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The consolidated financial statements were approved by the Board of Directors on 5 March 2025 and signed on its behalf by:
Philip BroadleyNatalie Kershaw
Director/ChairDirector/CFO", "dimensions": { "concept": "ifrs-full:DisclosureOfAuthorisationOfFinancialStatementsExplanatory", "language": "en", "entity": "scheme:5493002UNUYXLHOWF752", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-92": { "value": "122000000.0", "decimals": -5, "dimensions": { "concept": "ifrs-full:Equity", "entity": "scheme:5493002UNUYXLHOWF752", "period": "2023-01-01T00:00:00", "ifrs-full:ComponentsOfEquityAxis": "ifrs-full:IssuedCapitalMember", "unit": "iso4217:USD" } }, "f-93": { "value": "-34000000.0", "decimals": -5, "dimensions": { "concept": "ifrs-full:Equity", "entity": "scheme:5493002UNUYXLHOWF752", "period": "2023-01-01T00:00:00", "ifrs-full:ComponentsOfEquityAxis": "lancashire:OwnSharesMember", "unit": "iso4217:USD" } }, "f-94": { "value": "1221900000.0", "decimals": -5, "dimensions": { "concept": "ifrs-full:Equity", "entity": "scheme:5493002UNUYXLHOWF752", "period": "2023-01-01T00:00:00", "ifrs-full:ComponentsOfEquityAxis": 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Summary of material accounting policies
The basis of preparation, use of judgements, estimates and assumptions, consolidation principles, and material accounting policies
adopted in the preparation of these consolidated financial statements are set out below.
Basis of preparation
The consolidated financial statements have been prepared in accordance with IFRS (as issued by the International Accounting Standards
Board), as adopted by the EU.
Going concern basis of accounting
The consolidated financial statements have been prepared on a going concern basis. In assessing the Group's going concern position as
at 31 December 2024, the Directors have considered a number of factors. These include:
\u2022 the current balance sheet and liquidity position;
\u2022 the level and composition of the Group's capital and solvency ratios;
\u2022 the Group's ability to service its long-term debt financing arrangements;
\u2022 the current performance against the Group's strategic and financial business plan;
\u2022 the Group's dividend distribution policy; and
\u2022 the current market environment, including consideration of climate change.
In addition, the ORSA report is a key document informing the Group's going concern assessment that is submitted to the Board.
The Group's financial forecasts reflect the outcomes that the Directors consider most likely, based on the information available at the
date of signing these consolidated financial statements. To assess the Group's going concern, the financial stability of the Group was
modelled for a period of at least 12 months and a number of sensitivity, stress and scenario tests were applied. This included a best
estimate forecast, and incorporated different magnitudes of reserve releases and attritional, large and catastrophe loss events, plus
optimistic and pessimistic investment return scenarios.
To further stress the financial stability of the Group, additional stress testing was performed. This included modelling the breakeven
capital requirements of our regulators and rating agencies, the impact of potential management actions to reduce the Group's exposure
to climate change-related risks, and a combination of large losses and catastrophe losses, which would result in a net loss for the
Group, and finally a reverse stress test scenario designed to render the business model unviable. The testing identified that even under
the more severe but plausible stress scenarios, the Group had more than adequate liquidity and solvency headroom.
Based on the going concern assessment performed, the Directors consider there to be no material uncertainties that may cast
significant doubt over the Group's ability to continue to operate as a going concern. The Directors have formed a judgement that there
is a reasonable expectation that the Group\u00a0has adequate resources to continue in operational existence in the foreseeable future, being
a period of at least 12 months from the date of signing these consolidated financial statements.
Currency and liquidity
All amounts presented, excluding share data, or where otherwise stated, are in millions of US dollars ($m), with amounts rounded to the
nearest $0.1 million where appropriate. The consolidated statement of financial position is presented in order of decreasing liquidity.
Use of judgements, estimates and assumptions
The preparation of the Group's consolidated financial statements requires management to make judgements, estimates and
assumptions that affect the application of the Group's accounting policies and the reported amounts of assets, liabilities, income and
expenses. Actual amounts may differ from these estimates.
Assumptions and estimates are based on information, knowledge and data available when the consolidated financial statements are
prepared. However, existing circumstances and assumptions about future developments may change, or circumstances may arise that
are beyond the control of the Group. Such changes are reflected in the assumptions when they occur, and are recognised
prospectively. It is considered impracticable to determine the effect that changes in these assumptions and estimates are expected to
have on future periods.
Key assumptions concerning the future, and sources of estimation uncertainty
The Group has considered both key assumptions concerning the future, and sources of estimation uncertainty, that may be expected to
have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities in a subsequent financial year.\u00a0
Insurance contracts issued and reinsurance contracts held
The Group has determined that its most significant area of estimation uncertainty is in relation to the measurement of insurance
contracts issued and reinsurance contracts held. Changes in assumptions made may materially change the FCF that make up these
balances. The FCF are the current estimates of the future cash flows within the contract boundary of a group of insurance or
reinsurance contracts that we expect to collect premiums from, and pay out for claims, benefits and expenses, adjusted to reflect the
timing and uncertainty of those amounts. Changes in the following key assumptions may change the FCF materially:
\u2022 assumptions about the amount and timing of future cash flows;
\u2022 assumptions about claims development;
\u2022 assumptions about discount rates, including any illiquidity premiums; and
\u2022 assumptions about the risk adjustment for non-financial risk.
The estimation of the FCF is a complex actuarial process which incorporates a significant amount of judgement, in particular in relation
to the estimation of the LIC and AIC. Delays in reporting losses to the Group, together with unforeseen loss development, increase
uncertainty over the accuracy of loss reserves. A significant portion of the Group's business is in classes with high attachment points of
coverage and therefore a low frequency but high severity of claims. This adds further complexity to the reserving process due to the
limited volume of industry data available from which to reliably predict ultimate losses following a loss event. Volatility for the majority
of losses is limited on a net basis by the reinsurance protection purchased.
Information about these key assumptions and estimates are included in our risk disclosures and in note 13.
Level (iii) investments
The Group holds a relatively straightforward investment portfolio consisting mainly of standard fixed maturity products. Level (iii)
investments are securities for which valuation techniques are not based on observable market data, and therefore require significant
management judgement to determine an appropriate fair value. The Group determines securities classified as Level (iii) to include
private investment funds, hedge funds and loans made to the Lloyd's central fund. The estimation of fair value, specifically for Level (iii)
investments, is discussed within the risk disclosures and note 11.
Management judgements, other than those involving estimations
Lancashire is an insurance group whose primary focus is on underwriting and actively balancing risk and return. In doing so it focuses
on ensuring premium revenue and investment return exceeds the cost of claims, outwards reinsurance and operating expenses. The
main areas in which judgement is applied are therefore in the measurement and recognition of insurance contracts and financial assets.
Simplified premium allocation measurement model
Management applies judgement to determine if the Group is eligible to apply the simplified PAA measurement model under IFRS 17.
The Group considers that it is eligible to apply the PAA measurement model to its portfolios and groups of insurance contracts on the
basis that the measurement of the LRC is not reasonably expected to differ materially from that calculated under the GMM. The Group
applies the PAA to simplify the measurement of all its insurance contracts issued and reinsurance contracts held.
In the years prior to IFRS 17 adoption, and in the initial year of adoption, this assessment was made through detailed quantitative
modelling of all portfolios and groups of insurance contracts. Given consistency in the Group\u2019s business mix, together with relatively
stable economic factors, the PAA eligibility assessment has been undertaken through a combination of qualitative and quantitative
analysis for the year ended 31 December 2024. Detailed quantitative testing was performed on a small number of portfolios and groups
of contracts where the LRC and ARC were judged to be most likely to differ materially under the different models. This testing
confirmed that the PAA measurement model remained appropriate.
Level of aggregation
Judgement is required to determine the level of aggregation under IFRS 17. Insurance contracts issued that are subject to similar risks
and that are managed together, are classified into a portfolio of insurance contracts.
The following considerations have been given most weight in the definition of similar risks:
\u2022 risk aggregations used for other business purposes such as reserving;
\u2022 segmentations used for underwriting; and
\u2022 perils covered and incidence of risk over time.
Each portfolio of insurance contracts is then further disaggregated into annual cohorts, and each annual cohort is classified into a
maximum of three groups of contracts for recognition and measurement purposes based on their expected profitability. See accounting
policies and note 13.
Onerous contract assessment
Management applies judgement to assess whether facts and circumstances indicate that a group of insurance contracts is onerous at
initial recognition, and subsequently assesses whether facts and circumstances indicate any changes in the onerous group's profitability,
and whether any loss component remeasurement is required. See accounting policies and note 13.
Classification of investment portfolio
The classification of the Group's investment portfolio requires judgement in assessing the business model within which assets are held.
The Group has established that all investment classes are managed, and their performance evaluated, on a fair value basis and therefore
they are classified at FVTPL. See risk disclosures and note 11.
Annual impairment assessments
The syndicate participation rights and goodwill are intangible assets with an indefinite life and subject to an annual impairment
assessment. The Group applies judgement when determining the input assumptions for the value in use calculation. The input
assumptions and their sensitivity are disclosed in note 17.
Current and deferred tax
The Group is exposed to changes in tax legislation which are complex to interpret and evolve over time. The Group applies
management expertise and judgement to interpret and assess the impact of these changes in tax legislation. Third party specialists
provide tax guidance and tax opinions at the request of management. Recent changes in tax legislation are disclosed in note 14.
Changes in accounting policies
IFRS 18, Presentation and Disclosure in Financial Statements
On 9 April 2024, the IASB published IFRS 18, Presentation and Disclosure in Financial Statements. The standard will be effective from 1
January 2027, replacing IAS 1, Presentation of Financial Statements. The Group is monitoring the endorsement process and undertaking
an initial assessment into the potential impact of adopting IFRS 18.
There are also amendments to other existing standards and interpretations that are mandatory for the first time for financial periods
beginning 1 January 2024. These are not currently relevant for the Group and do not impact the consolidated financial statements of
the Group.
Consolidation principles
The Group's consolidated financial statements comprise the financial statements of the Company and its subsidiaries as at and for the
year ended 31 December 2024. Subsidiaries are fully consolidated from the date of acquisition or incorporation, being the date on
which the Group obtains control, and continue to be consolidated until the date when such control ceases. Intercompany balances,
profits and transactions are eliminated. Control is achieved when the Group is exposed, or has rights, to variable returns from its
involvement with the subsidiary, and has the ability to affect those returns through its power over the subsidiary.
The Group participates in two syndicates at Lloyd's, which are managed by the Group's Lloyd's managing agent subsidiary. In view of the
several liability of underwriting members at Lloyd's, the Group recognises its proportion of all the transactions undertaken by the
syndicates in which it participates within its consolidated statement of comprehensive income. Similarly, the Group's proportion of the
syndicates' assets and liabilities has been reflected in its consolidated statement of financial position. This proportion is calculated by
reference to the Group\u2019s participation as a percentage of each syndicate's total capacity for each underwriting year of account.
Subsidiaries' accounting policies are generally consistent with the Group's accounting policies. Where they differ, adjustments are made
on consolidation to bring the subsidiaries' accounting policies in line with that of the Group.
Associates
Investments in which the Group has significant influence over the operational and financial policies of the investee, are recognised at
cost and thereafter accounted for using the equity method. Under this method, the Group records its proportionate share of income or
loss from such investments in its consolidated statement of comprehensive income for the period. Adjustments are made to the
associate's accounting policies, where necessary, to be consistent with the Group\u2019s accounting policies.
Foreign currency
Functional currency
Items included in the financial statements of each of the Group's entities are measured using the currency of the primary economic
environment in which the entities' operations are conducted (the 'functional currency'). The functional currency is US dollars for all of
the Group's entities, other than the Group's Australian entities, which have a functional currency of Australian dollars. The Group's
consolidated financial statements are presented in US dollars (the 'presentation currency').
Transactions and balances
Foreign currency transactions are recorded in the functional currency for each entity using the exchange rates prevailing at the dates of
the transactions, or at the average rate for the period when this is a reasonable approximation. Monetary assets and liabilities
denominated in foreign currencies are revalued at period end exchange rates. The resulting exchange differences on revaluation are
recorded in profit or loss within net foreign exchange gains (losses) in the consolidated statement of comprehensive income. Non-
monetary assets and liabilities denominated in a foreign currency are carried at historic rates. Non-monetary assets and liabilities carried
at estimated fair value and denominated in a foreign currency are translated at the exchange rate on the date that the estimated fair
value was determined.
Foreign operations
The results and financial position of the Group's entities that have a functional currency different from the presentation currency are
translated into the presentation currency as follows:
\u2022 assets and liabilities are translated at the closing rate on the period end date;
\u2022 income and expenses are translated at the average exchange rates for the period; and
\u2022 all resulting foreign exchange differences are recognised in other comprehensive income, and as a separate component of
shareholders\u2019 equity.
On disposal of foreign operations, cumulative exchange differences previously recognised in other comprehensive income are
recognised in profit or loss as part of the gain or loss on disposal.
Insurance contracts issued and reinsurance contracts held
Classification
Insurance contracts issued under IFRS 17 are those contracts that transfer significant insurance risk at the inception of the contract.
Insurance risk is transferred when an insurer agrees to compensate a policyholder if a specified uncertain future event adversely affects
the policyholder. Contracts that have a legal form of insurance risk but do not transfer significant insurance risk are classified as
investment contracts and follow financial instrument accounting under IFRS 9. The Group does not issue any contracts with direct
participation features.
In the normal course of business, the Group uses reinsurance to mitigate its risk exposures. A reinsurance contract held transfers
significant insurance risk if it transfers substantially all the insurance risk resulting from the insured or reinsured portion of the underlying
insurance contracts, even if it does not expose the reinsurer to the possibility of a significant loss.
All references to insurance contracts in these consolidated financial statements apply to insurance contracts issued and reinsurance
contracts held, unless specifically stated otherwise.
Level of aggregation of insurance contracts issued and reinsurance contracts held
Insurance contracts issued and reinsurance contracts held that are subject to similar risks and managed together are classified into
portfolios of contracts. These are disaggregated into annual cohorts and then further classified into groups based on their expected
profitability. The groups are:
\u2022 insurance contracts issued that are onerous at initial recognition, or reinsurance contracts held for which there is a net gain at initial
recognition;
\u2022 insurance contracts issued that at initial recognition have no significant possibility of becoming onerous, or reinsurance contracts
held where there is no significant possibility of a net gain arising subsequently; or
\u2022 a group of the remaining insurance contracts issued, or reinsurance contracts held.
These groups represent the level of aggregation at which insurance contracts issued are initially recognised and measured, and they are
not subsequently reconsidered.
Initial recognition of insurance contracts issued and reinsurance contracts held
An insurance contract issued by the Group is recognised at the earliest of:
\u2022 the beginning of the coverage period;
\u2022 when the first payment from the policyholder is due, or actually received if there is no due date; or
\u2022 the date when facts and circumstances indicate that the group of contracts is onerous.
Groups of reinsurance contracts held are initially recognised at the beginning of the coverage period. In the case of proportional
reinsurance contracts held, this may be delayed until the initial recognition date of any underlying insurance contract. Reinsurance
contracts held already entered into and covering an underlying onerous group of insurance contracts, are recognised on the same date
as the related onerous group of contracts.
Insurance contracts issued are initially added to the relevant groups of insurance contracts in the reporting period in which they meet
the recognition criteria, subject to the annual cohorts' restriction. Composition of the groups is not reassessed in subsequent periods.
Measurement applying the PAA measurement model
PAA eligibility
The Group considers that it is eligible to apply the PAA to simplify the measurement of groups of insurance contracts issued and
reinsurance contracts held, as the measurement of the LRC and ARC is not reasonably expected to differ materially from that calculated
under the GMM. The PAA has been applied to all groups of contracts.
Contract boundary
The measurement of a group of insurance contracts issued or reinsurance contracts held includes all of the cash flows within the
boundary of each contract in the group.
Cash flows are within the boundary of each contract if they arise from substantive rights and obligations that exist during the period. In
the case of insurance contracts issued, this is where the Group can compel the policyholder to pay premiums, or the Group has
substantive obligations to provide the policyholder with insurance coverage or other services. In the case of reinsurance contracts held,
this is where the Group is compelled to pay amounts to the reinsurer, or has a substantive right to receive insurance coverage or other
services from the reinsurer.
A substantive obligation to provide services ends when:
\u2022 the Group has the practical ability to reassess the risks of the particular policyholder, and as a result can set a price or level of benefits
that fully reflects those risks; or
\u2022 the Group has the practical ability to reassess the risks of the portfolio of insurance contracts that contains the contract, and as a
result can set a price or level of benefits that fully reflects the risks of the portfolio; and
\u2022 the pricing of premiums up to the date when risks are reassessed does not reflect the risks related to periods beyond the
reassessment date.
A substantive right to receive services from the reinsurer ceases when the reinsurer:
\u2022 has the practical ability to reassess the risks transferred to it and can set a price or level of benefits that fully reflects those reassessed
risks; or
\u2022 has a substantive right to terminate the coverage.
The contract boundary is reassessed at each reporting period to include the effect of change in circumstances on the Group's rights
and obligations, and may change over time.
Cash flows not directly attributable to a portfolio of insurance contracts are recognised in other operating expenses as incurred.
Fulfilment cash flows within the contract boundary
The FCF are the current estimates of the future cash flows within the contract boundary of a group of insurance contracts. These include
premiums, claims, acquisition costs and administrative expenses, adjusted to reflect the timing and the uncertainty of those amounts.
The estimates of future cash flows are based on an unbiased probability weighted mean of the full range of possible outcomes. They
reflect current estimates, factoring in expected credit losses or non-performance risk of reinsurers, and are determined from the
perspective of the Group.
The Group uses assumptions to measure the estimates of the future cash flows for a group of reinsurance contracts held that are
consistent with the underlying group of insurance contracts issued. Reinsurance cash flows that are contingent on claims incurred by
the underlying insurance contracts issued are therefore included as part of the cash flows that are expected to be reimbursed under the
relevant reinsurance contracts held.
Discounting
The FCF within the LIC and AIC are discounted using current discount rates to reflect the time value of money and the financial risks
related to those cash flows. The discount rates reflect the characteristics of the cash flows arising from each group of insurance
contracts, including the timing, currency, and liquidity of the cash flows. The Group does not discount the LRC or the ARC. This would
be required if the LRC or ARC included a significant financing component.
