        8.9        12.4        10.0
Investments
- Fixed income securities, available  for      1,824.0     1,844.1     1,714.0
sale
- Fixed income securities, at fair  value            -         0.7           -
through profit or loss
- Other investments                              (0.2)       (0.2)       (0.6)
Reinsurance assets
- Unearned premiums on premiums ceded             47.5        23.7         8.8
- Reinsurance recoveries                         101.3        42.4        69.7
- Other receivables                                1.4         2.4         6.2
Deferred acquisition costs                        78.2        66.2        61.4
Other receivables                                  3.9        21.4        48.6
Inwards premiums receivable from insureds        259.9       232.1       212.1
and cedants
Deferred tax asset                                 7.8         9.0         8.2
Investment in associate                           46.4         7.3        50.9
Property, plant and equipment                      3.4         6.1         5.3
Intangible asset                                     -           -         1.2
Total assets                                   2,794.9     2,636.1     2,507.6
Liabilities
Insurance contracts
- Losses and loss adjustment expenses            546.9       556.9       571.2
- Unearned premiums                              425.7       397.8       347.1
- Other payables                                  26.6        17.1        23.5
Amounts payable to reinsurers                     53.2        20.0        17.8
Deferred acquisition costs ceded                   3.6         1.2         0.7
Other payables                                    93.8        72.0        85.2
Corporation tax payable                            0.5         3.4         1.2
Interest rate swap                                 8.4         5.6         6.1
Long-term debt                                   127.9       129.6       128.0
Total liabilities                              1,286.6     1,203.6     1,180.8
Shareholders' equity
Share capital                                     84.3        84.3        84.3
Own shares                                      (65.8)      (95.7)      (83.0)
Share premium                                      2.4         2.4         2.4
Contributed surplus                              659.1       665.9       660.5
Accumulated other comprehensive income            39.4        16.8        17.6
Other reserves                                    57.8        68.4        67.6
Retained earnings                                731.1       690.4       577.4
Total shareholders' equity attributable to     1,508.3     1,432.5     1,326.8
equity shareholders
Total   liabilities   and   shareholders'      2,794.9     2,636.1     2,507.6
equity



















Statement of consolidated cashflows

(unaudited)



                                       Unaudited Unaudited             Audited
                                            Nine      Nine Twelve months 2011

                                     months 2012    months

                                                      2011
                                              $m        $m                  $m
Cash    flows    from    operating 
activities
Profit before tax                          185.1     178.4               218.6
Tax paid                                   (1.2)     (7.3)               (9.7)
Depreciation                                 2.1       2.2                 2.9
Interest expense on long term debt           4.2       4.2                 5.6
Interest and dividend income              (36.3)    (43.6)              (56.2)
Net amortisation  of fixed  income           8.7       5.9                 8.7
securities
Equity based compensation                   12.5      10.9                18.8
Foreign exchange (gains) losses            (2.7)      12.6                11.5
Share of profit of associate               (4.4)         -               (0.9)
Net  other   investment   (income)         (0.7)       0.9                 0.5
losses
Net realised  (gains)  losses  and         (8.7)     (6.0)               (8.6)
impairments
Loss  on  disposal  of  intangible           2.9         -                   -
asset
Net unrealised  loss  on  interest           2.3       4.8                 5.4
rate swaps
Changes in operational assets  and 
liabilities
-   Insurance   and    reinsurance        (31.0)      59.1                38.2
contracts
- Other assets and liabilities              53.1      37.1                22.9
Net  cash  flows  from   operating         185.9     259.2               257.7
activities
Cash  flows   used  in   investing 
activities
Interest and dividends received             37.4      44.7                59.6
Net purchase  of  property,  plant         (0.2)     (0.9)               (0.6)
and equipment
Purchase   and   development    of         (1.7)         -               (1.2)
intangible asset
Investment in associate                      8.9     (7.3)              (50.0)
Purchase    of    fixed     income     (1,278.4) (1,593.0)           (1,944.5)
securities
Purchase of equity securities                  -    (87.4)              (87.4)
Proceeds on maturity and  disposal       1,192.8   1,455.1             1,939.0
of fixed income securities
Proceeds  on  disposal  of  equity             -      80.2                80.2
securities
Net proceeds on other investments          (2.6)       1.1                 1.1
Net cash flows  used in  investing        (43.8)   (107.5)               (3.8)
activities
Cash  flows   used  in   financing 
activities
Interest paid                              (4.2)     (4.2)               (5.6)
Dividends paid                            (28.8)   (292.4)             (444.4)
Distributions by trust                     (8.7)     (4.2)               (4.5)
Net cash flows  used in  financing        (41.7)   (300.8)             (454.5)
activities
Net increase  (decrease)  in  cash         100.4   (149.1)             (200.6)
and cash equivalents
Cash  and   cash  equivalents   at         311.8     512.5               512.5
beginning of period
Effect of exchange rate fluctuations         0.2       5.1               (0.1)
on cash and cash equivalents
Cash and cash  equivalents at  end         412.4     368.5               311.8
of period



                     This information is provided by RNS
           The company news service from the London Stock Exchange

END


QRTFMMGMRNRGZZM -0- Nov/08/2012 07:01 GMT
 
Press spacebar to pause and continue. Press esc to stop.