A.M. Best Affirms Credit Ratings of Lancashire Holdings Limited and Its Subsidiaries

OLDWICK, N.J.--(BUSINESS WIRE)-- A.M. Best has affirmed the Financial Strength Rating of A (Excellent) and the Long-Term Issuer Credit Ratings (Long-Term ICR) of “a” of Lancashire Insurance Company Limited (Hamilton, Bermuda) and Lancashire Insurance Company (UK) Limited (United Kingdom) (collectively referred to as Lancashire). Additionally, A.M. Best has affirmed the Long-Term ICR of “bbb” and the Long-Term Issue Credit Ratings (Long-Term IR) of the parent company, Lancashire Holdings Limited (Lancashire Holdings) (Hamilton, Bermuda) [LSE: LRE]. The outlook for each of these Credit Ratings (rating) remains stable. (See below for a detailed listing of the Long-Term IRs)

The ratings reflect Lancashire’s very strong balance sheet, strong operating performance, limited business profile and appropriate enterprise risk management (ERM) for the group’s risk profile.

Lancashire’s levels of risk-adjusted capitalization remain very strong even under stress scenarios. Balance sheet strength is further enhanced by the group’s financial flexibility and history of consistent favorable reserve development, as well as its relatively modest underwriting leverage. Financial leverage and coverage metrics continue to be within tolerances for the group’s rating level. Also reflected in the ratings are Lancashire’s historically strong overall returns driven by excellent underwriting results and complimented by investment income and, to a lesser extent, fee income. The group’s five-year average return on equity and combined ratio through year-end 2016 consistently have placed Lancashire at the high end of its peer group, particularly in non-catastrophe affected years. However, as demonstrated by recent events, Lancashire maintains an elevated risk profile and primarily writes lines of business that have significant exposures to catastrophe activity.

A.M. Best’s view that Lancashire maintains a limited business profile is largely a function of the group’s lines of business, which generally are highly syndicated and have been under substantial rate pressure for a number of years. This has significantly limited the group’s potential for growth as it has closely managed the cycle and maintained underwriting discipline. Despite these challenges, Lancashire is a specialty underwriter with a good degree of geographic and product line diversification as the company’s offerings includes primary insurance, reinsurance and retrocessional coverages on a global basis through traditional capacity, Lloyd’s and its Kinesis platform.

In terms of ERM, Lancashire’s risk management function is embedded and customized across the entire organization, which is necessary given the group’s elevated risk profile. The group’s historically strong underwriting results are demonstrative of the group’s risk management capabilities.

The following Long-Term IRs have been affirmed with a stable outlook:

Lancashire Holdings Limited—

— “bbb” on $130 million 5.7% senior unsecured notes, due 2022
— “bbb-” on $97 million 3.7% over LIBOR subordinated notes, due 2035

This press release relates to Credit Ratings that have been published on A.M. Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see A.M. Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Best’s Credit Ratings. For information on the proper media use of Best’s Credit Ratings and A.M. Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and A.M. Best Rating Action Press Releases.

A.M. Best is the world’s oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.

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A.M. Best

Scott Mangan, +1 908-439-2200, ext. 5593

Senior Financial Analyst

scott.mangan@ambest.com

or

Greg Reisner, +1 908-439-2200, ext. 5224

Director

greg.reisner@ambest.com

or

Christopher Sharkey, +1 908-439-2200, ext. 5159

Manager, Public Relations

christopher.sharkey@ambest.com

or

Jim Peavy, +1 908-439-2200, ext. 5644

Director, Public Relations

james.peavy@ambest.com

Source: A.M. Best