Risk adjustment for non-financial risk
The measurement of the LIC and AIC includes an explicit risk adjustment for non-financial risk. This is estimated separately from the
discounted FCF and is applied to the present value of the estimated future cash flows. It reflects the compensation the Group requires,
or transfers to a reinsurer, for bearing uncertainty about the amount and timing of the cash flows from non-financial risk as the Group
fulfils its insurance contracts issued.
Insurance acquisition cash flows
Insurance acquisition cash flows arise from the cost of selling, underwriting, and initiating a group of insurance contracts that are
directly attributable to the portfolio of insurance contracts to which the group belongs. These include:
\u2022 contract specific costs, such as brokerage; and
\u2022 a systematic and rational allocation of fixed and variable overheads to groups of contracts based on insurance revenue.
Initial measurement of insurance contracts issued applying the PAA
The carrying amount of the LRC is measured with reference to the premiums received on initial recognition from either policyholders or
intermediaries, minus any insurance acquisition cash flows allocated to the relevant group at that date, less the derecognition of any
assets or liabilities previously recognised for cash flows related to the group.
The Group assumes that no contracts are onerous at initial recognition, unless facts and circumstances indicate otherwise. If such
evidence exists, the Group determines if the contract will result in a net cash outflow. The Group recognises an insurance service
expense for the net cash outflow, and an onerous loss component is added to the LRC.
Subsequent measurement of insurance contracts issued applying the PAA
The carrying amount of a group of insurance contracts issued is the sum of the LRC and the LIC, and is measured at the end of each
reporting period. The measurement of the LRC includes:
\u2022 any premiums received, less amounts recognised as insurance revenue;
\u2022 less insurance acquisition cash flows paid, plus amortisation of any insurance acquisition cash flows recognised as insurance service
expense in the period; and
\u2022 less any non-distinct investment components paid or transferred to the LIC.
Groups of insurance contracts that were not onerous at initial recognition can subsequently become onerous if facts and circumstances
change during the coverage period. Onerous groups of contracts are assessed at the end of each reporting period with changes in the
expected net cash outflow recognised in the carrying amount of the LRC and insurance service expenses. The Group amortises the
onerous loss component within the LRC based on the passage of time over the remaining coverage period within insurance service
expenses. The equivalent basis is also applied to any relevant reinsurance recovery component.
The Group recognises the LIC for a group of insurance contracts as the amount of FCF relating to the incurred claims that have not yet
been paid, including claims that have been incurred but not yet reported, together with the associated expenses, including all claims
handling expenses that relate to incurred claims which have not yet been paid. The FCF are measured at the reporting date using
current estimates of future cash flows, current discount rates and current estimates of the risk adjustment for non-financial risk.
Initial and subsequent measurement of reinsurance contracts held applying the PAA
The carrying amount of a group of reinsurance contracts held is the sum of the ARC and the AIC, and is measured at the end of each
reporting period. The Group measures a group of reinsurance contracts held on the same basis as a group of insurance contracts
issued, with adaptations to reflect the features of reinsurance contracts held that differ from insurance contracts issued.
Derecognition and modification under the PAA
The Group derecognises an insurance contract issued or a reinsurance contract held when it is extinguished (that is, when the specified
obligations in the contract expire, are discharged, or cancelled), or the contract is modified.
Modifications to a contract are accounted for as a change in the estimate of the FCF. A contract is derecognised and treated as a new
contract if the modification to the contract either:
\u2022 changes the measurement model;
\u2022 brings the contract, or separable component parts of the contract, outside the scope of IFRS 17;
\u2022 substantially changes the contract boundary; or
\u2022 results in the contract being allocated to a different group.
When an insurance contract is extinguished, transferred to a third party, or modified in such a way that results in derecognition, any
adjustments made to the FCF are recorded within the consolidated statement of comprehensive income.
Presentation within the financial statements
Portfolios of insurance contracts issued, and portfolios of reinsurance contracts held, that are assets, and those that are liabilities, are
presented separately in the consolidated statement of financial position.
The Group disaggregates amounts recognised in the consolidated statement of comprehensive income into an insurance service result,
and insurance finance income and expense.
The Group disaggregates changes in the risk adjustment for non-financial risk between the insurance services result (which represents
the change related to non-financial risk), and insurance finance income or expenses (which represents the effect of the time value of
money and changes in the time value of money).
Income and expenses from reinsurance contracts held are presented separately from the income and expenses on insurance contracts
issued.
Insurance revenue and insurance service expenses exclude any non-distinct investment components.
Insurance revenue from insurance contracts issued
Insurance revenue from groups of insurance contracts issued is the amount of expected premiums net of ceding commission payable.
Expected premiums exclude any investment components.
Insurance revenue is recognised based on the passage of time over the coverage period.
The amount of insurance revenue recognised in the period reflects the provision of insurance services and the corresponding
consideration the Group expects to be entitled to in exchange for those services.
Insurance service expenses from insurance contracts issued
Insurance service expenses are recognised as they are incurred, and comprise the following items:
\u2022 incurred claims, net of inwards reinstatement premiums, and net of the initial discount on incurred claims;
\u2022 adjustments to the LIC (including the risk adjustment) that do not arise from the effects of the time value of money, financial risk and
changes therein;
\u2022 amortisation of insurance acquisition cash flows based on the passage of time over the relevant coverage period;
\u2022 other directly attributable insurance service expenses, including an allocation of fixed and variable overhead costs; and
\u2022 losses on onerous contracts and the reversal of such losses.
Expenses not meeting the above criteria are included within other operating expenses in the consolidated statement of comprehensive
income.
Allocation of reinsurance premium and amounts recoverable from reinsurers
The allocation of reinsurance premiums is the amount of expected reinsurance premium payments net of commission income
receivable for a group of reinsurance contracts held, and is recognised based on the passage of time over the relevant coverage period
of the reinsurance contract.
Amounts recoverable from reinsurers are recognised as they are incurred and include reinsurance recovery cash flow assumptions that
are consistent with underlying insurance contracts issued, recognition of movements in onerous loss recovery components and the
effect of any risk of non-performance by the issuer of the reinsurance contract.
Finance income or expenses from insurance contracts issued and reinsurance contracts held
Insurance finance income or expenses comprise the change in the carrying amount of the group of insurance contracts issued, or
reinsurance contracts held, arising from the effect of the time value of money, financial risk and changes therein. These include:
\u2022 the unwind of the initial discount (that is, interest accreted on the LIC or AIC); and
\u2022 the effect of changes in interest rate assumptions.
The Group has elected to include insurance finance income and expenses within the consolidated statement of comprehensive income
and does not disaggregate these between profit and loss and OCI.
Non-distinct investment components
The non-distinct investment component of an insurance contract is the amount that the Group would be required to repay to a
policyholder in all circumstances, regardless of whether an insured event occurs. The receipt of this investment component and the
subsequent repayment do not relate to insurance services. Non-distinct investment components are therefore excluded from insurance
revenue and insurance service expenses, and are considered as a settlement of an insurance contract liability.
Financial instruments
Financial assets
On initial recognition, a financial asset is classified as either measured at amortised cost, FVTPL or FVOCI. The classification is dependent
on the Group's business model for managing the financial asset, and the contractual terms of the cash flows.
Financial assets are classified as measured at amortised cost if they are held to collect contractual cash flows, and where those cash
flows represent solely payments of principal and interest.
Financial assets are classified as measured at FVOCI if they are held to both collect contractual cash flows and sell, and where those
cash flows represent solely payments of principal and interest.
All financial assets not classified as measured at amortised cost or FVOCI are classified as measured at FVTPL. Financial assets in this
FVTPL category are those that are managed in a fair value business model, or that have been designated as FVTPL by management upon
initial recognition.
Financial assets are not reclassified subsequent to their initial recognition, unless the Group changes its business model for managing
those financial assets, in which case the affected financial assets are reclassified on the first day of the first reporting period following
the change in the business model.
Cash and cash equivalents
Cash and cash equivalents are carried in the consolidated statement of financial position at amortised cost and include cash in hand,
deposits held on call with banks, and other short-term highly liquid investments with a maturity of three months or less at the date of
purchase. Carrying amounts approximate fair value due to the short-term nature and high liquidity of the instruments.
Interest income earned on cash and cash equivalents is recognised by applying the effective interest rate method. The carrying value of
accrued interest income approximates estimated fair value due to its short-term nature and high liquidity.
Investments
The Group's business model emphasises the preservation of capital and the provision of sufficient liquidity for the prompt payment of
claims, in conjunction with providing a stable income stream as far as possible. Management reviews the composition, duration and
asset allocation of the investment portfolio regularly to respond to changes in interest rates, and other market conditions.
Investments are recognised when the Group becomes a party to the contractual provisions of the instrument. Regular-way purchases
and sales of investments are recognised on the trade date, being the date on which the Group commits to purchase or sell the asset.
At initial recognition, the Group measures financial assets held at FVTPL at their fair value on acquisition. Transaction costs in respect of
financial assets carried at FVTPL are expensed within the consolidated statement of comprehensive income as they are incurred.
Financial assets held at FVTPL are subsequently measured at their fair value.
The Group's investment portfolio comprising fixed maturity securities, private investment funds and hedge funds, is managed in a fair
value business model and are therefore mandatorily classified as FVTPL.
The Group's investment portfolio includes quoted and unquoted investments. The fair values of the investments are determined based on bid
prices from recognised exchanges, broker-dealers, recognised indices or pricing vendors. Unrealised gains or losses from changes in the fair
value of investments are presented in profit or loss within net investment return. Interest income is recognised by applying the effective interest
rate method and presented in the consolidated statement of comprehensive income within net investment return. The carrying value of
accrued interest receivable approximates fair value due to its short-term nature and high liquidity.
Investments are derecognised when the Group has transferred substantially all of the risks and rewards of ownership or when the right
to receive cash flows from the asset has expired, with any realised gains or losses recognised in the consolidated statement of
comprehensive income within net investment return.
Derivatives
Derivatives are classified as financial assets or liabilities at FVTPL. They are initially recognised at fair value on the date a contract is
entered into, the trade date, and are subsequently carried at fair value. Derivative instruments with a positive fair value are recorded as
derivative financial assets and those with a negative fair value are recorded as derivative financial liabilities.
Derivative financial instruments may include the use of exchange-traded future and option contracts, forward foreign currency
contracts, interest rate swaps, credit default swaps, and interest rate swaptions. They derive their value from the underlying instrument
and are subject to the same risks as that underlying instrument, including liquidity risk, credit risk, and market risk. Estimated fair values
are based on exchange or broker-dealer quotations, where available, or discounted cash flow models, which incorporate the pricing of
the underlying instrument, yield curves and other factors. Changes in the estimated fair value of derivative instruments are recognised in
the consolidated statement of comprehensive income within net investment return. The Group does not currently hold any derivatives
classified as hedging instruments. For discounted cash flow techniques, estimated future cash flows are based on management\u2019s best
estimates, and the discount rate used is an appropriate market rate.
Derivative financial assets and liabilities are offset and the net amount is reported in the consolidated statement of financial position only
to the extent there is a legally enforceable right of offset, and there is an intention to settle on a net basis, or to realise the assets and
liabilities simultaneously. Derivative financial assets and liabilities are derecognised when the Group has transferred substantially all of
the risks and rewards of ownership, or the liability is discharged, cancelled or expired, with any realised gains or losses recognised in the
consolidated statement of comprehensive income within net investment return.
Other receivables
Other receivables includes trade receivables and contract assets. Trade receivables that do not have a significant financing component
are measured on initial recognition at their fair value, which is typically their transaction price, and are subsequently measured at
amortised cost using the effective interest rate method, less an expected credit loss allowance where applicable. The other receivables
held by the Group are short-term in nature.
Impairment
The Group applies the simplified approach to measuring ECL, which uses a lifetime ECL for all receivables and contract assets (other
than those recognised under IFRS 17). The lifetime ECL is measured from the date of the initial recognition of trade receivables and
contract assets. The Group calculates the lifetime ECL using three main components: a probability of default, a loss given default and
the exposure at default (collectively the expected loss rates).
To measure the lifetime ECL, receivables and contract assets are grouped based on shared credit risk characteristics. The expected loss
rates are based on the payment profiles over the three years prior to the period end and the corresponding credit losses experienced
within this three-year period. The historical loss rates are adjusted to reflect current and forward-looking information based on
macroeconomic factors affecting the ability to collect receivables.
Financial liabilities
Other payables
Other payables represent goods and services provided to the Group prior to the financial year end which are unpaid. These amounts are
unsecured and are usually paid within 30 to 60 days of recognition. Other payables are recognised initially at their fair value and are
subsequently measured at amortised cost using the effective interest method.
Long-term debt
Long-term debt is recognised initially at fair value, net of transaction costs incurred. Thereafter it is measured at amortised cost using
the effective interest method. Derecognition occurs when the obligation has been extinguished. The difference between the carrying
amount that has been extinguished and the consideration paid, is recognised within the consolidated statement of comprehensive
income.
Intangible assets
The Group's intangible assets comprise indefinite life intangible assets, and internally generated intangible assets.
The Group's indefinite life intangible assets comprise syndicate participation rights and goodwill. The cost of syndicate participation
rights and goodwill acquired in a business combination is their fair value as at the date of acquisition. Additional syndicate participation
rights may be purchased from time to time and are recorded at the cost on the date of the relevant syndicate capacity auction. As a
result of their anticipated ability to continue to generate cash flows for the Group on a long-term basis, goodwill and syndicate
participation rights are considered to have an indefinite useful life, and are not amortised. They are carried at cost less any accumulated
impairment losses. Intangible assets with an indefinite useful life are tested annually for impairment at the CGU level by comparing the
net present value of the future cash flow stream of the CGU to the carrying value of the net assets of the CGU, including the related
intangible assets. The useful life of an indefinite life intangible asset is reviewed annually, to determine if the assessment that it has an
indefinite life continues to be supportable.
Internally generated intangible assets represent directly attributable costs incurred in the development phase of implementing cloud-
based software to support the Group's target operating model. An internally generated intangible asset is recognised if it can be
demonstrated that there is an intent, available resources, and technical feasibility to complete the intangible asset so that it is available
for use, and that it will generate probable future economic benefits. The costs must be capable of being measured reliably. Such
intangible assets are carried at cost less any accumulated impairment losses. Intangible assets not yet available for use are tested
annually for impairment at the CGU level by comparing the net present value of the future cash flow stream of the CGU to the carrying
value of the net assets of the CGU, including the related intangible assets.
Internally generated intangible assets available for use are considered to have a finite life. Applying the cost model, intangible assets with
finite lives are amortised over their estimated useful economic life, and assessed for impairment whenever there are indicators of
impairment.
The useful lives and amortisation period of the internally generated intangibles are estimated to be between 5 to 7 years, and will be
amortised using the straight-line method with no residual value. The amortisation of these internally generated intangibles is recognised
within other operating expenses.
Other income
Other income is measured based on the consideration specified in a contract and excludes amounts collected on behalf of third parties.
Nature of services
The table below details the type of services from which the Group derives its other income.
Services
Nature, timing of satisfaction of performance obligation and significant payment terms
LCM underwriting fees
The Group recognises underwriting fees over the underwriting cycle based on the underlying exposure of
the covered contracts. Underwriting fees are received on or before the collateral funding date, which is prior
to commencement of the underwriting cycle.
LCM profit commission
The Group recognises profit commission following the end of the underwriting cycle based on the
underlying performance of the covered contracts and as collateral is released. Profit commissions may only
be received once the profit commission hurdle has been met.
LSL consortium
management fees
The Group recognises consortium fees over the risk period based on the underlying exposure of the covered
contracts. Consortium fees are received quarterly.
LSL consortium profit
commission
The Group recognises profit commission in line with the underlying performance of covered contracts once
the year of account closes, which is also when the profit commissions are received.
LSL managing agency
fees
The Group recognises managing agency fees in line with the services provided in respect of each
underwriting year of account. Managing agency fees are received quarterly.
LSL managing agency
profit commission
The Group recognises profit commission on open years of account when measurement is highly probable.
Profit commissions are received once the year of account closes.
LSL coverholder fee
income
The Group recognises coverholder fee income in line with services provided. Coverholder fee income is
received quarterly.
Property, plant and equipment
Property, plant and equipment is carried at historical cost, less accumulated depreciation, and any impairment in value. Depreciation
is calculated to write off the cost over the estimated useful economic life on a straight-line basis as follows:
IT equipment
33% per annum
Office furniture and equipment
20% to 33% per annum
Leasehold improvements
20% per annum
Indicators of impairment, together with the assets\u2019 residual values, useful lives, and depreciation methods are reviewed, and adjusted if
appropriate, at each reporting date.
An item of property, plant or equipment is derecognised on disposal, or when no future economic benefits are expected to arise from
the continued use of the asset.
Gains and losses on the disposal of property, plant and equipment are determined by comparing proceeds with the carrying amount of
the asset, and are included in the consolidated statement of comprehensive income. Costs for repairs and maintenance are charged to
the statement of comprehensive income as incurred.
Leases
The Group assesses whether a contract is, or contains, a lease, at the inception of the contract. A contract is, or contains, a lease if the
contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.
The lease liability is initially measured at the present value of the lease payments that are not paid at the lease commencement date.
Lease payments are discounted using the rate implicit in the lease, if readily determinable, or at the Group\u2019s incremental borrowing rate.
Lease payments included in the measurement of the lease liability comprise:
\u2022 fixed lease payments;
\u2022 variable lease payments that depend on an index or rate, initially measured using the index or rate at the commencement date of the
lease; or
\u2022 payments in respect of purchase options, lease termination options, or lease extension options that the Group is reasonably certain to
exercise.
The lease liability is subsequently measured by increasing the lease carrying amount to reflect the interest on the lease liability using the
effective interest rate method, and by reducing the carrying amount to reflect the lease payments made.
The Group re-measures the lease liability and the related right-of-use asset whenever:
\u2022 the lease term changes as a result of the Group changing its assessment of whether it will exercise a purchase, extension, or
termination option, in which case the lease liability is re-measured by discounting the revised lease payments using a revised discount
rate;
\u2022 the lease payments change due to changes in an index or rate, or a change in expected payment under a guaranteed residual value,
in which case the lease liability is re-measured by discounting the revised lease payments using the initial discount rate; or
\u2022 a lease contract is modified and the lease modification is not accounted for as a separate lease, in which case the lease liability is re-
measured by discounting the revised lease payments using a revised discount rate.
