Last checked at 13 Oct 2008 07:00
Lancashire Holdings Limited 13 October 2008Hamilton, Bermuda Preliminary Loss Estimates for Hurricanes Gustav and Ike and Comments on Investments
Lancashire Holdings Limited ("Lancashire" or "the Company") today announced that it currently estimates that Hurricanes Gustav and Ike will have a combined net negative impact on its financial results of approximately US$150 million. Net negative impact includes the sum of gross claims and claims expenses, reinsurance recoveries and reinstatement premium. Hurricane Gustav is expected to contribute less than US$5 million to the total estimate. Of the US$150 million impact, approximately US$125 million relates to offshore losses. This assumes an offshore industry loss of approximately US$3 billion. These amounts are based on management's estimates following a review of the Company's potential exposures and discussions with certain counterparties. Lancashire's actual ultimate net losses from these events may vary materially from these preliminary estimates as additional information emerges.
Lancashire also announced that its estimated annualized total investment return is a positive 1.2% for the nine months to September 30, 2008. Total investment return includes net investment income, realised gains and losses, impairments, and unrealised gains and losses.
Richard Brindle, Group Chief Executive Officer, commented:
"In the third quarter, Lancashire has been thoroughly tested on both sides of the balance sheet by two large hurricanes in the Gulf of Mexico and by the worst financial crisis since the Great Depression."
"Hurricane Gustav was a Category Three hurricane, generating losses more or less in-line with that typically expected of that storm category. Gustav passed over a significant number of oil platforms however Lancashire's loss was minimal. In contrast to Gustav, Ike was a remarkable storm. Despite officially being a Category Two hurricane, Ike demonstrated the destructive potential more commonly expected of Category 4 or 5 storms while offshore. It was enormously wide, with the second highest measure of integrated kinetic energy of any U.S. hurricane in the past forty years. Hurricane force winds were experienced by any one location for an unusually long period of time, resulting in the destruction of at least 52 oil platforms, compared to 47 in Hurricane Katrina. This was a very large loss event indeed for the offshore energy industry but we anticipate our losses will be underweight our market share. We are also encouraged by what we believe will be a significant hardening of this sector in 2009."
Neil McConachie, Chief Financial Officer and Chief Risk Officer, commented:
"The continuing turmoil in the financial markets can only be described as extraordinary. Since inception, Lancashire's investment strategy has been highly conservative, with the primary aims being to preserve liquidity and limit downside risk. That philosophy has served us well, particularly in recent weeks. Lancashire has no holdings of alternative investments such as hedge funds, has a very small allocation to U.S. equities, has no holdings in non-agency structured products and has a large allocation to cash. At June 30, 2008 the average duration of the fixed income portfolio and managed cash was 1.3 years and the average credit quality was AA+. Our investment strategy will remain very defensive for the foreseeable future."
The make-up by asset class of Lancashire's investment portfolio at June 30, 2008 is set out in the table below:
Consolidated investment portfolio at fair value(shown in millions of U.S. dollars, except percentages) june 30, 2008 % type of investment short term investments $ 61.3 3.3% U.S. treasuries 402.9 21.6% other government bonds 15.6 0.8%
U.S. government agency mortgage backed 261.2 14.0%securities non-agency structured products - -
corporate bonds 269.9 14.5% convertible debt securities 11.6 0.6%
total fixed income securities, available for 1,022.5 54.8%sale equity securities, available for sale 83.0 4.5% alternative investments - - fixed income securities, at fair value through 20.9 1.1%
income statement other investments 4.0 0.2% managed cash 734.7 39.4% total investments $ 1,865.1 100.0%
For further information, please contact:
Lancashire Holdings Jonny Creagh-Coen +44 (0) 20 7264 4066 Neil McConachie +1 441 278 8960 Greg Lunn +1 441 278 8953 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 AIM 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 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', 'INTENDS', 'EXPECTS', 'ESTIMATES', 'PREDICTS', 'MAY','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, 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 FORWARD-LOOKING STATEMENTS SPEAK ONLY AS AT THE DATE OF THIS ANNOUNCEMENT OR OTHER INFORMATION CONCERNED. LANCASHIRE HOLDINGS LIMITED EXPRESSLY DISCLAIMS ANY OBLIGATION OR UNDERTAKING (SAVE AS REQUIRED TO COMPLY WITH ANY LEGAL OR REGULATORY OBLIGATIONS (INCLUDING THE AIM RULES)) TO DISSEMINATE ANY UPDATES OR REVISIONS TO ANY FORWARD-LOOKING STATEMENTS CONTAINED HEREIN TO REFLECT ANY CHANGES IN THE GROUP'S EXPECTATIONS WITH REGARD THERETO OR ANY CHANGE IN EVENTS, CONDITIONS OR CIRCUMSTANCES ON WHICH ANY SUCH STATEMENT IS BASED.
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