Lancashire Holdings Limited

Hello and welcome to the Lancashire Holdings Limited full-year 2025 results conference call. Throughout the call, all participants will be in listen-only mode and afterwards there will be a question and answer session. On the call today, we have Alex Maloney, Group CEO, Natalie Kershaw, Group CFO, and Paul Gregory, Group CEO. I will now hand the call over to Alex. Please go ahead with your meeting.

Thank you operator. Good afternoon everyone and thank you for joining our call today. It's our usual approach and I will give some highlights on the progress of our business, Paul will focus on the underwriting trends, Natalie will cover financials and then we will go to Q&A. Lancashire today is a stronger and more balanced franchise. Whilst our DNA remains the same, 2025 was a year that demonstrated the strength and durability of our model, one that blends disciplined underwriting, active cycle management, and efficient capital management. Against the year that started with the California wildfires, one of the largest catastrophe losses the business has ever faced, we delivered another set of resilient results. We delivered an undiscounted combined ratio of 93.1%, an investment return of 7%, and most importantly, an ROE of nearly 21%. whilst continuing to improve the quality and durability of our earnings. Our underwriting portfolio today is more balanced, more diversified and more capable of generating attractive returns throughout the cycle. This is the third consecutive year of above 20% returns and marks yet another proof point of our strategy. It is a testament to our strategy in action over the last three years that we have on average paid out 100% of our earnings, whilst growing our business at about 8% on average. Looking at the market backdrop more broadly, we have always believed the market is cyclical. And whilst we have seen a more competitive market, the portfolio we secured at the 1st of January renewals is still one of the best we have ever had in terms of rate adequacy. The group RPI is still well ahead of pre-2023 levels and this is reflected over market well. After a few profitable years, the supply of capital has increased as existing players deploy more retained earnings. And this tends to be more disciplined capital. Demand meanwhile has not kept pace with the increased supply of capital. I do want to emphasise that margins remain favourable particularly at the net level, taking into account reinsurance costs. This gives us confidence when looking at our profitability for 2026 and beyond. So looking ahead, this type of market creates new opportunities for Lancashire. The cornerstone for us will be the continued expansion of our US operation. And also, as we've seen in the past, market consolidation typically occurs at this point in the cycle. And this may well give us opportunities to hire talented individuals to join our fantastic underwriting team. The other critical element of our strategy is our active capital management from a position of strength. Since inception, we have returned $3.7 billion to our shareholders, and today our strong 2025 results have enabled us to declare a special dividend of 50 cents per share, which is an additional $121 million alongside our regular dividends. As you will see from our capital disclosures, we've been able to do this whilst retaining an extremely strong capital position and retaining capacity to continue to support the future development of our franchise. All this means that, as Paul and Natalie will outline, we anticipate delivering an ROE in the higher teams for 2026. We will leave with underwriting, construct the best portfolio for this stage in the cycle We will actively manage our capital and risk exposures to deliver attractive returns throughout the cycle and we do that with fantastic people seeking to attract and retain the best talent that fits our culture. As I've said before, the quality of the business we have built and the talent we have within our organisation together mean we will continue to execute a strategy of delivering more sustainable returns for our shareholders. I'm extremely pleased at this stage of the cycle that we have a healthy balance sheet to allow us plenty of flexibility for the future. And with that, I will now hand over to Paul to talk you through the underwriting trends.

Thanks, Alex. As Alex has just described, we enter 2026 in a position of strength helped by another strong year of underwriting performance. We have a very strong capital base that will support the continued maturity of the Lancashire underwriting franchise. Our diversified and balanced portfolio provides earnings resilience and multiple options to successfully navigate the underwriting cycle. Looking at 2025, it was a year of strong underwriting performance. A combined ratio of 93.1% is a robust performance in light of lost activity and continued reserve prudence. This delivers an insurance service result of $381 million which is marginally more than last year despite increased catastrophe and large losses and a high combined ratio. This is the benefit of a more diverse and capital-efficient portfolio where significant dollars of underwriting profit are helping to deliver an ROE of nearly 21%. That is now over 1.14 billion of insurance service results produced over the past three years, helping to deliver an ROE above 20% in each of those years. In terms of growth, 2025 was our eighth consecutive year of premium growth in excessive rate with 5.1% growth year on year, continuing to develop our franchise in what was still a healthy and supportive rate environment. Moving to our portfolio make-up and underwriting conditions for 2025. We remain equally split between insurance and reinsurance. and grew both during 25. Whilst the rating environment softened for the first time since 2017, we remained close to peak rating and the vast majority of products had healthy rate adequacy and we were happy to grow in a disciplined way. Our expectation and guidance for last year was for low single digit growth and we delivered in line with this. Looking ahead to 2026 we are clearly in a more competitive market that is softening but importantly not soft. What I mean by this is that rates for most classes are under pressure but the majority of product lines have good margin that will continue to deliver healthy underwriting returns. We are at the stage of the market where you can continue to produce these healthy underwriting returns if you make sensible underwriting decisions to navigate the cycle and we have proven that we can navigate market cycles. At this time, given the work over the past eight years to diversify and build increased resilience, we have far more options available to us than before. To summarise the recent 1.1 renewal season, we're very pleased with our performance where we managed the more competitive environment well and secured an outcome in line with our expectations. This sets us up very well to execute on our plans for the remainder of the year. As always, we appreciated the ongoing support we received from our clients and brokers and look forward to building on these valued relationships. Alongside this, we were very pleased with the outcomes of our home insurance renewals at the 1st of January. As we've said, the one benefit of the softening market is the products we buy to protect our earnings and balance sheet are also more efficient. We can manage our reinsurance spend, which helps mitigate some of the margin pressure on the inwards book. As importantly, we have better tailored the structure of our reinsurance to box in our exposures, which better manages our earnings volatility. As an example, the aggregate catastrophe products that we described last year renewed at 1.1 with a lower attachment point and more limits. This provides more certainty of underwriting result in an active catastrophe loss year. Look at anticipated market conditions for the remainder of the year and what this means for our 26 portfolio. We would expect to see the following. At a portfolio level, we would expect to see rate reduction in the high single digits. As always, there will be a variance between product line and a benefit of a diversified portfolio is that not everything moves at the same pace. The casualty classes will be relatively stable with property and specialty insurance and reinsurance classes generally seeing rate reductions of varying degrees. To re-emphasise and repeat what Alex and I have both said, rates remain in a good place for the majority of classes. With this in mind and our proven track record of cycle management, we would anticipate our top line to remain broadly stable during 2026. Our net cap footprint will likely be marginally lower than last year. Whilst we have assumed more cap risk with an increased share of syndicate 2010, we have continued to shrink our inwards retro portfolio in light of market conditions, as well as seeing the benefit of a more efficient reinsurance program. Our US operation will continue to mature with existing and new product lines further developing the Lancashire franchise and portfolio diversification. The strategic investment to purchase the names allocation of Syndicate 2010 helps mitigate top line pressure by retaining more profitable business. So in summary, we enter 2026 in a very strong position. We have a strong capital base, a fantastic underwriting portfolio across a number of platforms supported by a talented and committed team of underwriters. From this, we are well positioned to continue to deliver robust underwriting returns. I'll now pass over to Natalie.