The right-of-use asset is initially measured at cost, which comprises the initial measurement of the corresponding lease liability adjusted
for any lease payments made at, or before, the commencement date, plus any initial direct costs incurred, and an estimate of any costs
to be incurred at expiration of the lease agreement.
Right-of-use assets are subsequently measured at cost less accumulated depreciation and any impairment losses. Straight-line
depreciation is calculated from the commencement date of the lease to the earlier of the end date of the lease term, or the useful life of
the underlying asset.
The Group applies IAS 36, Impairment of Assets, to determine whether a right-of-use asset is impaired and recognises any identified
impairment loss within the consolidated statement of comprehensive income.
Employee benefits
Equity compensation plans
The Group currently operates an RSS under which nil-cost options have been granted. The fair value of the equity instruments granted
is estimated on the date of grant. The estimated fair value is recognised as an expense pro-rata over the vesting period of the
instrument, adjusted for the impact of any non-market vesting conditions. No adjustment to vesting assumptions is made in respect of
market vesting conditions.
At each reporting date, the Group revises its estimate of the number of RSS nil-cost options that are expected to become exercisable. It
recognises the impact of the revision of original estimates, if any, as an equity-based compensation expense in the consolidated
statement of comprehensive income over the remaining vesting period, and a corresponding adjustment is made to other reserves
within shareholders\u2019 equity.
Upon exercise, the differences between the expense charged to the consolidated statement of comprehensive income and the actual
cost to the Group, if any, are transferred to other reserves within shareholders\u2019 equity.
Pensions
The Group operates a defined contribution plan. On payment of contributions to the plan there is no further obligation for the Group.
Contributions are recognised as employee benefits in the consolidated statement of comprehensive income in the period when the
employee's services are rendered.
Tax
The tax charge or credit represents the sum of the tax currently payable and any deferred tax. The tax payable is calculated based on
taxable profit for the period using tax rates and tax laws enacted, or substantively enacted, at the year-end reporting date, and any
adjustments to tax payable in respect of prior periods. Taxable profit for the period can differ from that reported in the consolidated
statement of comprehensive income due to non-taxable income, and certain items which are not tax deductible, or which are deferred
to subsequent periods.
Deferred tax is recognised on all temporary differences between the assets and liabilities in the consolidated statement of financial
position and their tax base, except when the deferred tax liability arises from the initial recognition of goodwill. Deferred tax assets or
liabilities are accounted for using the balance sheet liability method. Deferred tax assets are recognised to the extent that realising the
related tax benefit through future taxable profits is probable, and are reassessed each year for recognition.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax
liabilities, and when the deferred income taxes relate to the same fiscal authority.
At the date equity-based compensation awards are exercised, and where the current estimated fair value of an award exceeds the estimated fair
value at the date they were granted, corporation tax on this excess amount is recognised within equity. At the period end date, equity-based
compensation awards that have not been exercised, and for which the current estimated fair value of an award exceeds the estimated fair value
at the date they were granted, have deferred tax on this excess amount recognised within shareholders' equity.
Own shares
Own shares include shares repurchased under share repurchase authorisations and held as treasury shares, plus shares repurchased and
held in trust, for the purposes of employee equity-based compensation schemes. Own shares are deducted from shareholders\u2019 equity.
No gain or loss is recognised on the purchase, sale, cancellation, or issue of own shares, and any consideration paid or received is
recognised directly in shareholders' equity.
", "dimensions": { "concept": "ifrs-full:DisclosureOfMaterialAccountingPolicyInformationExplanatory", "language": "en", "entity": "scheme:5493002UNUYXLHOWF752", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-200": { "value": "
Basis of preparation
The consolidated financial statements have been prepared in accordance with IFRS (as issued by the International Accounting Standards
Board), as adopted by the EU.
Going concern basis of accounting
The consolidated financial statements have been prepared on a going concern basis. In assessing the Group's going concern position as
at 31 December 2024, the Directors have considered a number of factors. These include:
\u2022 the current balance sheet and liquidity position;
\u2022 the level and composition of the Group's capital and solvency ratios;
\u2022 the Group's ability to service its long-term debt financing arrangements;
\u2022 the current performance against the Group's strategic and financial business plan;
\u2022 the Group's dividend distribution policy; and
\u2022 the current market environment, including consideration of climate change.
In addition, the ORSA report is a key document informing the Group's going concern assessment that is submitted to the Board.
The Group's financial forecasts reflect the outcomes that the Directors consider most likely, based on the information available at the
date of signing these consolidated financial statements. To assess the Group's going concern, the financial stability of the Group was
modelled for a period of at least 12 months and a number of sensitivity, stress and scenario tests were applied. This included a best
estimate forecast, and incorporated different magnitudes of reserve releases and attritional, large and catastrophe loss events, plus
optimistic and pessimistic investment return scenarios.
To further stress the financial stability of the Group, additional stress testing was performed. This included modelling the breakeven
capital requirements of our regulators and rating agencies, the impact of potential management actions to reduce the Group's exposure
to climate change-related risks, and a combination of large losses and catastrophe losses, which would result in a net loss for the
Group, and finally a reverse stress test scenario designed to render the business model unviable. The testing identified that even under
the more severe but plausible stress scenarios, the Group had more than adequate liquidity and solvency headroom.
Based on the going concern assessment performed, the Directors consider there to be no material uncertainties that may cast
significant doubt over the Group's ability to continue to operate as a going concern. The Directors have formed a judgement that there
is a reasonable expectation that the Group\u00a0has adequate resources to continue in operational existence in the foreseeable future, being
a period of at least 12 months from the date of signing these consolidated financial statements.
Currency and liquidity
All amounts presented, excluding share data, or where otherwise stated, are in millions of US dollars ($m), with amounts rounded to the
nearest $0.1 million where appropriate. The consolidated statement of financial position is presented in order of decreasing liquidity.
Use of judgements, estimates and assumptions
The preparation of the Group's consolidated financial statements requires management to make judgements, estimates and
assumptions that affect the application of the Group's accounting policies and the reported amounts of assets, liabilities, income and
expenses. Actual amounts may differ from these estimates.
Assumptions and estimates are based on information, knowledge and data available when the consolidated financial statements are
prepared. However, existing circumstances and assumptions about future developments may change, or circumstances may arise that
are beyond the control of the Group. Such changes are reflected in the assumptions when they occur, and are recognised
prospectively. It is considered impracticable to determine the effect that changes in these assumptions and estimates are expected to
have on future periods.
Key assumptions concerning the future, and sources of estimation uncertainty
The Group has considered both key assumptions concerning the future, and sources of estimation uncertainty, that may be expected to
have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities in a subsequent financial year.\u00a0
Insurance contracts issued and reinsurance contracts held
The Group has determined that its most significant area of estimation uncertainty is in relation to the measurement of insurance
contracts issued and reinsurance contracts held. Changes in assumptions made may materially change the FCF that make up these
balances. The FCF are the current estimates of the future cash flows within the contract boundary of a group of insurance or
reinsurance contracts that we expect to collect premiums from, and pay out for claims, benefits and expenses, adjusted to reflect the
timing and uncertainty of those amounts. Changes in the following key assumptions may change the FCF materially:
\u2022 assumptions about the amount and timing of future cash flows;
\u2022 assumptions about claims development;
\u2022 assumptions about discount rates, including any illiquidity premiums; and
\u2022 assumptions about the risk adjustment for non-financial risk.
The estimation of the FCF is a complex actuarial process which incorporates a significant amount of judgement, in particular in relation
to the estimation of the LIC and AIC. Delays in reporting losses to the Group, together with unforeseen loss development, increase
uncertainty over the accuracy of loss reserves. A significant portion of the Group's business is in classes with high attachment points of
coverage and therefore a low frequency but high severity of claims. This adds further complexity to the reserving process due to the
limited volume of industry data available from which to reliably predict ultimate losses following a loss event. Volatility for the majority
of losses is limited on a net basis by the reinsurance protection purchased.
Information about these key assumptions and estimates are included in our risk disclosures and in note 13.
Level (iii) investments
The Group holds a relatively straightforward investment portfolio consisting mainly of standard fixed maturity products. Level (iii)
investments are securities for which valuation techniques are not based on observable market data, and therefore require significant
management judgement to determine an appropriate fair value. The Group determines securities classified as Level (iii) to include
private investment funds, hedge funds and loans made to the Lloyd's central fund. The estimation of fair value, specifically for Level (iii)
investments, is discussed within the risk disclosures and note 11.
Management judgements, other than those involving estimations
Lancashire is an insurance group whose primary focus is on underwriting and actively balancing risk and return. In doing so it focuses
on ensuring premium revenue and investment return exceeds the cost of claims, outwards reinsurance and operating expenses. The
main areas in which judgement is applied are therefore in the measurement and recognition of insurance contracts and financial assets.
Simplified premium allocation measurement model
Management applies judgement to determine if the Group is eligible to apply the simplified PAA measurement model under IFRS 17.
The Group considers that it is eligible to apply the PAA measurement model to its portfolios and groups of insurance contracts on the
basis that the measurement of the LRC is not reasonably expected to differ materially from that calculated under the GMM. The Group
applies the PAA to simplify the measurement of all its insurance contracts issued and reinsurance contracts held.
In the years prior to IFRS 17 adoption, and in the initial year of adoption, this assessment was made through detailed quantitative
modelling of all portfolios and groups of insurance contracts. Given consistency in the Group\u2019s business mix, together with relatively
stable economic factors, the PAA eligibility assessment has been undertaken through a combination of qualitative and quantitative
analysis for the year ended 31 December 2024. Detailed quantitative testing was performed on a small number of portfolios and groups
of contracts where the LRC and ARC were judged to be most likely to differ materially under the different models. This testing
confirmed that the PAA measurement model remained appropriate.
Level of aggregation
Judgement is required to determine the level of aggregation under IFRS 17. Insurance contracts issued that are subject to similar risks
and that are managed together, are classified into a portfolio of insurance contracts.
The following considerations have been given most weight in the definition of similar risks:
\u2022 risk aggregations used for other business purposes such as reserving;
\u2022 segmentations used for underwriting; and
\u2022 perils covered and incidence of risk over time.
Each portfolio of insurance contracts is then further disaggregated into annual cohorts, and each annual cohort is classified into a
maximum of three groups of contracts for recognition and measurement purposes based on their expected profitability. See accounting
policies and note 13.
Onerous contract assessment
Management applies judgement to assess whether facts and circumstances indicate that a group of insurance contracts is onerous at
initial recognition, and subsequently assesses whether facts and circumstances indicate any changes in the onerous group's profitability,
and whether any loss component remeasurement is required. See accounting policies and note 13.
Classification of investment portfolio
The classification of the Group's investment portfolio requires judgement in assessing the business model within which assets are held.
The Group has established that all investment classes are managed, and their performance evaluated, on a fair value basis and therefore
they are classified at FVTPL. See risk disclosures and note 11.
Annual impairment assessments
The syndicate participation rights and goodwill are intangible assets with an indefinite life and subject to an annual impairment
assessment. The Group applies judgement when determining the input assumptions for the value in use calculation. The input
assumptions and their sensitivity are disclosed in note 17.
Current and deferred tax
The Group is exposed to changes in tax legislation which are complex to interpret and evolve over time. The Group applies
management expertise and judgement to interpret and assess the impact of these changes in tax legislation. Third party specialists
provide tax guidance and tax opinions at the request of management. Recent changes in tax legislation are disclosed in note 14.
Changes in accounting policies
IFRS 18, Presentation and Disclosure in Financial Statements
On 9 April 2024, the IASB published IFRS 18, Presentation and Disclosure in Financial Statements. The standard will be effective from 1
January 2027, replacing IAS 1, Presentation of Financial Statements. The Group is monitoring the endorsement process and undertaking
an initial assessment into the potential impact of adopting IFRS 18.
There are also amendments to other existing standards and interpretations that are mandatory for the first time for financial periods
beginning 1 January 2024. These are not currently relevant for the Group and do not impact the consolidated financial statements of
the Group.
", "dimensions": { "concept": "ifrs-full:DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory", "language": "en", "entity": "scheme:5493002UNUYXLHOWF752", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-201": { "value": "
Going concern basis of accounting
The consolidated financial statements have been prepared on a going concern basis. In assessing the Group's going concern position as
at 31 December 2024, the Directors have considered a number of factors. These include:
\u2022 the current balance sheet and liquidity position;
\u2022 the level and composition of the Group's capital and solvency ratios;
\u2022 the Group's ability to service its long-term debt financing arrangements;
\u2022 the current performance against the Group's strategic and financial business plan;
\u2022 the Group's dividend distribution policy; and
\u2022 the current market environment, including consideration of climate change.
In addition, the ORSA report is a key document informing the Group's going concern assessment that is submitted to the Board.
The Group's financial forecasts reflect the outcomes that the Directors consider most likely, based on the information available at the
date of signing these consolidated financial statements. To assess the Group's going concern, the financial stability of the Group was
modelled for a period of at least 12 months and a number of sensitivity, stress and scenario tests were applied. This included a best
estimate forecast, and incorporated different magnitudes of reserve releases and attritional, large and catastrophe loss events, plus
optimistic and pessimistic investment return scenarios.
To further stress the financial stability of the Group, additional stress testing was performed. This included modelling the breakeven
capital requirements of our regulators and rating agencies, the impact of potential management actions to reduce the Group's exposure
to climate change-related risks, and a combination of large losses and catastrophe losses, which would result in a net loss for the
Group, and finally a reverse stress test scenario designed to render the business model unviable. The testing identified that even under
the more severe but plausible stress scenarios, the Group had more than adequate liquidity and solvency headroom.
Based on the going concern assessment performed, the Directors consider there to be no material uncertainties that may cast
significant doubt over the Group's ability to continue to operate as a going concern. The Directors have formed a judgement that there
is a reasonable expectation that the Group\u00a0has adequate resources to continue in operational existence in the foreseeable future, being
a period of at least 12 months from the date of signing these consolidated financial statements.
", "dimensions": { "concept": "ifrs-full:DisclosureOfGoingConcernExplanatory", "language": "en", "entity": "scheme:5493002UNUYXLHOWF752", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-203": { "value": "
Use of judgements, estimates and assumptions
The preparation of the Group's consolidated financial statements requires management to make judgements, estimates and
assumptions that affect the application of the Group's accounting policies and the reported amounts of assets, liabilities, income and
expenses. Actual amounts may differ from these estimates.
Assumptions and estimates are based on information, knowledge and data available when the consolidated financial statements are
prepared. However, existing circumstances and assumptions about future developments may change, or circumstances may arise that
are beyond the control of the Group. Such changes are reflected in the assumptions when they occur, and are recognised
prospectively. It is considered impracticable to determine the effect that changes in these assumptions and estimates are expected to
have on future periods.
Key assumptions concerning the future, and sources of estimation uncertainty
The Group has considered both key assumptions concerning the future, and sources of estimation uncertainty, that may be expected to
have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities in a subsequent financial year.\u00a0
Insurance contracts issued and reinsurance contracts held
The Group has determined that its most significant area of estimation uncertainty is in relation to the measurement of insurance
contracts issued and reinsurance contracts held. Changes in assumptions made may materially change the FCF that make up these
balances. The FCF are the current estimates of the future cash flows within the contract boundary of a group of insurance or
reinsurance contracts that we expect to collect premiums from, and pay out for claims, benefits and expenses, adjusted to reflect the
timing and uncertainty of those amounts. Changes in the following key assumptions may change the FCF materially:
\u2022 assumptions about the amount and timing of future cash flows;
\u2022 assumptions about claims development;
\u2022 assumptions about discount rates, including any illiquidity premiums; and
\u2022 assumptions about the risk adjustment for non-financial risk.
The estimation of the FCF is a complex actuarial process which incorporates a significant amount of judgement, in particular in relation
to the estimation of the LIC and AIC. Delays in reporting losses to the Group, together with unforeseen loss development, increase
uncertainty over the accuracy of loss reserves. A significant portion of the Group's business is in classes with high attachment points of
coverage and therefore a low frequency but high severity of claims. This adds further complexity to the reserving process due to the
limited volume of industry data available from which to reliably predict ultimate losses following a loss event. Volatility for the majority
of losses is limited on a net basis by the reinsurance protection purchased.
Information about these key assumptions and estimates are included in our risk disclosures and in note 13.
Level (iii) investments
The Group holds a relatively straightforward investment portfolio consisting mainly of standard fixed maturity products. Level (iii)
investments are securities for which valuation techniques are not based on observable market data, and therefore require significant
management judgement to determine an appropriate fair value. The Group determines securities classified as Level (iii) to include
private investment funds, hedge funds and loans made to the Lloyd's central fund. The estimation of fair value, specifically for Level (iii)
investments, is discussed within the risk disclosures and note 11.
Management judgements, other than those involving estimations
Lancashire is an insurance group whose primary focus is on underwriting and actively balancing risk and return. In doing so it focuses
on ensuring premium revenue and investment return exceeds the cost of claims, outwards reinsurance and operating expenses. The
main areas in which judgement is applied are therefore in the measurement and recognition of insurance contracts and financial assets.
Simplified premium allocation measurement model
Management applies judgement to determine if the Group is eligible to apply the simplified PAA measurement model under IFRS 17.
The Group considers that it is eligible to apply the PAA measurement model to its portfolios and groups of insurance contracts on the
basis that the measurement of the LRC is not reasonably expected to differ materially from that calculated under the GMM. The Group
applies the PAA to simplify the measurement of all its insurance contracts issued and reinsurance contracts held.
In the years prior to IFRS 17 adoption, and in the initial year of adoption, this assessment was made through detailed quantitative
modelling of all portfolios and groups of insurance contracts. Given consistency in the Group\u2019s business mix, together with relatively
stable economic factors, the PAA eligibility assessment has been undertaken through a combination of qualitative and quantitative
analysis for the year ended 31 December 2024. Detailed quantitative testing was performed on a small number of portfolios and groups
of contracts where the LRC and ARC were judged to be most likely to differ materially under the different models. This testing
confirmed that the PAA measurement model remained appropriate.
Level of aggregation
Judgement is required to determine the level of aggregation under IFRS 17. Insurance contracts issued that are subject to similar risks
and that are managed together, are classified into a portfolio of insurance contracts.
