Richard Brindle, Group Chief Executive Officer, commented:
I am pleased to report a solid final quarter and an excellent year for Lancashire. Our RoE of 16.7% for the year represents a strong result. Lancashire has now increased book value per share, including dividends, every year since its inception in 2005 and has achieved an industry beating compound annual return over that period of 19.2%.
The exceptional level of market losses witnessed in 2011 was not repeated in 2012. There were nonetheless material industry losses, including the loss of the Costa Concordia, which in addition to causing tragic loss of life was also the largest insured marine loss in history, and the devastation and injury of Sandy during the fourth quarter, which is likely to be one of the largest insured property losses of all time.
At the beginning of 2012 I expressed a cautious optimism about the insurance pricing environment. That proved justified in our property retrocession and reinsurance lines and in the energy offshore accounts. Otherwise, the rating environment, outside of loss affected accounts in our core lines, remained competitive. On our direct property business, rates, and more importantly terms and conditions, proved frustratingly immune to improvement. Coupled with the cost of capital and reinsurance costs, this led to the hard decision to cease underwriting our direct and facultative book in the summer of 2012.
In recent years we have developed our business by engaging with third party capital providers through both the Accordion and the Saltire facilities. We see such opportunities as a capital- efficient way of generating additional benefits for our shareholders, drawing on Lancashire's underwriting expertise. We are actively engaged in the further development of these types of opportunities under the banner of "Lancashire Capital Management". We are careful only to develop products we believe in and to ensure that these projects don't distract us from the "mothership".
Our success is built on the talent and quality of our people. We have worked hard in 2012 to bring our different disciplines even closer together. In Bermuda our underwriting and actuarial teams now operate in a fully integrated way to assess and price risk. Our fortnightly Risk and Return Committee meeting brings together senior people from underwriting, finance, actuarial, risk and operations to look at all areas of our company. This teamwork drives our success, and I would like to thank all our staff for their commitment and contribution to another excellent year.
Dividends
The Lancashire Board declared the following dividends during 2012:
A final dividend in respect of 2011 of $0.10 per common share;
An interim dividend of $0.05 per common share; and
A special dividend of $0.90 per common share.
Lancashire announces that its Board has declared the following dividend payments (collectively the "Dividends"):
(i) a final dividend for 2012 of $0.10 per common share (approximately £0.06 per common share at the current exchange rate) amounting to an aggregate payment of approximately $16.1 million; and
(ii) an additional special dividend for 2012 of $1.05 per common share (approximately £0.68 per common share at the current exchange rate) amounting to an aggregate payment of approximately $169.6 million.
The Dividends will result in an aggregate payment of approximately $185.7 million. The Dividends will be paid as a single payment in Pounds Sterling on 17 April 2013 (the "Dividend Payment Date") to shareholders of record on 22 March 2013 (the "Record Date") using the £/$ spot market exchange rate at 12 noon London time on the Record Date.