The following considerations have been given most weight in the definition of similar risks:
\u2022 risk aggregations used for other business purposes such as reserving;
\u2022 segmentations used for underwriting; and
\u2022 perils covered and incidence of risk over time.
Each portfolio of insurance contracts is then further disaggregated into annual cohorts, and each annual cohort is classified into a
maximum of three groups of contracts for recognition and measurement purposes based on their expected profitability. See accounting
policies and note 13.
Onerous contract assessment
Management applies judgement to assess whether facts and circumstances indicate that a group of insurance contracts is onerous at
initial recognition, and subsequently assesses whether facts and circumstances indicate any changes in the onerous group's profitability,
and whether any loss component remeasurement is required. See accounting policies and note 13.
Classification of investment portfolio
The classification of the Group's investment portfolio requires judgement in assessing the business model within which assets are held.
The Group has established that all investment classes are managed, and their performance evaluated, on a fair value basis and therefore
they are classified at FVTPL. See risk disclosures and note 11.
Annual impairment assessments
The syndicate participation rights and goodwill are intangible assets with an indefinite life and subject to an annual impairment
assessment. The Group applies judgement when determining the input assumptions for the value in use calculation. The input
assumptions and their sensitivity are disclosed in note 17.
Current and deferred tax
The Group is exposed to changes in tax legislation which are complex to interpret and evolve over time. The Group applies
management expertise and judgement to interpret and assess the impact of these changes in tax legislation. Third party specialists
provide tax guidance and tax opinions at the request of management. Recent changes in tax legislation are disclosed in note 14.
", "dimensions": { "concept": "ifrs-full:DisclosureOfAccountingJudgementsAndEstimatesExplanatory", "language": "en", "entity": "scheme:5493002UNUYXLHOWF752", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-202": { "value": "Use of judgements, estimates and assumptionsThe preparation of the Group's consolidated financial statements requires management to make judgements, estimates and assumptions that affect the application of the Group's accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual amounts may differ from these estimates.Assumptions and estimates are based on information, knowledge and data available when the consolidated financial statements are prepared. However, existing circumstances and assumptions about future developments may change, or circumstances may arise that are beyond the control of the Group. Such changes are reflected in the assumptions when they occur, and are recognised prospectively. It is considered impracticable to determine the effect that changes in these assumptions and estimates are expected to have on future periods. Key assumptions concerning the future, and sources of estimation uncertainty The Group has considered both key assumptions concerning the future, and sources of estimation uncertainty, that may be expected to have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities in a subsequent financial year.\u00a0 Insurance contracts issued and reinsurance contracts heldThe Group has determined that its most significant area of estimation uncertainty is in relation to the measurement of insurance contracts issued and reinsurance contracts held. Changes in assumptions made may materially change the FCF that make up these balances. The FCF are the current estimates of the future cash flows within the contract boundary of a group of insurance or reinsurance contracts that we expect to collect premiums from, and pay out for claims, benefits and expenses, adjusted to reflect the timing and uncertainty of those amounts. Changes in the following key assumptions may change the FCF materially:\u2022 assumptions about the amount and timing of future cash flows;\u2022 assumptions about claims development;\u2022 assumptions about discount rates, including any illiquidity premiums; and\u2022 assumptions about the risk adjustment for non-financial risk.The estimation of the FCF is a complex actuarial process which incorporates a significant amount of judgement, in particular in relation to the estimation of the LIC and AIC. Delays in reporting losses to the Group, together with unforeseen loss development, increase uncertainty over the accuracy of loss reserves. A significant portion of the Group's business is in classes with high attachment points of coverage and therefore a low frequency but high severity of claims. This adds further complexity to the reserving process due to the limited volume of industry data available from which to reliably predict ultimate losses following a loss event. Volatility for the majority of losses is limited on a net basis by the reinsurance protection purchased.Information about these key assumptions and estimates are included in our risk disclosures and in note 13.Level (iii) investmentsThe Group holds a relatively straightforward investment portfolio consisting mainly of standard fixed maturity products. Level (iii) investments are securities for which valuation techniques are not based on observable market data, and therefore require significant management judgement to determine an appropriate fair value. The Group determines securities classified as Level (iii) to include private investment funds, hedge funds and loans made to the Lloyd's central fund. The estimation of fair value, specifically for Level (iii) investments, is discussed within the risk disclosures and note 11.Management judgements, other than those involving estimations Lancashire is an insurance group whose primary focus is on underwriting and actively balancing risk and return. In doing so it focuses on ensuring premium revenue and investment return exceeds the cost of claims, outwards reinsurance and operating expenses. The main areas in which judgement is applied are therefore in the measurement and recognition of insurance contracts and financial assets.Simplified premium allocation measurement modelManagement applies judgement to determine if the Group is eligible to apply the simplified PAA measurement model under IFRS 17. The Group considers that it is eligible to apply the PAA measurement model to its portfolios and groups of insurance contracts on the basis that the measurement of the LRC is not reasonably expected to differ materially from that calculated under the GMM. The Group applies the PAA to simplify the measurement of all its insurance contracts issued and reinsurance contracts held.In the years prior to IFRS 17 adoption, and in the initial year of adoption, this assessment was made through detailed quantitative modelling of all portfolios and groups of insurance contracts. Given consistency in the Group\u2019s business mix, together with relatively stable economic factors, the PAA eligibility assessment has been undertaken through a combination of qualitative and quantitative analysis for the year ended 31 December 2024. Detailed quantitative testing was performed on a small number of portfolios and groups of contracts where the LRC and ARC were judged to be most likely to differ materially under the different models. This testing confirmed that the PAA measurement model remained appropriate. Level of aggregationJudgement is required to determine the level of aggregation under IFRS 17. Insurance contracts issued that are subject to similar risks and that are managed together, are classified into a portfolio of insurance contracts. The following considerations have been given most weight in the definition of similar risks:\u2022 risk aggregations used for other business purposes such as reserving;\u2022 segmentations used for underwriting; and\u2022 perils covered and incidence of risk over time.Each portfolio of insurance contracts is then further disaggregated into annual cohorts, and each annual cohort is classified into a maximum of three groups of contracts for recognition and measurement purposes based on their expected profitability. See accounting policies and note 13.Onerous contract assessmentManagement applies judgement to assess whether facts and circumstances indicate that a group of insurance contracts is onerous at initial recognition, and subsequently assesses whether facts and circumstances indicate any changes in the onerous group's profitability, and whether any loss component remeasurement is required. See accounting policies and note 13.Classification of investment portfolioThe classification of the Group's investment portfolio requires judgement in assessing the business model within which assets are held. The Group has established that all investment classes are managed, and their performance evaluated, on a fair value basis and therefore they are classified at FVTPL. See risk disclosures and note 11.Annual impairment assessmentsThe syndicate participation rights and goodwill are intangible assets with an indefinite life and subject to an annual impairment assessment. The Group applies judgement when determining the input assumptions for the value in use calculation. The input assumptions and their sensitivity are disclosed in note 17.Current and deferred taxThe Group is exposed to changes in tax legislation which are complex to interpret and evolve over time. The Group applies management expertise and judgement to interpret and assess the impact of these changes in tax legislation. Third party specialists provide tax guidance and tax opinions at the request of management. Recent changes in tax legislation are disclosed in note 14.", "dimensions": { "concept": "ifrs-full:ExplanationOfAssumptionAboutFutureWithSignificantRiskOfResultingInMaterialAdjustments", "language": "en", "entity": "scheme:5493002UNUYXLHOWF752", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-204": { "value": "
Changes in accounting policies
IFRS 18, Presentation and Disclosure in Financial Statements
On 9 April 2024, the IASB published IFRS 18, Presentation and Disclosure in Financial Statements. The standard will be effective from 1
January 2027, replacing IAS 1, Presentation of Financial Statements. The Group is monitoring the endorsement process and undertaking
an initial assessment into the potential impact of adopting IFRS 18.
There are also amendments to other existing standards and interpretations that are mandatory for the first time for financial periods
beginning 1 January 2024. These are not currently relevant for the Group and do not impact the consolidated financial statements of
the Group.
", "dimensions": { "concept": "ifrs-full:DisclosureOfChangesInAccountingPoliciesExplanatory", "language": "en", "entity": "scheme:5493002UNUYXLHOWF752", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-205": { "value": "
Consolidation principles
The Group's consolidated financial statements comprise the financial statements of the Company and its subsidiaries as at and for the
year ended 31 December 2024. Subsidiaries are fully consolidated from the date of acquisition or incorporation, being the date on
which the Group obtains control, and continue to be consolidated until the date when such control ceases. Intercompany balances,
profits and transactions are eliminated. Control is achieved when the Group is exposed, or has rights, to variable returns from its
involvement with the subsidiary, and has the ability to affect those returns through its power over the subsidiary.
The Group participates in two syndicates at Lloyd's, which are managed by the Group's Lloyd's managing agent subsidiary. In view of the
several liability of underwriting members at Lloyd's, the Group recognises its proportion of all the transactions undertaken by the
syndicates in which it participates within its consolidated statement of comprehensive income. Similarly, the Group's proportion of the
syndicates' assets and liabilities has been reflected in its consolidated statement of financial position. This proportion is calculated by
reference to the Group\u2019s participation as a percentage of each syndicate's total capacity for each underwriting year of account.
Subsidiaries' accounting policies are generally consistent with the Group's accounting policies. Where they differ, adjustments are made
on consolidation to bring the subsidiaries' accounting policies in line with that of the Group.
", "dimensions": { "concept": "ifrs-full:DisclosureOfBasisOfConsolidationExplanatory", "language": "en", "entity": "scheme:5493002UNUYXLHOWF752", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-206": { "value": "
Associates
Investments in which the Group has significant influence over the operational and financial policies of the investee, are recognised at
cost and thereafter accounted for using the equity method. Under this method, the Group records its proportionate share of income or
loss from such investments in its consolidated statement of comprehensive income for the period. Adjustments are made to the
associate's accounting policies, where necessary, to be consistent with the Group\u2019s accounting policies.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForInvestmentInAssociates", "language": "en", "entity": "scheme:5493002UNUYXLHOWF752", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-207": { "value": "
Foreign currency
Functional currency
Items included in the financial statements of each of the Group's entities are measured using the currency of the primary economic
environment in which the entities' operations are conducted (the 'functional currency'). The functional currency is US dollars for all of
the Group's entities, other than the Group's Australian entities, which have a functional currency of Australian dollars. The Group's
consolidated financial statements are presented in US dollars (the 'presentation currency').
Transactions and balances
Foreign currency transactions are recorded in the functional currency for each entity using the exchange rates prevailing at the dates of
the transactions, or at the average rate for the period when this is a reasonable approximation. Monetary assets and liabilities
denominated in foreign currencies are revalued at period end exchange rates. The resulting exchange differences on revaluation are
recorded in profit or loss within net foreign exchange gains (losses) in the consolidated statement of comprehensive income. Non-
monetary assets and liabilities denominated in a foreign currency are carried at historic rates. Non-monetary assets and liabilities carried
at estimated fair value and denominated in a foreign currency are translated at the exchange rate on the date that the estimated fair
value was determined.
Foreign operations
The results and financial position of the Group's entities that have a functional currency different from the presentation currency are
translated into the presentation currency as follows:
\u2022 assets and liabilities are translated at the closing rate on the period end date;
\u2022 income and expenses are translated at the average exchange rates for the period; and
\u2022 all resulting foreign exchange differences are recognised in other comprehensive income, and as a separate component of
shareholders\u2019 equity.
On disposal of foreign operations, cumulative exchange differences previously recognised in other comprehensive income are
recognised in profit or loss as part of the gain or loss on disposal.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForForeignCurrencyTranslationExplanatory", "language": "en", "entity": "scheme:5493002UNUYXLHOWF752", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-208": { "value": "
Functional currency
Items included in the financial statements of each of the Group's entities are measured using the currency of the primary economic
environment in which the entities' operations are conducted (the 'functional currency'). The functional currency is US dollars for all of
the Group's entities, other than the Group's Australian entities, which have a functional currency of Australian dollars. The Group's
consolidated financial statements are presented in US dollars (the 'presentation currency').
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForFunctionalCurrencyExplanatory", "language": "en", "entity": "scheme:5493002UNUYXLHOWF752", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-210": { "value": "
Insurance contracts issued and reinsurance contracts held
Classification
Insurance contracts issued under IFRS 17 are those contracts that transfer significant insurance risk at the inception of the contract.
Insurance risk is transferred when an insurer agrees to compensate a policyholder if a specified uncertain future event adversely affects
the policyholder. Contracts that have a legal form of insurance risk but do not transfer significant insurance risk are classified as
investment contracts and follow financial instrument accounting under IFRS 9. The Group does not issue any contracts with direct
participation features.
In the normal course of business, the Group uses reinsurance to mitigate its risk exposures. A reinsurance contract held transfers
significant insurance risk if it transfers substantially all the insurance risk resulting from the insured or reinsured portion of the underlying
insurance contracts, even if it does not expose the reinsurer to the possibility of a significant loss.
All references to insurance contracts in these consolidated financial statements apply to insurance contracts issued and reinsurance
contracts held, unless specifically stated otherwise.
Level of aggregation of insurance contracts issued and reinsurance contracts held
Insurance contracts issued and reinsurance contracts held that are subject to similar risks and managed together are classified into
portfolios of contracts. These are disaggregated into annual cohorts and then further classified into groups based on their expected
profitability. The groups are:
\u2022 insurance contracts issued that are onerous at initial recognition, or reinsurance contracts held for which there is a net gain at initial
recognition;
\u2022 insurance contracts issued that at initial recognition have no significant possibility of becoming onerous, or reinsurance contracts
held where there is no significant possibility of a net gain arising subsequently; or
\u2022 a group of the remaining insurance contracts issued, or reinsurance contracts held.
These groups represent the level of aggregation at which insurance contracts issued are initially recognised and measured, and they are
not subsequently reconsidered.
Initial recognition of insurance contracts issued and reinsurance contracts held
An insurance contract issued by the Group is recognised at the earliest of:
\u2022 the beginning of the coverage period;
\u2022 when the first payment from the policyholder is due, or actually received if there is no due date; or
\u2022 the date when facts and circumstances indicate that the group of contracts is onerous.
Groups of reinsurance contracts held are initially recognised at the beginning of the coverage period. In the case of proportional
reinsurance contracts held, this may be delayed until the initial recognition date of any underlying insurance contract. Reinsurance
contracts held already entered into and covering an underlying onerous group of insurance contracts, are recognised on the same date
as the related onerous group of contracts.
Insurance contracts issued are initially added to the relevant groups of insurance contracts in the reporting period in which they meet
the recognition criteria, subject to the annual cohorts' restriction. Composition of the groups is not reassessed in subsequent periods.
Measurement applying the PAA measurement model
PAA eligibility
The Group considers that it is eligible to apply the PAA to simplify the measurement of groups of insurance contracts issued and
reinsurance contracts held, as the measurement of the LRC and ARC is not reasonably expected to differ materially from that calculated
under the GMM. The PAA has been applied to all groups of contracts.
Contract boundary
The measurement of a group of insurance contracts issued or reinsurance contracts held includes all of the cash flows within the
boundary of each contract in the group.
Cash flows are within the boundary of each contract if they arise from substantive rights and obligations that exist during the period. In
the case of insurance contracts issued, this is where the Group can compel the policyholder to pay premiums, or the Group has
substantive obligations to provide the policyholder with insurance coverage or other services. In the case of reinsurance contracts held,
this is where the Group is compelled to pay amounts to the reinsurer, or has a substantive right to receive insurance coverage or other
services from the reinsurer.
A substantive obligation to provide services ends when:
\u2022 the Group has the practical ability to reassess the risks of the particular policyholder, and as a result can set a price or level of benefits
that fully reflects those risks; or
\u2022 the Group has the practical ability to reassess the risks of the portfolio of insurance contracts that contains the contract, and as a
result can set a price or level of benefits that fully reflects the risks of the portfolio; and
\u2022 the pricing of premiums up to the date when risks are reassessed does not reflect the risks related to periods beyond the
reassessment date.
A substantive right to receive services from the reinsurer ceases when the reinsurer:
\u2022 has the practical ability to reassess the risks transferred to it and can set a price or level of benefits that fully reflects those reassessed
risks; or
\u2022 has a substantive right to terminate the coverage.
The contract boundary is reassessed at each reporting period to include the effect of change in circumstances on the Group's rights
and obligations, and may change over time.
Cash flows not directly attributable to a portfolio of insurance contracts are recognised in other operating expenses as incurred.
Fulfilment cash flows within the contract boundary
The FCF are the current estimates of the future cash flows within the contract boundary of a group of insurance contracts. These include
premiums, claims, acquisition costs and administrative expenses, adjusted to reflect the timing and the uncertainty of those amounts.
The estimates of future cash flows are based on an unbiased probability weighted mean of the full range of possible outcomes. They
reflect current estimates, factoring in expected credit losses or non-performance risk of reinsurers, and are determined from the
perspective of the Group.
The Group uses assumptions to measure the estimates of the future cash flows for a group of reinsurance contracts held that are
consistent with the underlying group of insurance contracts issued. Reinsurance cash flows that are contingent on claims incurred by
the underlying insurance contracts issued are therefore included as part of the cash flows that are expected to be reimbursed under the
relevant reinsurance contracts held.
Discounting
The FCF within the LIC and AIC are discounted using current discount rates to reflect the time value of money and the financial risks
related to those cash flows. The discount rates reflect the characteristics of the cash flows arising from each group of insurance
contracts, including the timing, currency, and liquidity of the cash flows. The Group does not discount the LRC or the ARC. This would
be required if the LRC or ARC included a significant financing component.
Risk adjustment for non-financial risk
The measurement of the LIC and AIC includes an explicit risk adjustment for non-financial risk. This is estimated separately from the
discounted FCF and is applied to the present value of the estimated future cash flows. It reflects the compensation the Group requires,
or transfers to a reinsurer, for bearing uncertainty about the amount and timing of the cash flows from non-financial risk as the Group
fulfils its insurance contracts issued.
Insurance acquisition cash flows
Insurance acquisition cash flows arise from the cost of selling, underwriting, and initiating a group of insurance contracts that are
directly attributable to the portfolio of insurance contracts to which the group belongs. These include:
\u2022 contract specific costs, such as brokerage; and
\u2022 a systematic and rational allocation of fixed and variable overheads to groups of contracts based on insurance revenue.
Initial measurement of insurance contracts issued applying the PAA
The carrying amount of the LRC is measured with reference to the premiums received on initial recognition from either policyholders or
intermediaries, minus any insurance acquisition cash flows allocated to the relevant group at that date, less the derecognition of any
assets or liabilities previously recognised for cash flows related to the group.
The Group assumes that no contracts are onerous at initial recognition, unless facts and circumstances indicate otherwise. If such
evidence exists, the Group determines if the contract will result in a net cash outflow. The Group recognises an insurance service
expense for the net cash outflow, and an onerous loss component is added to the LRC.
Subsequent measurement of insurance contracts issued applying the PAA
The carrying amount of a group of insurance contracts issued is the sum of the LRC and the LIC, and is measured at the end of each
reporting period. The measurement of the LRC includes:
\u2022 any premiums received, less amounts recognised as insurance revenue;
\u2022 less insurance acquisition cash flows paid, plus amortisation of any insurance acquisition cash flows recognised as insurance service
expense in the period; and
\u2022 less any non-distinct investment components paid or transferred to the LIC.
Groups of insurance contracts that were not onerous at initial recognition can subsequently become onerous if facts and circumstances
change during the coverage period. Onerous groups of contracts are assessed at the end of each reporting period with changes in the
expected net cash outflow recognised in the carrying amount of the LRC and insurance service expenses. The Group amortises the
onerous loss component within the LRC based on the passage of time over the remaining coverage period within insurance service
expenses. The equivalent basis is also applied to any relevant reinsurance recovery component.
The Group recognises the LIC for a group of insurance contracts as the amount of FCF relating to the incurred claims that have not yet
been paid, including claims that have been incurred but not yet reported, together with the associated expenses, including all claims
handling expenses that relate to incurred claims which have not yet been paid. The FCF are measured at the reporting date using
current estimates of future cash flows, current discount rates and current estimates of the risk adjustment for non-financial risk.
Initial and subsequent measurement of reinsurance contracts held applying the PAA
The carrying amount of a group of reinsurance contracts held is the sum of the ARC and the AIC, and is measured at the end of each
reporting period. The Group measures a group of reinsurance contracts held on the same basis as a group of insurance contracts
issued, with adaptations to reflect the features of reinsurance contracts held that differ from insurance contracts issued.
Derecognition and modification under the PAA
The Group derecognises an insurance contract issued or a reinsurance contract held when it is extinguished (that is, when the specified
obligations in the contract expire, are discharged, or cancelled), or the contract is modified.
Modifications to a contract are accounted for as a change in the estimate of the FCF. A contract is derecognised and treated as a new
contract if the modification to the contract either:
\u2022 changes the measurement model;
\u2022 brings the contract, or separable component parts of the contract, outside the scope of IFRS 17;
\u2022 substantially changes the contract boundary; or
\u2022 results in the contract being allocated to a different group.
When an insurance contract is extinguished, transferred to a third party, or modified in such a way that results in derecognition, any
adjustments made to the FCF are recorded within the consolidated statement of comprehensive income.
Presentation within the financial statements
Portfolios of insurance contracts issued, and portfolios of reinsurance contracts held, that are assets, and those that are liabilities, are
presented separately in the consolidated statement of financial position.
The Group disaggregates amounts recognised in the consolidated statement of comprehensive income into an insurance service result,
and insurance finance income and expense.
The Group disaggregates changes in the risk adjustment for non-financial risk between the insurance services result (which represents
the change related to non-financial risk), and insurance finance income or expenses (which represents the effect of the time value of
money and changes in the time value of money).
Income and expenses from reinsurance contracts held are presented separately from the income and expenses on insurance contracts
issued.
Insurance revenue and insurance service expenses exclude any non-distinct investment components.
Insurance revenue from insurance contracts issued
Insurance revenue from groups of insurance contracts issued is the amount of expected premiums net of ceding commission payable.
Expected premiums exclude any investment components.
Insurance revenue is recognised based on the passage of time over the coverage period.
The amount of insurance revenue recognised in the period reflects the provision of insurance services and the corresponding
consideration the Group expects to be entitled to in exchange for those services.
Insurance service expenses from insurance contracts issued
Insurance service expenses are recognised as they are incurred, and comprise the following items:
\u2022 incurred claims, net of inwards reinstatement premiums, and net of the initial discount on incurred claims;
\u2022 adjustments to the LIC (including the risk adjustment) that do not arise from the effects of the time value of money, financial risk and
changes therein;
\u2022 amortisation of insurance acquisition cash flows based on the passage of time over the relevant coverage period;
\u2022 other directly attributable insurance service expenses, including an allocation of fixed and variable overhead costs; and
\u2022 losses on onerous contracts and the reversal of such losses.
Expenses not meeting the above criteria are included within other operating expenses in the consolidated statement of comprehensive
income.
Allocation of reinsurance premium and amounts recoverable from reinsurers
The allocation of reinsurance premiums is the amount of expected reinsurance premium payments net of commission income
receivable for a group of reinsurance contracts held, and is recognised based on the passage of time over the relevant coverage period
of the reinsurance contract.
Amounts recoverable from reinsurers are recognised as they are incurred and include reinsurance recovery cash flow assumptions that
are consistent with underlying insurance contracts issued, recognition of movements in onerous loss recovery components and the
effect of any risk of non-performance by the issuer of the reinsurance contract.
Finance income or expenses from insurance contracts issued and reinsurance contracts held
Insurance finance income or expenses comprise the change in the carrying amount of the group of insurance contracts issued, or
reinsurance contracts held, arising from the effect of the time value of money, financial risk and changes therein. These include:
\u2022 the unwind of the initial discount (that is, interest accreted on the LIC or AIC); and
\u2022 the effect of changes in interest rate assumptions.
The Group has elected to include insurance finance income and expenses within the consolidated statement of comprehensive income
and does not disaggregate these between profit and loss and OCI.
Non-distinct investment components
The non-distinct investment component of an insurance contract is the amount that the Group would be required to repay to a
policyholder in all circumstances, regardless of whether an insured event occurs. The receipt of this investment component and the
subsequent repayment do not relate to insurance services. Non-distinct investment components are therefore excluded from insurance
revenue and insurance service expenses, and are considered as a settlement of an insurance contract liability.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForInsuranceContracts", "language": "en", "entity": "scheme:5493002UNUYXLHOWF752", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-209": { "value": "
Insurance contracts issued and reinsurance contracts held
Classification
Insurance contracts issued under IFRS 17 are those contracts that transfer significant insurance risk at the inception of the contract.
Insurance risk is transferred when an insurer agrees to compensate a policyholder if a specified uncertain future event adversely affects
the policyholder. Contracts that have a legal form of insurance risk but do not transfer significant insurance risk are classified as
investment contracts and follow financial instrument accounting under IFRS 9. The Group does not issue any contracts with direct
participation features.
In the normal course of business, the Group uses reinsurance to mitigate its risk exposures. A reinsurance contract held transfers
significant insurance risk if it transfers substantially all the insurance risk resulting from the insured or reinsured portion of the underlying
insurance contracts, even if it does not expose the reinsurer to the possibility of a significant loss.
All references to insurance contracts in these consolidated financial statements apply to insurance contracts issued and reinsurance
contracts held, unless specifically stated otherwise.
Level of aggregation of insurance contracts issued and reinsurance contracts held
Insurance contracts issued and reinsurance contracts held that are subject to similar risks and managed together are classified into
portfolios of contracts. These are disaggregated into annual cohorts and then further classified into groups based on their expected
profitability. The groups are:
\u2022 insurance contracts issued that are onerous at initial recognition, or reinsurance contracts held for which there is a net gain at initial
recognition;
\u2022 insurance contracts issued that at initial recognition have no significant possibility of becoming onerous, or reinsurance contracts
held where there is no significant possibility of a net gain arising subsequently; or
\u2022 a group of the remaining insurance contracts issued, or reinsurance contracts held.
These groups represent the level of aggregation at which insurance contracts issued are initially recognised and measured, and they are
not subsequently reconsidered.
Initial recognition of insurance contracts issued and reinsurance contracts held
An insurance contract issued by the Group is recognised at the earliest of:
\u2022 the beginning of the coverage period;
\u2022 when the first payment from the policyholder is due, or actually received if there is no due date; or
\u2022 the date when facts and circumstances indicate that the group of contracts is onerous.
Groups of reinsurance contracts held are initially recognised at the beginning of the coverage period. In the case of proportional
reinsurance contracts held, this may be delayed until the initial recognition date of any underlying insurance contract. Reinsurance
contracts held already entered into and covering an underlying onerous group of insurance contracts, are recognised on the same date
as the related onerous group of contracts.
Insurance contracts issued are initially added to the relevant groups of insurance contracts in the reporting period in which they meet
the recognition criteria, subject to the annual cohorts' restriction. Composition of the groups is not reassessed in subsequent periods.
Measurement applying the PAA measurement model
PAA eligibility
The Group considers that it is eligible to apply the PAA to simplify the measurement of groups of insurance contracts issued and
reinsurance contracts held, as the measurement of the LRC and ARC is not reasonably expected to differ materially from that calculated
under the GMM. The PAA has been applied to all groups of contracts.
Contract boundary
The measurement of a group of insurance contracts issued or reinsurance contracts held includes all of the cash flows within the
boundary of each contract in the group.
Cash flows are within the boundary of each contract if they arise from substantive rights and obligations that exist during the period. In
the case of insurance contracts issued, this is where the Group can compel the policyholder to pay premiums, or the Group has
substantive obligations to provide the policyholder with insurance coverage or other services. In the case of reinsurance contracts held,
this is where the Group is compelled to pay amounts to the reinsurer, or has a substantive right to receive insurance coverage or other
services from the reinsurer.
A substantive obligation to provide services ends when:
\u2022 the Group has the practical ability to reassess the risks of the particular policyholder, and as a result can set a price or level of benefits
that fully reflects those risks; or
\u2022 the Group has the practical ability to reassess the risks of the portfolio of insurance contracts that contains the contract, and as a
result can set a price or level of benefits that fully reflects the risks of the portfolio; and
\u2022 the pricing of premiums up to the date when risks are reassessed does not reflect the risks related to periods beyond the
reassessment date.
A substantive right to receive services from the reinsurer ceases when the reinsurer:
\u2022 has the practical ability to reassess the risks transferred to it and can set a price or level of benefits that fully reflects those reassessed
risks; or
\u2022 has a substantive right to terminate the coverage.
The contract boundary is reassessed at each reporting period to include the effect of change in circumstances on the Group's rights
and obligations, and may change over time.
Cash flows not directly attributable to a portfolio of insurance contracts are recognised in other operating expenses as incurred.
Fulfilment cash flows within the contract boundary
The FCF are the current estimates of the future cash flows within the contract boundary of a group of insurance contracts. These include
premiums, claims, acquisition costs and administrative expenses, adjusted to reflect the timing and the uncertainty of those amounts.
The estimates of future cash flows are based on an unbiased probability weighted mean of the full range of possible outcomes. They
reflect current estimates, factoring in expected credit losses or non-performance risk of reinsurers, and are determined from the
perspective of the Group.
The Group uses assumptions to measure the estimates of the future cash flows for a group of reinsurance contracts held that are
consistent with the underlying group of insurance contracts issued. Reinsurance cash flows that are contingent on claims incurred by
the underlying insurance contracts issued are therefore included as part of the cash flows that are expected to be reimbursed under the
relevant reinsurance contracts held.
Discounting
The FCF within the LIC and AIC are discounted using current discount rates to reflect the time value of money and the financial risks
related to those cash flows. The discount rates reflect the characteristics of the cash flows arising from each group of insurance
contracts, including the timing, currency, and liquidity of the cash flows. The Group does not discount the LRC or the ARC. This would
be required if the LRC or ARC included a significant financing component.
Risk adjustment for non-financial risk
The measurement of the LIC and AIC includes an explicit risk adjustment for non-financial risk. This is estimated separately from the
discounted FCF and is applied to the present value of the estimated future cash flows. It reflects the compensation the Group requires,
or transfers to a reinsurer, for bearing uncertainty about the amount and timing of the cash flows from non-financial risk as the Group
fulfils its insurance contracts issued.
Insurance acquisition cash flows
Insurance acquisition cash flows arise from the cost of selling, underwriting, and initiating a group of insurance contracts that are
directly attributable to the portfolio of insurance contracts to which the group belongs. These include:
\u2022 contract specific costs, such as brokerage; and
\u2022 a systematic and rational allocation of fixed and variable overheads to groups of contracts based on insurance revenue.
Initial measurement of insurance contracts issued applying the PAA
The carrying amount of the LRC is measured with reference to the premiums received on initial recognition from either policyholders or
intermediaries, minus any insurance acquisition cash flows allocated to the relevant group at that date, less the derecognition of any
assets or liabilities previously recognised for cash flows related to the group.
The Group assumes that no contracts are onerous at initial recognition, unless facts and circumstances indicate otherwise. If such
evidence exists, the Group determines if the contract will result in a net cash outflow. The Group recognises an insurance service
expense for the net cash outflow, and an onerous loss component is added to the LRC.
Subsequent measurement of insurance contracts issued applying the PAA
The carrying amount of a group of insurance contracts issued is the sum of the LRC and the LIC, and is measured at the end of each
reporting period. The measurement of the LRC includes:
\u2022 any premiums received, less amounts recognised as insurance revenue;
\u2022 less insurance acquisition cash flows paid, plus amortisation of any insurance acquisition cash flows recognised as insurance service
expense in the period; and
\u2022 less any non-distinct investment components paid or transferred to the LIC.
Groups of insurance contracts that were not onerous at initial recognition can subsequently become onerous if facts and circumstances
change during the coverage period. Onerous groups of contracts are assessed at the end of each reporting period with changes in the
expected net cash outflow recognised in the carrying amount of the LRC and insurance service expenses. The Group amortises the
onerous loss component within the LRC based on the passage of time over the remaining coverage period within insurance service
expenses. The equivalent basis is also applied to any relevant reinsurance recovery component.
The Group recognises the LIC for a group of insurance contracts as the amount of FCF relating to the incurred claims that have not yet
been paid, including claims that have been incurred but not yet reported, together with the associated expenses, including all claims
handling expenses that relate to incurred claims which have not yet been paid. The FCF are measured at the reporting date using
current estimates of future cash flows, current discount rates and current estimates of the risk adjustment for non-financial risk.
Initial and subsequent measurement of reinsurance contracts held applying the PAA
The carrying amount of a group of reinsurance contracts held is the sum of the ARC and the AIC, and is measured at the end of each
reporting period. The Group measures a group of reinsurance contracts held on the same basis as a group of insurance contracts
issued, with adaptations to reflect the features of reinsurance contracts held that differ from insurance contracts issued.
Derecognition and modification under the PAA
The Group derecognises an insurance contract issued or a reinsurance contract held when it is extinguished (that is, when the specified
obligations in the contract expire, are discharged, or cancelled), or the contract is modified.
Modifications to a contract are accounted for as a change in the estimate of the FCF. A contract is derecognised and treated as a new
contract if the modification to the contract either:
\u2022 changes the measurement model;
\u2022 brings the contract, or separable component parts of the contract, outside the scope of IFRS 17;
\u2022 substantially changes the contract boundary; or
\u2022 results in the contract being allocated to a different group.
When an insurance contract is extinguished, transferred to a third party, or modified in such a way that results in derecognition, any
adjustments made to the FCF are recorded within the consolidated statement of comprehensive income.
Presentation within the financial statements
Portfolios of insurance contracts issued, and portfolios of reinsurance contracts held, that are assets, and those that are liabilities, are
presented separately in the consolidated statement of financial position.
The Group disaggregates amounts recognised in the consolidated statement of comprehensive income into an insurance service result,
and insurance finance income and expense.
The Group disaggregates changes in the risk adjustment for non-financial risk between the insurance services result (which represents
the change related to non-financial risk), and insurance finance income or expenses (which represents the effect of the time value of
money and changes in the time value of money).
Income and expenses from reinsurance contracts held are presented separately from the income and expenses on insurance contracts
issued.
Insurance revenue and insurance service expenses exclude any non-distinct investment components.
Insurance revenue from insurance contracts issued
Insurance revenue from groups of insurance contracts issued is the amount of expected premiums net of ceding commission payable.
Expected premiums exclude any investment components.
Insurance revenue is recognised based on the passage of time over the coverage period.
The amount of insurance revenue recognised in the period reflects the provision of insurance services and the corresponding
consideration the Group expects to be entitled to in exchange for those services.
Insurance service expenses from insurance contracts issued
Insurance service expenses are recognised as they are incurred, and comprise the following items:
\u2022 incurred claims, net of inwards reinstatement premiums, and net of the initial discount on incurred claims;
\u2022 adjustments to the LIC (including the risk adjustment) that do not arise from the effects of the time value of money, financial risk and
changes therein;
\u2022 amortisation of insurance acquisition cash flows based on the passage of time over the relevant coverage period;
\u2022 other directly attributable insurance service expenses, including an allocation of fixed and variable overhead costs; and
\u2022 losses on onerous contracts and the reversal of such losses.
Expenses not meeting the above criteria are included within other operating expenses in the consolidated statement of comprehensive
income.
Allocation of reinsurance premium and amounts recoverable from reinsurers
The allocation of reinsurance premiums is the amount of expected reinsurance premium payments net of commission income
receivable for a group of reinsurance contracts held, and is recognised based on the passage of time over the relevant coverage period
of the reinsurance contract.
Amounts recoverable from reinsurers are recognised as they are incurred and include reinsurance recovery cash flow assumptions that
are consistent with underlying insurance contracts issued, recognition of movements in onerous loss recovery components and the
effect of any risk of non-performance by the issuer of the reinsurance contract.
Finance income or expenses from insurance contracts issued and reinsurance contracts held
Insurance finance income or expenses comprise the change in the carrying amount of the group of insurance contracts issued, or
reinsurance contracts held, arising from the effect of the time value of money, financial risk and changes therein. These include:
\u2022 the unwind of the initial discount (that is, interest accreted on the LIC or AIC); and
\u2022 the effect of changes in interest rate assumptions.
The Group has elected to include insurance finance income and expenses within the consolidated statement of comprehensive income
and does not disaggregate these between profit and loss and OCI.
Non-distinct investment components
The non-distinct investment component of an insurance contract is the amount that the Group would be required to repay to a
policyholder in all circumstances, regardless of whether an insured event occurs. The receipt of this investment component and the
subsequent repayment do not relate to insurance services. Non-distinct investment components are therefore excluded from insurance
revenue and insurance service expenses, and are considered as a settlement of an insurance contract liability.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForReinsuranceExplanatory", "language": "en", "entity": "scheme:5493002UNUYXLHOWF752", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-211": { "value": "
Financial instruments
Financial assets
On initial recognition, a financial asset is classified as either measured at amortised cost, FVTPL or FVOCI. The classification is dependent
on the Group's business model for managing the financial asset, and the contractual terms of the cash flows.
Financial assets are classified as measured at amortised cost if they are held to collect contractual cash flows, and where those cash
flows represent solely payments of principal and interest.
Financial assets are classified as measured at FVOCI if they are held to both collect contractual cash flows and sell, and where those
cash flows represent solely payments of principal and interest.
All financial assets not classified as measured at amortised cost or FVOCI are classified as measured at FVTPL. Financial assets in this
FVTPL category are those that are managed in a fair value business model, or that have been designated as FVTPL by management upon
initial recognition.
Financial assets are not reclassified subsequent to their initial recognition, unless the Group changes its business model for managing
those financial assets, in which case the affected financial assets are reclassified on the first day of the first reporting period following
the change in the business model.
Cash and cash equivalents
Cash and cash equivalents are carried in the consolidated statement of financial position at amortised cost and include cash in hand,
deposits held on call with banks, and other short-term highly liquid investments with a maturity of three months or less at the date of
purchase. Carrying amounts approximate fair value due to the short-term nature and high liquidity of the instruments.
Interest income earned on cash and cash equivalents is recognised by applying the effective interest rate method. The carrying value of
accrued interest income approximates estimated fair value due to its short-term nature and high liquidity.
Investments
The Group's business model emphasises the preservation of capital and the provision of sufficient liquidity for the prompt payment of
claims, in conjunction with providing a stable income stream as far as possible. Management reviews the composition, duration and
asset allocation of the investment portfolio regularly to respond to changes in interest rates, and other market conditions.
Investments are recognised when the Group becomes a party to the contractual provisions of the instrument. Regular-way purchases
and sales of investments are recognised on the trade date, being the date on which the Group commits to purchase or sell the asset.
At initial recognition, the Group measures financial assets held at FVTPL at their fair value on acquisition. Transaction costs in respect of
financial assets carried at FVTPL are expensed within the consolidated statement of comprehensive income as they are incurred.
Financial assets held at FVTPL are subsequently measured at their fair value.
The Group's investment portfolio comprising fixed maturity securities, private investment funds and hedge funds, is managed in a fair
value business model and are therefore mandatorily classified as FVTPL.
The Group's investment portfolio includes quoted and unquoted investments. The fair values of the investments are determined based on bid
prices from recognised exchanges, broker-dealers, recognised indices or pricing vendors. Unrealised gains or losses from changes in the fair
value of investments are presented in profit or loss within net investment return. Interest income is recognised by applying the effective interest
rate method and presented in the consolidated statement of comprehensive income within net investment return. The carrying value of
accrued interest receivable approximates fair value due to its short-term nature and high liquidity.
Investments are derecognised when the Group has transferred substantially all of the risks and rewards of ownership or when the right
to receive cash flows from the asset has expired, with any realised gains or losses recognised in the consolidated statement of
comprehensive income within net investment return.
Derivatives
Derivatives are classified as financial assets or liabilities at FVTPL. They are initially recognised at fair value on the date a contract is
entered into, the trade date, and are subsequently carried at fair value. Derivative instruments with a positive fair value are recorded as
derivative financial assets and those with a negative fair value are recorded as derivative financial liabilities.
Derivative financial instruments may include the use of exchange-traded future and option contracts, forward foreign currency
contracts, interest rate swaps, credit default swaps, and interest rate swaptions. They derive their value from the underlying instrument
and are subject to the same risks as that underlying instrument, including liquidity risk, credit risk, and market risk. Estimated fair values
are based on exchange or broker-dealer quotations, where available, or discounted cash flow models, which incorporate the pricing of
the underlying instrument, yield curves and other factors. Changes in the estimated fair value of derivative instruments are recognised in
the consolidated statement of comprehensive income within net investment return. The Group does not currently hold any derivatives
classified as hedging instruments. For discounted cash flow techniques, estimated future cash flows are based on management\u2019s best
estimates, and the discount rate used is an appropriate market rate.
Derivative financial assets and liabilities are offset and the net amount is reported in the consolidated statement of financial position only
to the extent there is a legally enforceable right of offset, and there is an intention to settle on a net basis, or to realise the assets and
liabilities simultaneously. Derivative financial assets and liabilities are derecognised when the Group has transferred substantially all of
the risks and rewards of ownership, or the liability is discharged, cancelled or expired, with any realised gains or losses recognised in the
consolidated statement of comprehensive income within net investment return.
Other receivables
Other receivables includes trade receivables and contract assets. Trade receivables that do not have a significant financing component
are measured on initial recognition at their fair value, which is typically their transaction price, and are subsequently measured at
amortised cost using the effective interest rate method, less an expected credit loss allowance where applicable. The other receivables
held by the Group are short-term in nature.
Impairment
The Group applies the simplified approach to measuring ECL, which uses a lifetime ECL for all receivables and contract assets (other
than those recognised under IFRS 17). The lifetime ECL is measured from the date of the initial recognition of trade receivables and
contract assets. The Group calculates the lifetime ECL using three main components: a probability of default, a loss given default and
the exposure at default (collectively the expected loss rates).
To measure the lifetime ECL, receivables and contract assets are grouped based on shared credit risk characteristics. The expected loss
rates are based on the payment profiles over the three years prior to the period end and the corresponding credit losses experienced
within this three-year period. The historical loss rates are adjusted to reflect current and forward-looking information based on
macroeconomic factors affecting the ability to collect receivables.
Financial liabilities
Other payables
Other payables represent goods and services provided to the Group prior to the financial year end which are unpaid. These amounts are
unsecured and are usually paid within 30 to 60 days of recognition. Other payables are recognised initially at their fair value and are
subsequently measured at amortised cost using the effective interest method.
Long-term debt
Long-term debt is recognised initially at fair value, net of transaction costs incurred. Thereafter it is measured at amortised cost using
the effective interest method. Derecognition occurs when the obligation has been extinguished. The difference between the carrying
amount that has been extinguished and the consideration paid, is recognised within the consolidated statement of comprehensive
income.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory", "language": "en", "entity": "scheme:5493002UNUYXLHOWF752", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-212": { "value": "
Financial assets
On initial recognition, a financial asset is classified as either measured at amortised cost, FVTPL or FVOCI. The classification is dependent
on the Group's business model for managing the financial asset, and the contractual terms of the cash flows.
Financial assets are classified as measured at amortised cost if they are held to collect contractual cash flows, and where those cash
flows represent solely payments of principal and interest.
Financial assets are classified as measured at FVOCI if they are held to both collect contractual cash flows and sell, and where those
cash flows represent solely payments of principal and interest.
All financial assets not classified as measured at amortised cost or FVOCI are classified as measured at FVTPL. Financial assets in this
FVTPL category are those that are managed in a fair value business model, or that have been designated as FVTPL by management upon
initial recognition.
Financial assets are not reclassified subsequent to their initial recognition, unless the Group changes its business model for managing
those financial assets, in which case the affected financial assets are reclassified on the first day of the first reporting period following
the change in the business model.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForFinancialAssetsExplanatory", "language": "en", "entity": "scheme:5493002UNUYXLHOWF752", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-213": { "value": "
Cash and cash equivalents
Cash and cash equivalents are carried in the consolidated statement of financial position at amortised cost and include cash in hand,
deposits held on call with banks, and other short-term highly liquid investments with a maturity of three months or less at the date of
purchase. Carrying amounts approximate fair value due to the short-term nature and high liquidity of the instruments.
Interest income earned on cash and cash equivalents is recognised by applying the effective interest rate method. The carrying value of
accrued interest income approximates estimated fair value due to its short-term nature and high liquidity.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyToDetermineComponentsOfCashAndCashEquivalents", "language": "en", "entity": "scheme:5493002UNUYXLHOWF752", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-214": { "value": "
Investments
The Group's business model emphasises the preservation of capital and the provision of sufficient liquidity for the prompt payment of
claims, in conjunction with providing a stable income stream as far as possible. Management reviews the composition, duration and
asset allocation of the investment portfolio regularly to respond to changes in interest rates, and other market conditions.
Investments are recognised when the Group becomes a party to the contractual provisions of the instrument. Regular-way purchases
and sales of investments are recognised on the trade date, being the date on which the Group commits to purchase or sell the asset.
At initial recognition, the Group measures financial assets held at FVTPL at their fair value on acquisition. Transaction costs in respect of
financial assets carried at FVTPL are expensed within the consolidated statement of comprehensive income as they are incurred.
Financial assets held at FVTPL are subsequently measured at their fair value.
The Group's investment portfolio comprising fixed maturity securities, private investment funds and hedge funds, is managed in a fair
value business model and are therefore mandatorily classified as FVTPL.
The Group's investment portfolio includes quoted and unquoted investments. The fair values of the investments are determined based on bid
prices from recognised exchanges, broker-dealers, recognised indices or pricing vendors. Unrealised gains or losses from changes in the fair
value of investments are presented in profit or loss within net investment return. Interest income is recognised by applying the effective interest
rate method and presented in the consolidated statement of comprehensive income within net investment return. The carrying value of
accrued interest receivable approximates fair value due to its short-term nature and high liquidity.
Investments are derecognised when the Group has transferred substantially all of the risks and rewards of ownership or when the right
to receive cash flows from the asset has expired, with any realised gains or losses recognised in the consolidated statement of
comprehensive income within net investment return.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForInvestmentsOtherThanInvestmentsAccountedForUsingEquityMethodExplanatory", "language": "en", "entity": "scheme:5493002UNUYXLHOWF752", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-215": { "value": "
Derivatives
Derivatives are classified as financial assets or liabilities at FVTPL. They are initially recognised at fair value on the date a contract is
entered into, the trade date, and are subsequently carried at fair value. Derivative instruments with a positive fair value are recorded as
derivative financial assets and those with a negative fair value are recorded as derivative financial liabilities.
Derivative financial instruments may include the use of exchange-traded future and option contracts, forward foreign currency
contracts, interest rate swaps, credit default swaps, and interest rate swaptions. They derive their value from the underlying instrument
and are subject to the same risks as that underlying instrument, including liquidity risk, credit risk, and market risk. Estimated fair values
are based on exchange or broker-dealer quotations, where available, or discounted cash flow models, which incorporate the pricing of
the underlying instrument, yield curves and other factors. Changes in the estimated fair value of derivative instruments are recognised in
the consolidated statement of comprehensive income within net investment return. The Group does not currently hold any derivatives
classified as hedging instruments. For discounted cash flow techniques, estimated future cash flows are based on management\u2019s best
estimates, and the discount rate used is an appropriate market rate.
Derivative financial assets and liabilities are offset and the net amount is reported in the consolidated statement of financial position only
to the extent there is a legally enforceable right of offset, and there is an intention to settle on a net basis, or to realise the assets and
liabilities simultaneously. Derivative financial assets and liabilities are derecognised when the Group has transferred substantially all of
the risks and rewards of ownership, or the liability is discharged, cancelled or expired, with any realised gains or losses recognised in the
consolidated statement of comprehensive income within net investment return.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForDerivativeFinancialInstrumentsExplanatory", "language": "en", "entity": "scheme:5493002UNUYXLHOWF752", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-216": { "value": "
Other receivables
Other receivables includes trade receivables and contract assets. Trade receivables that do not have a significant financing component
are measured on initial recognition at their fair value, which is typically their transaction price, and are subsequently measured at
amortised cost using the effective interest rate method, less an expected credit loss allowance where applicable. The other receivables
held by the Group are short-term in nature.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForTradeAndOtherReceivablesExplanatory", "language": "en", "entity": "scheme:5493002UNUYXLHOWF752", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-217": { "value": "
Impairment
The Group applies the simplified approach to measuring ECL, which uses a lifetime ECL for all receivables and contract assets (other
than those recognised under IFRS 17). The lifetime ECL is measured from the date of the initial recognition of trade receivables and
contract assets. The Group calculates the lifetime ECL using three main components: a probability of default, a loss given default and
the exposure at default (collectively the expected loss rates).
To measure the lifetime ECL, receivables and contract assets are grouped based on shared credit risk characteristics. The expected loss
rates are based on the payment profiles over the three years prior to the period end and the corresponding credit losses experienced
within this three-year period. The historical loss rates are adjusted to reflect current and forward-looking information based on
macroeconomic factors affecting the ability to collect receivables.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForImpairmentOfAssetsExplanatory", "language": "en", "entity": "scheme:5493002UNUYXLHOWF752", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-218": { "value": "
Financial liabilities
Other payables
Other payables represent goods and services provided to the Group prior to the financial year end which are unpaid. These amounts are
unsecured and are usually paid within 30 to 60 days of recognition. Other payables are recognised initially at their fair value and are
subsequently measured at amortised cost using the effective interest method.
Long-term debt
Long-term debt is recognised initially at fair value, net of transaction costs incurred. Thereafter it is measured at amortised cost using
the effective interest method. Derecognition occurs when the obligation has been extinguished. The difference between the carrying
amount that has been extinguished and the consideration paid, is recognised within the consolidated statement of comprehensive
income.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForFinancialLiabilitiesExplanatory", "language": "en", "entity": "scheme:5493002UNUYXLHOWF752", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-219": { "value": "
Other payables
Other payables represent goods and services provided to the Group prior to the financial year end which are unpaid. These amounts are
unsecured and are usually paid within 30 to 60 days of recognition. Other payables are recognised initially at their fair value and are
subsequently measured at amortised cost using the effective interest method.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForTradeAndOtherPayablesExplanatory", "language": "en", "entity": "scheme:5493002UNUYXLHOWF752", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-220": { "value": "
Long-term debt
Long-term debt is recognised initially at fair value, net of transaction costs incurred. Thereafter it is measured at amortised cost using
the effective interest method. Derecognition occurs when the obligation has been extinguished. The difference between the carrying
amount that has been extinguished and the consideration paid, is recognised within the consolidated statement of comprehensive
income.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForBorrowingsExplanatory", "language": "en", "entity": "scheme:5493002UNUYXLHOWF752", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-221": { "value": "
Intangible assets
The Group's intangible assets comprise indefinite life intangible assets, and internally generated intangible assets.
The Group's indefinite life intangible assets comprise syndicate participation rights and goodwill. The cost of syndicate participation
rights and goodwill acquired in a business combination is their fair value as at the date of acquisition. Additional syndicate participation
rights may be purchased from time to time and are recorded at the cost on the date of the relevant syndicate capacity auction. As a
result of their anticipated ability to continue to generate cash flows for the Group on a long-term basis, goodwill and syndicate
participation rights are considered to have an indefinite useful life, and are not amortised. They are carried at cost less any accumulated
impairment losses. Intangible assets with an indefinite useful life are tested annually for impairment at the CGU level by comparing the
net present value of the future cash flow stream of the CGU to the carrying value of the net assets of the CGU, including the related
intangible assets. The useful life of an indefinite life intangible asset is reviewed annually, to determine if the assessment that it has an
indefinite life continues to be supportable.
Internally generated intangible assets represent directly attributable costs incurred in the development phase of implementing cloud-
based software to support the Group's target operating model. An internally generated intangible asset is recognised if it can be
demonstrated that there is an intent, available resources, and technical feasibility to complete the intangible asset so that it is available
for use, and that it will generate probable future economic benefits. The costs must be capable of being measured reliably. Such
intangible assets are carried at cost less any accumulated impairment losses. Intangible assets not yet available for use are tested
annually for impairment at the CGU level by comparing the net present value of the future cash flow stream of the CGU to the carrying
value of the net assets of the CGU, including the related intangible assets.
Internally generated intangible assets available for use are considered to have a finite life. Applying the cost model, intangible assets with
finite lives are amortised over their estimated useful economic life, and assessed for impairment whenever there are indicators of
impairment.
The useful lives and amortisation period of the internally generated intangibles are estimated to be between 5 to 7 years, and will be
amortised using the straight-line method with no residual value. The amortisation of these internally generated intangibles is recognised
within other operating expenses.", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForIntangibleAssetsAndGoodwillExplanatory", "language": "en", "entity": "scheme:5493002UNUYXLHOWF752", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-223": { "value": "
The Group's indefinite life intangible assets comprise syndicate participation rights and goodwill. The cost of syndicate participation
rights and goodwill acquired in a business combination is their fair value as at the date of acquisition. Additional syndicate participation
rights may be purchased from time to time and are recorded at the cost on the date of the relevant syndicate capacity auction. As a
result of their anticipated ability to continue to generate cash flows for the Group on a long-term basis, goodwill and syndicate
participation rights are considered to have an indefinite useful life, and are not amortised. They are carried at cost less any accumulated
impairment losses. Intangible assets with an indefinite useful life are tested annually for impairment at the CGU level by comparing the
net present value of the future cash flow stream of the CGU to the carrying value of the net assets of the CGU, including the related
intangible assets. The useful life of an indefinite life intangible asset is reviewed annually, to determine if the assessment that it has an
indefinite life continues to be supportable.
Internally generated intangible assets represent directly attributable costs incurred in the development phase of implementing cloud-
based software to support the Group's target operating model. An internally generated intangible asset is recognised if it can be
demonstrated that there is an intent, available resources, and technical feasibility to complete the intangible asset so that it is available
for use, and that it will generate probable future economic benefits. The costs must be capable of being measured reliably. Such
intangible assets are carried at cost less any accumulated impairment losses. Intangible assets not yet available for use are tested
annually for impairment at the CGU level by comparing the net present value of the future cash flow stream of the CGU to the carrying
value of the net assets of the CGU, including the related intangible assets.
Internally generated intangible assets available for use are considered to have a finite life. Applying the cost model, intangible assets with
finite lives are amortised over their estimated useful economic life, and assessed for impairment whenever there are indicators of
impairment.
The useful lives and amortisation period of the internally generated intangibles are estimated to be between 5 to 7 years, and will be
amortised using the straight-line method with no residual value. The amortisation of these internally generated intangibles is recognised
within other operating expenses.", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForIntangibleAssetsOtherThanGoodwillExplanatory", "language": "en", "entity": "scheme:5493002UNUYXLHOWF752", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-222": { "value": "
The Group's indefinite life intangible assets comprise syndicate participation rights and goodwill. The cost of syndicate participation
rights and goodwill acquired in a business combination is their fair value as at the date of acquisition. Additional syndicate participation
rights may be purchased from time to time and are recorded at the cost on the date of the relevant syndicate capacity auction. As a
result of their anticipated ability to continue to generate cash flows for the Group on a long-term basis, goodwill and syndicate
participation rights are considered to have an indefinite useful life, and are not amortised. They are carried at cost less any accumulated
impairment losses. Intangible assets with an indefinite useful life are tested annually for impairment at the CGU level by comparing the
net present value of the future cash flow stream of the CGU to the carrying value of the net assets of the CGU, including the related
intangible assets. The useful life of an indefinite life intangible asset is reviewed annually, to determine if the assessment that it has an
indefinite life continues to be supportable.", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForGoodwillExplanatory", "language": "en", "entity": "scheme:5493002UNUYXLHOWF752", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-224": { "value": "
Other income
Other income is measured based on the consideration specified in a contract and excludes amounts collected on behalf of third parties.
Nature of services
The table below details the type of services from which the Group derives its other income.
Services
Nature, timing of satisfaction of performance obligation and significant payment terms
LCM underwriting fees
The Group recognises underwriting fees over the underwriting cycle based on the underlying exposure of
the covered contracts. Underwriting fees are received on or before the collateral funding date, which is prior
to commencement of the underwriting cycle.
LCM profit commission
The Group recognises profit commission following the end of the underwriting cycle based on the
underlying performance of the covered contracts and as collateral is released. Profit commissions may only
be received once the profit commission hurdle has been met.
LSL consortium
management fees
The Group recognises consortium fees over the risk period based on the underlying exposure of the covered
contracts. Consortium fees are received quarterly.
LSL consortium profit
commission
The Group recognises profit commission in line with the underlying performance of covered contracts once
the year of account closes, which is also when the profit commissions are received.
LSL managing agency
fees
The Group recognises managing agency fees in line with the services provided in respect of each
underwriting year of account. Managing agency fees are received quarterly.
LSL managing agency
profit commission
The Group recognises profit commission on open years of account when measurement is highly probable.
Profit commissions are received once the year of account closes.
LSL coverholder fee
income
The Group recognises coverholder fee income in line with services provided. Coverholder fee income is
received quarterly.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForRecognitionOfRevenue", "language": "en", "entity": "scheme:5493002UNUYXLHOWF752", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-226": { "value": "
Property, plant and equipment
Property, plant and equipment is carried at historical cost, less accumulated depreciation, and any impairment in value. Depreciation
is calculated to write off the cost over the estimated useful economic life on a straight-line basis as follows:
IT equipment
33% per annum
Office furniture and equipment
20% to 33% per annum
Leasehold improvements
20% per annum
Indicators of impairment, together with the assets\u2019 residual values, useful lives, and depreciation methods are reviewed, and adjusted if
appropriate, at each reporting date.
An item of property, plant or equipment is derecognised on disposal, or when no future economic benefits are expected to arise from
the continued use of the asset.
Gains and losses on the disposal of property, plant and equipment are determined by comparing proceeds with the carrying amount of
the asset, and are included in the consolidated statement of comprehensive income. Costs for repairs and maintenance are charged to
the statement of comprehensive income as incurred.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForPropertyPlantAndEquipmentExplanatory", "language": "en", "entity": "scheme:5493002UNUYXLHOWF752", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-225": { "value": "
Property, plant and equipment
Property, plant and equipment is carried at historical cost, less accumulated depreciation, and any impairment in value. Depreciation
is calculated to write off the cost over the estimated useful economic life on a straight-line basis as follows:
IT equipment
33% per annum
Office furniture and equipment
20% to 33% per annum
Leasehold improvements
20% per annum
Indicators of impairment, together with the assets\u2019 residual values, useful lives, and depreciation methods are reviewed, and adjusted if
appropriate, at each reporting date.
An item of property, plant or equipment is derecognised on disposal, or when no future economic benefits are expected to arise from
the continued use of the asset.
Gains and losses on the disposal of property, plant and equipment are determined by comparing proceeds with the carrying amount of
the asset, and are included in the consolidated statement of comprehensive income. Costs for repairs and maintenance are charged to
the statement of comprehensive income as incurred.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForDepreciationExpenseExplanatory", "language": "en", "entity": "scheme:5493002UNUYXLHOWF752", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-227": { "value": "
Leases
The Group assesses whether a contract is, or contains, a lease, at the inception of the contract. A contract is, or contains, a lease if the
contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.
The lease liability is initially measured at the present value of the lease payments that are not paid at the lease commencement date.
Lease payments are discounted using the rate implicit in the lease, if readily determinable, or at the Group\u2019s incremental borrowing rate.
Lease payments included in the measurement of the lease liability comprise:
\u2022 fixed lease payments;
\u2022 variable lease payments that depend on an index or rate, initially measured using the index or rate at the commencement date of the
lease; or
\u2022 payments in respect of purchase options, lease termination options, or lease extension options that the Group is reasonably certain to
exercise.
The lease liability is subsequently measured by increasing the lease carrying amount to reflect the interest on the lease liability using the
effective interest rate method, and by reducing the carrying amount to reflect the lease payments made.
The Group re-measures the lease liability and the related right-of-use asset whenever:
\u2022 the lease term changes as a result of the Group changing its assessment of whether it will exercise a purchase, extension, or
termination option, in which case the lease liability is re-measured by discounting the revised lease payments using a revised discount
rate;
\u2022 the lease payments change due to changes in an index or rate, or a change in expected payment under a guaranteed residual value,
in which case the lease liability is re-measured by discounting the revised lease payments using the initial discount rate; or
\u2022 a lease contract is modified and the lease modification is not accounted for as a separate lease, in which case the lease liability is re-
measured by discounting the revised lease payments using a revised discount rate.
The right-of-use asset is initially measured at cost, which comprises the initial measurement of the corresponding lease liability adjusted
for any lease payments made at, or before, the commencement date, plus any initial direct costs incurred, and an estimate of any costs
to be incurred at expiration of the lease agreement.
Right-of-use assets are subsequently measured at cost less accumulated depreciation and any impairment losses. Straight-line
depreciation is calculated from the commencement date of the lease to the earlier of the end date of the lease term, or the useful life of
the underlying asset.
The Group applies IAS 36, Impairment of Assets, to determine whether a right-of-use asset is impaired and recognises any identified
impairment loss within the consolidated statement of comprehensive income.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForLeasesExplanatory", "language": "en", "entity": "scheme:5493002UNUYXLHOWF752", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-228": { "value": "
Employee benefits
Equity compensation plans
The Group currently operates an RSS under which nil-cost options have been granted. The fair value of the equity instruments granted
is estimated on the date of grant. The estimated fair value is recognised as an expense pro-rata over the vesting period of the
instrument, adjusted for the impact of any non-market vesting conditions. No adjustment to vesting assumptions is made in respect of
market vesting conditions.
At each reporting date, the Group revises its estimate of the number of RSS nil-cost options that are expected to become exercisable. It
recognises the impact of the revision of original estimates, if any, as an equity-based compensation expense in the consolidated
statement of comprehensive income over the remaining vesting period, and a corresponding adjustment is made to other reserves
within shareholders\u2019 equity.
Upon exercise, the differences between the expense charged to the consolidated statement of comprehensive income and the actual
cost to the Group, if any, are transferred to other reserves within shareholders\u2019 equity.
Pensions
The Group operates a defined contribution plan. On payment of contributions to the plan there is no further obligation for the Group.
Contributions are recognised as employee benefits in the consolidated statement of comprehensive income in the period when the
employee's services are rendered.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForEmployeeBenefitsExplanatory", "language": "en", "entity": "scheme:5493002UNUYXLHOWF752", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-229": { "value": "
Equity compensation plans
The Group currently operates an RSS under which nil-cost options have been granted. The fair value of the equity instruments granted
is estimated on the date of grant. The estimated fair value is recognised as an expense pro-rata over the vesting period of the
instrument, adjusted for the impact of any non-market vesting conditions. No adjustment to vesting assumptions is made in respect of
market vesting conditions.
At each reporting date, the Group revises its estimate of the number of RSS nil-cost options that are expected to become exercisable. It
recognises the impact of the revision of original estimates, if any, as an equity-based compensation expense in the consolidated
statement of comprehensive income over the remaining vesting period, and a corresponding adjustment is made to other reserves
within shareholders\u2019 equity.
Upon exercise, the differences between the expense charged to the consolidated statement of comprehensive income and the actual
cost to the Group, if any, are transferred to other reserves within shareholders\u2019 equity.", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForSharebasedPaymentTransactionsExplanatory", "language": "en", "entity": "scheme:5493002UNUYXLHOWF752", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-231": { "value": "
Tax
The tax charge or credit represents the sum of the tax currently payable and any deferred tax. The tax payable is calculated based on
taxable profit for the period using tax rates and tax laws enacted, or substantively enacted, at the year-end reporting date, and any
adjustments to tax payable in respect of prior periods. Taxable profit for the period can differ from that reported in the consolidated
statement of comprehensive income due to non-taxable income, and certain items which are not tax deductible, or which are deferred
to subsequent periods.
Deferred tax is recognised on all temporary differences between the assets and liabilities in the consolidated statement of financial
position and their tax base, except when the deferred tax liability arises from the initial recognition of goodwill. Deferred tax assets or
liabilities are accounted for using the balance sheet liability method. Deferred tax assets are recognised to the extent that realising the
related tax benefit through future taxable profits is probable, and are reassessed each year for recognition.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax
liabilities, and when the deferred income taxes relate to the same fiscal authority.
At the date equity-based compensation awards are exercised, and where the current estimated fair value of an award exceeds the estimated fair
value at the date they were granted, corporation tax on this excess amount is recognised within equity. At the period end date, equity-based
compensation awards that have not been exercised, and for which the current estimated fair value of an award exceeds the estimated fair value
at the date they were granted, have deferred tax on this excess amount recognised within shareholders' equity.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForDeferredIncomeTaxExplanatory", "language": "en", "entity": "scheme:5493002UNUYXLHOWF752", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-230": { "value": "
Tax
The tax charge or credit represents the sum of the tax currently payable and any deferred tax. The tax payable is calculated based on
taxable profit for the period using tax rates and tax laws enacted, or substantively enacted, at the year-end reporting date, and any
adjustments to tax payable in respect of prior periods. Taxable profit for the period can differ from that reported in the consolidated
statement of comprehensive income due to non-taxable income, and certain items which are not tax deductible, or which are deferred
to subsequent periods.
Deferred tax is recognised on all temporary differences between the assets and liabilities in the consolidated statement of financial
position and their tax base, except when the deferred tax liability arises from the initial recognition of goodwill. Deferred tax assets or
liabilities are accounted for using the balance sheet liability method. Deferred tax assets are recognised to the extent that realising the
related tax benefit through future taxable profits is probable, and are reassessed each year for recognition.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax
liabilities, and when the deferred income taxes relate to the same fiscal authority.
At the date equity-based compensation awards are exercised, and where the current estimated fair value of an award exceeds the estimated fair
value at the date they were granted, corporation tax on this excess amount is recognised within equity. At the period end date, equity-based
compensation awards that have not been exercised, and for which the current estimated fair value of an award exceeds the estimated fair value
at the date they were granted, have deferred tax on this excess amount recognised within shareholders' equity.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForIncomeTaxExplanatory", "language": "en", "entity": "scheme:5493002UNUYXLHOWF752", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-232": { "value": "
Own shares
Own shares include shares repurchased under share repurchase authorisations and held as treasury shares, plus shares repurchased and
held in trust, for the purposes of employee equity-based compensation schemes. Own shares are deducted from shareholders\u2019 equity.
No gain or loss is recognised on the purchase, sale, cancellation, or issue of own shares, and any consideration paid or received is
recognised directly in shareholders' equity.
", "dimensions": { "concept": "lancashire:DescriptionOfAccountingPolicyForOwnSharesTextBlock", "language": "en", "entity": "scheme:5493002UNUYXLHOWF752", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-233": { "value": "
Risk disclosures: introduction
The Group is exposed to risks from several sources, classified into six primary risk categories. These risks are:
1. Insurance risk;
2. Market risk;
3. Liquidity risk;
4. Credit risk;
5. Operational risk; and
6. Strategic risk.
The most significant risk to the Group is considered to be insurance risk. The primary objective of the Group's ERM framework is to
ensure that the capital resources held are matched to the risk profile of the Group, and that the balance between risk and return is
considered as part of all key business decisions. The Group has formulated, and keeps under review, a risk appetite which is set by the
Board of Directors. The Group's appetite for risk will vary from time to time to reflect the potential risks and returns that present
themselves. However, protecting the Group's capital and maximising risk-adjusted returns for investors over the long-term remain
constant elements of the Group's strategy. The risk appetite of the Group is central to how the business is run and permeates into the
risk appetites that the individual operating entity boards of directors have adopted. These risk appetites are expressed through detailed
risk tolerances at both a Group and an operating entity level. Risk tolerances represent the maximum amount of capital, generally on a
modelled basis, that the Group and its entities are prepared to expose to certain risks.
The Board of Directors is responsible for setting and monitoring the Group's risk appetite and tolerances, whereas the individual entity
boards of directors are responsible for setting and monitoring entity level risk tolerances. All risk tolerances are subject to at least an
annual review and consideration by the respective boards of directors. The LHL Board and individual entity boards of directors review
actual risk levels versus tolerances, emerging risks, and any risk learning events at least quarterly. In addition, on a monthly basis,
management assesses the modelled potential catastrophe losses against the risk tolerances and ensures that risk levels are managed in
accordance with them.
Emerging risks
Artificial Intelligence
AI refers to the advancement of computer systems or machines capable of executing tasks that typically necessitate human intelligence.
AI broadly encompasses systems that emulate human-like reasoning, decision-making, and problem-solving. Generative AI, a
specialised subset of AI, focuses on content creation by leveraging deep learning models to generate new and often creative outputs
based on existing data patterns.
While AI and Generative AI offer immense potential for innovation and creativity, they also present significant risks that must be
addressed. These emerging risks include the spread of misinformation, threats to data privacy, challenges to intellectual property rights,
and ethical concerns. The Group is evaluating the integration of AI capabilities into existing business processes. It is essential to
implement measures that mitigate associated risks and ensure the responsible and beneficial use of this transformative technology.
Due to the sensitive nature of the insurance-related data and information held by the Group, the application of Generative AI should be
approached with caution to achieve business outcomes while simultaneously protecting client data, adhering to regulatory
requirements, and safeguarding the Group\u2019s intellectual property. Given the nature of this technology, the risk management function is
working closely with the business, specifically the IT team, to manage AI-related threats and risks, together with identifying, reviewing,
and evaluating AI technology and business solutions, and supporting the approved implementation of AI in a safe and responsible
manner.
Economic capital models
The Group maintains economic capital models at the LICL, LUK and syndicate levels. These models are primarily focused on insurance
risks; however, they are also used to model other risks, including market, credit and operational risks. The syndicate models are
reviewed and approved by Lloyd's as part of its own capital and solvency regulations.
The economic capital models produce data in the form of stochastic distributions for all classes, including non-elemental classes. The
distributions include the mean outcome and the result at various return periods, including very remote events. Projected financial
outcomes for each insurance class are calculated, as well as the overall portfolio, including diversification credit. Diversification credit
arises as individual risks are generally not strongly correlated and are unlikely to all produce profits or losses at the same time.
A. Insurance risk
Insurance risk is the risk that the Group's underwriting, reserving, claims management, or reinsurance decisions and judgements result in
a detrimental financial impact to the Group. The Group underwrites worldwide insurance and reinsurance contracts that transfer
insurance risk, including risks exposed to both natural and man-made catastrophes. The Group's exposure in connection with insurance
contracts or reinsurance contracts underwritten is whether, in the event of insured losses, premiums will be sufficient to cover the loss
payments and expenses. Insurance and reinsurance markets are cyclical and premium rates and terms and conditions vary by line of
business depending on market conditions and the stage of the underwriting cycle. Market conditions are impacted by capacity and
recent loss events, and broader economic cycle impacts, amongst other factors. The Group\u2019s underwriters assess likely losses using
their experience and knowledge of past loss experience, industry trends, and current circumstances. This allows them to estimate the
premiums sufficient to meet likely losses and expenses and desired levels of profitability.
The Group considers insurance risk at an individual contract level, at a segment level, at a geographic level, and at an aggregate
portfolio level. This ensures that careful risk selection, limits on concentration and appropriate portfolio diversification are
accomplished. The level of insurance risk tolerance per peril is set by the Board and the boards of directors at individual entity level.
A number of controls are deployed by the Group to manage the amount of insurance exposure assumed:
\u2022 a rolling strategic plan that helps establish the business goals that the Board of Directors aims to achieve;
\u2022 a detailed three-year business plan is produced annually. The plan is approved by the Board of Directors and is monitored, reviewed
and updated on an ongoing basis;
\u2022 for LSL, the syndicates' business forecasts and business plans are subject to review and approval by Lloyd's;
\u2022 economic capital models are used to model risk levels and capital requirements;
\u2022 each authorised class has a predetermined normal maximum line structure;
\u2022 each underwriter has a clearly defined limit of underwriting authority;
\u2022 the Group and individual operating entities have predetermined tolerances on probabilistic and deterministic losses of capital for
certain single events, which are monitored on a regular basis;
\u2022 pricing and aggregation models are used to assist with the underwriting process; and
\u2022 reinsurance is purchased to mitigate both frequency and severity of losses on a facultative, excess of loss treaty or proportional treaty
basis.
Some of the Group's business provides coverage for natural catastrophes (for example, hurricanes, earthquakes, wildfires and floods)
and is subject to potential seasonal variation and the effects of climate change. A proportion of the Group\u2019s business is exposed to large
catastrophe losses in North America, Europe and Japan as a result of windstorms. The level of windstorm activity, and landfall thereof,
during the North American, European and Japanese wind seasons may materially impact the Group\u2019s loss experience. The North
American and Japanese wind seasons are typically June to November, and the European wind season November to March. The Group
also has exposure to large losses arising from other non-seasonal natural catastrophes, such as earthquakes, tsunamis, droughts, floods
and tornadoes, from risk losses throughout the year and from war, terrorism and political risk, and other events.
Climate change may expose the Group to the risk of heightened severity and frequency of weather-related losses. Climate-related risks
are identified and assessed as part of the usual risk identification and management process, which includes, but is not limited to,
discussions with risk owners and subject matter experts across the Group, discussions at the Emerging Risk Forum, and the ESG
Committee.
Climate-related risks specific to the (re)insurance portfolios are identified and assessed as part of the day-to-day underwriting process
by individual underwriters in their analysis of specific risk information, and more broadly in the context of the wider portfolio during the
individual class of business QBR process, and through the RRC meetings. These reviews include: the physical location of assets insured,
weather-related perils that have impacted the location and their historical frequency and severity, as well as expected short-term and
long-term changes. The insurance and reinsurance underwriting strategy days assess climate-related risks of both current and
anticipated future risks, which include but are not limited to transition risk arising from a decline in the value of assets to be insured,
changing energy costs, and liability risks that could arise from climate-related litigation. Physical, transition and liability risks are
considered by business segment and geographical location, and the expected impact from the risks identified is considered with respect
to both magnitude and timescale.
The Group manages climate risk by using stochastic models from third-party vendors that have a long history of data quality
governance. We adapt these models based upon our views of climate risk, as well as our clients' exposure data, to create aggregate loss
scenarios. Underwriting guidelines support the underwriting process and provide guidance to assist underwriters in their decision
making. Performance against guidelines is monitored through the regular meetings, QBRs and related reporting. We have clear
tolerances and preferences in place to actively manage exposures, and the Board regularly monitors our PMLs.
The Group accepts risks for periods primarily of one year, which mitigates the potential short-term impacts of climate risk. The Group
has the ability to re-evaluate the portfolio on an annual basis and therefore reprice physical risk and reset exposure levels to consider
new data regarding the frequency and severity of elemental catastrophe events.
Catastrophe management
The Group actively monitors risk levels and manages catastrophe risk accumulations using reinsurance and PML based risk tolerances,
which are monitored as part of our climate-related risks. The Group's exposures to certain peak zone elemental losses, as a percentage
of tangible capital, including long-term debt, are shown below. Net loss estimates are undiscounted before income tax and net of
reinstatement premiums and outwards reinsurance on a first occurrence return period basis.
31 December 2024
31 December 2023
100 year return period estimated net loss1
$m
% of
tangible capital
$m
% of
tangible capital
Zones
Perils
Gulf of Mexico2
Hurricane
335.8
19.3%
300.5
16.9%
California
Earthquake
247.6
14.2%
256.0
14.4%
Non-Gulf of Mexico \u2013 US
Hurricane
233.4
13.4%
237.9
13.4%
Pan-European
Windstorm
129.4
7.4%
161.4
9.1%
Japan
Earthquake
107.3
6.2%
137.6
7.8%
Japan
Typhoon
102.3
5.9%
134.0
7.6%
Pacific North West
Earthquake
34.3
2.0%
31.5
1.8%
31 December 2024
31 December 2023
250 year return period estimated net loss1
$m
% of
tangible capital
$m
% of
tangible capital
Zones
Perils
Gulf of Mexico2
Hurricane
435.4
25.0%
364.6
20.6%
California
Earthquake
302.6
17.4%
311.2
17.5%
Non-Gulf of Mexico \u2013 US
Hurricane
525.9
30.2%
448.0
25.3%
Pan-European
Windstorm
195.9
11.2%
201.2
11.3%
Japan
Earthquake
189.5
10.9%
244.1
13.8%
Japan
Typhoon
155.0
8.9%
181.2
10.2%
Pacific North West
Earthquake
170.9
9.8%
123.0
6.9%
1. Estimated net loss balances presented in the table are unaudited.
2. Landing hurricane from Florida to Texas.
There can be no guarantee that the modelled assumptions and techniques deployed in calculating these figures are accurate. There
could also be an unmodelled loss which exceeds these figures. In addition, any modelled loss scenario could cause a larger loss to
capital than the modelled expectation from the above return periods.
Geopolitical conflict
We continue to monitor our loss exposure with regard to the ongoing conflict between the Ukraine and Russia, which remains a
complex and fluid situation. With the ongoing tensions in the Middle East, focus remains on monitoring our exposures in this area, and
seeking to ensure that such exposures are within an acceptable risk tolerance. As geopolitical risks can change and evolve rapidly, these
are factors that we carefully consider in our underwriting decisions. Where appropriate, thematic reviews are performed to provide a
more detailed analysis of the risk and potential impact.
Insurance revenue geographical split and operating segment
The following table provides an analysis of the Group's insurance revenue by operating segment and geographical location:
2024
2023
For the year ended 31 December
Reinsurance
$m
Insurance
$m
Total
$m
Reinsurance
$m
Insurance
$m
Total
$m
US and Canada
437.7
318.7
756.4
339.6
269.4
609.0
Worldwide - multi territory
314.2
311.6
625.8
257.4
276.5
533.9
Europe
58.8
99.2
158.0
62.1
83.2
145.3
Rest of world
44.4
180.5
224.9
55.8
175.9
231.7
Total insurance revenue
855.1
910.0
1,765.1
714.9
805.0
1,519.9
I. Reinsurance segment
The Group's reinsurance segment comprises property reinsurance, specialty reinsurance and casualty reinsurance. The property
reinsurance portfolio is predominantly written on an excess of loss basis with the 'catastrophe' portfolio exposed to large natural
disasters and the 'risk' portfolio exposed to individual, man-made losses such as fire and explosion. The specialty reinsurance portfolio
has a mix of exposure, with natural disasters exposing the retrocession portfolio and large, man-made risks from complex exposures,
such as offshore energy platforms, exposing the marine, energy, terror and aviation portfolios. This is underwritten through a
combination of excess of loss and proportional reinsurance. Casualty reinsurance is written through quota share reinsurance, assuming
a mix of general liability and professional lines exposures, predominantly from within the US.
II. Insurance segment
The Group's insurance segment is usually written on a direct or facultative basis and comprises aviation insurance, casualty insurance,
energy and marine insurance, property insurance and specialty insurance. Within aviation, aviation deductible, aviation hull, aviation
liability, aviation war, and AV52 are the main exposures. Casualty insurance covers accident and health policies, as well as a small
number of consortia arrangements within Lloyd's. Energy insurance covers a variety of energy exposures, from upstream and energy
construction, downstream processing and storage risks, power generation, and energy liability. Marine risks include cargo and specie
risks, as well as liability, hull and war. The property insurance account contains a worldwide property exposure with a mix of Fortune
500 business and smaller accounts with exposure in an individual location. Specialty insurance includes political risk, terror and credit
exposures and is often written on a multi-year basis.
Outwards reinsurance
The Group, in the normal course of business and in accordance with its risk management practices, seeks to reduce certain types of
losses that may arise from events that could cause unfavourable underwriting results by entering into external outwards reinsurance
arrangements. Reinsurance does not relieve the Group of its obligations to policyholders. Under the Group's reinsurance security policy,
reinsurers are assessed and approved based on their financial strength ratings, together with other factors. The Group RSC considers
reinsurers that are not rated or do not fall within the predefined rating categories on a case-by-case basis, and may require collateral to
be provided to support the reinsurer's obligations. There are specific guidelines for these collateralised contracts. The Group ORIF
monitors the Group's reinsurers on an ongoing basis, and formally reviews the Group's reinsurance arrangements as deemed necessary.
Exposure to the Group's reinsurance counterparties, compared to the Board-approved tolerances, is reported to the Board of Directors
on a quarterly basis.
Reinsurance protection is typically purchased on an excess of loss basis; however, it may also include ILW covers, or proportional treaty
arrangements. The mix of reinsurance cover is dependent on the specific loss mitigation requirements, market conditions, and available
capacity. Reinsurance may also be purchased to optimise the risk-adjusted return of the underwriting portfolio. The structure varies
between types of peril and sub-class. The Group regularly reviews its catastrophe and other exposures and may purchase reinsurance to
reduce its net exposure to a large natural catastrophe loss and/or to reduce net exposures to other large losses. The Group can
purchase both facultative and treaty reinsurance with varying cover and attachment points. The reinsurance coverage is not intended to
be available to meet all potential loss circumstances. The Group will retain some losses, as the cover purchased is unlikely to transfer the
totality of the Group\u2019s exposure. Any loss amount which exceeds the Group's reinsurance programme is retained by the Group. Some
parts of the reinsurance programme have limited reinstatements, therefore the number of claims which may be recovered from second
or subsequent losses in those particular circumstances is restricted.
Reserving
Estimates of future cash flows to fulfil insurance contracts issued
The Group measures the carrying amount of the LIC and the AIC at the end of each reporting period, being the amount of the FCF. The
FCF in respect of the LIC and AIC comprises:
\u2022 unbiased probability-weighted best estimates of future cash flows within the boundary of each insurance and reinsurance contract;
\u2022 an adjustment to reflect the time value of money and the financial risks related to future cash flows, to the extent that the financial
risks are not included in the estimates of future cash flows (see interest rate risk section); and
\u2022 a risk adjustment for non-financial risk.
Further detail on each of these is provided in the section below.
Probability-weighted best estimate of future cash flows
In estimating future cash flows, the Group incorporates, in an unbiased way, all reasonable and supportable information that is available
at the reporting date. The Group uses internal and external information about past events, current conditions and forecasts of future
conditions. The Group's estimate of future cash flows is the mean of a range of scenarios that reflect the full range of possible
outcomes.
Cash flows within the boundary of an insurance contract relate directly to the fulfilment of the contract, including those for which the
Group has discretion over the amount and timing. These include payments to or on behalf of policyholders, including, where relevant,
those made to intermediaries, together with other costs incurred in fulfilling contracts.
Other costs that are incurred in fulfilling contracts comprise both direct costs and an allocation of fixed and variable overheads. Where expenses
are contract specific, these costs are taken directly and aggregated, as required, to groups of insurance contracts. Where expenses are not
contract specific (for example overheads), these are allocated to groups of insurance contracts in a systematic and rational way.
For the Group's insurance contracts, uncertainty in the estimation of future claims and benefit payments arises primarily from the
severity and frequency of claims and uncertainties regarding future inflation rates.
The Group estimates the ultimate costs of settling claims incurred but unpaid at the reporting date, and the value of salvage and other
expected recoveries, by reviewing individual claims reported and making allowance for claims incurred but not yet reported. The
ultimate cost of settling claims is estimated using a range of loss reserving techniques (including the Bornhuetter-Ferguson, loss ratio
and chain-ladder methods). Often actuarial techniques assume that historic claims experience is indicative of future claims
development patterns, and therefore, the ultimate claims cost. The ultimate cost of settling attritional losses and large claims is
estimated separately for each class of business.
The assumptions used, including loss ratios and future claims inflation, are derived from a combination of historical information and
judgement where past trends may not apply in the future and future trends are expected to emerge.
For each nominal fulfilment amount, the timing of future cash flows is determined by applying cash flow assumptions based, where
available, on the Group\u2019s historical experience for the given portfolio of contracts. Where there is insufficient historical experience,
reliance may be placed on external benchmarks or portfolios which are believed to exhibit similar cash flow characteristics.
Methods used to measure the risk adjustment for non-financial risk
The risk adjustment for non-financial risk is the compensation that is required for bearing the uncertainty about the amount and timing
of cash flows that arises from non-financial risk as the insurance contract is fulfilled. The Group estimates an adjustment for non-
financial risk separately from all other estimates.
Under the PAA, the risk adjustment for non-financial risk is limited to the LIC and the AIC, with the exception of an onerous contract,
where it is implicitly considered in determining the required adjustment to the LRC and ARC. The undiscounted risk adjustment within
the LIC and AIC is set with reference to the Group\u2019s reserve risk appetite and aligns with the management margin, which depends on the
prevailing uncertainty in the FCF of the LIC and AIC at each reporting date. The management margin is set through a combination of
initial expected loss ratio uplifts for IBNR provisions and on a case-by-case basis for individual reported events. This process is overseen
by the Reserve and Audit Committees. Given this granular approach, no further allocation of the risk adjustment to groups of insurance
contracts is required. The undiscounted risk adjustment is then discounted to allow for the time value of money alongside the wider FCF
within the LIC and AIC. Changes in the risk adjustment for non-financial risk are disaggregated into insurance services and insurance
financing components in the same way as the best estimate FCF.
The Group estimates that FCF within the net of reinsurance LIC (including the risk adjustment for non-financial risks) correspond to a
confidence level of 86% (31 December 2023 \u2013 88%) on an ultimate time horizon.
The risk adjustment for non-financial risk is subject to discounting, and the confidence level is inferred for the purpose of disclosure.
The inference of the confidence level requires assumptions around the perceived volatility of each portfolio and the aggregation to the
overall entity level. Volatility parameters are set with reference to historical internal and external data but may be adjusted at each
reporting date to reflect the prevailing environment and associated reserve uncertainties. Given the inference of the confidence level,
the Group generally expects this to fall within the range of the 80th-90th percentile. Movements within this range between periods are
to be expected due to, for example, specific loss events or a change in the mix of business such as an increase in longer tail casualty
business written. The Group would expect to remain within this range, unless there is a change in reserving risk appetite. The Group\u2019s
reserve risk appetite and methods used to determine the risk adjustment for non-financial risk and resulting confidence level were not
changed for the current financial year.
Sensitivity analysis
The following table presents information on how reasonably possible changes in assumptions made by the Group impact the valuation
of the net insurance contract liabilities, profit after tax and shareholders' equity. Under the PAA, and given the current amount of the
Group's loss component, only the LIC component of insurance contract liabilities and the AIC component of reinsurance contract
assets are considered sensitive to possible changes in insurance risk and interest rate risk variables.
LIC as at 31
December 2024
$m
Impact on profit
after tax and
shareholders'
equity
$m
LIC as at 31
December 2023
$m
Impact on profit
after tax and
shareholders'
equity
$m
Insurance contract liabilities
2,237.7
1,765.9
Reinsurance contracts assets
(608.5)
(430.3)
Net insurance contract liabilities
1,629.2
1,335.6
20% increase in unpaid claims and expenses
Insurance contract liabilities
2,685.2
(391.2)
2,119.1
(307.9)
Reinsurance contract assets
(730.2)
99.6
(516.4)
72.0
Net insurance contract liabilities
1,955.0
(291.6)
1,602.7
(235.9)
The analysis is based on a change in an assumption while holding all other assumptions constant. In practice, this is unlikely to occur,
and changes in some of the assumptions may be correlated.
B. Market risk
Market risk is the risk that decisions, movements, trends, or other factors in financial markets impact the Group in a way that is
financially detrimental. The main market risks include:
I. Insurance market risk;
II. Investment risk;
III. Debt risk; and
IV. Currency risk.
These risks, and the management thereof, are described below.
I. Insurance market risk
Insurance market risk is the risk that factors within either the global insurance market, or the relevant local insurance markets in which
the Group operates, have a detrimental financial impact on the Group. The Group is exposed to insurance market risk from several
sources, including the following:
\u2022 the advent or continuation of a soft market, which may result in a stabilisation or decline in premium rates and/or terms and
conditions for certain lines, or across all lines;
\u2022 the actions and reactions of key competitors, which may directly result in volatility in premium volumes and rates, fee levels and other
input costs;
\u2022 market events, including unusual inflation in rates, which may result in a limit in the availability of cover, resulting in political
intervention or national remedies;
\u2022 failure to maintain broker, binding authority and client relationships, leading to a limited or substandard choice of risks which are
inconsistent with the Group\u2019s risk appetite;
\u2022 changes in regulation including capital, governance or licensing requirements; and
\u2022 changes in the geopolitical environment.
The most important method to mitigate insurance market risk is to maintain strict underwriting standards. The Group manages
insurance market risk in numerous ways, including the following:
\u2022 reviews and amends underwriting plans and outlook as necessary;
\u2022 reduces exposure to market sectors where conditions have reached unattractive levels;
\u2022 purchases appropriate, cost-effective reinsurance cover to mitigate loss exposures;
\u2022 closely monitors changes in premium rates and terms and conditions;
\u2022 ensures through continuous regulatory capital management that it does not allow surplus capital to unduly influence underwriting
appetite;
\u2022 has a collegiate approach towards taking risk, with most authority requiring at least 4 eyes and pre-authorisation peer review;
\u2022 reviews all new and renewal business post-underwriting for LSL;
\u2022 reviews outputs from the economic capital models to assess up-to-date profitability of classes and sectors;
\u2022 holds a monthly RRC meeting to discuss risk and reinsurance;
\u2022 holds a quarterly UURC meeting to review underwriting strategy; and
\u2022 holds regular meetings with regulators.
II. Investment risk
Investment risk is the risk that movements, trends or other factors, within either public or private investment markets, have a detrimental
financial impact on the price of securities within the Group's investment portfolio. Movements in investments resulting from changes in
prices, interest rates, inflation rates, and currency exchange rates, amongst other factors, may lead to an adverse impact on the value of
the Group\u2019s investment portfolio.
Investment guidelines are established by the Investment Committee of the Board of Directors to manage this risk. Investment guidelines
set parameters within which the Group's external investment managers must operate. All of the Group's fixed income managers and the
majority of the private investment managers are signatories of the UNPRI, which approximates to 96.7% (31 December 2023 \u2013 96.7%) of
the Group's externally managed assets. Important parameters include guidelines on permissible asset classes, duration ranges, credit
quality, currency, maturity, sectors, geographical, sovereign and issuer exposures. Compliance with guidelines is monitored on a
monthly basis. Any adjustments to the investment guidelines are approved by the Investment Committee and the Board of Directors.
The Group's fixed maturity portfolios are managed by external investment managers. The Group also has a portfolio consisting of a
hedge fund, principal protected products, and private investment funds. The performance of the managers is monitored on an ongoing
basis.
During the period, the investment portfolio was restructured by merging the core and core plus categories due to their similar risk-
return profiles. This consolidation simplifies the investment strategy, enhances portfolio management, and optimises returns without
altering the overall risk exposure. The unified 'core' portfolio remains aligned with the company\u2019s long-term financial goals and risk
tolerance while the 'surplus' portfolio will aim for higher returns and greater diversification by investing in a wider array of assets with
higher risk-return profiles, such as high-yield securities, private investment funds, hedge funds, and equities.
Within the Group\u2019s investment guidelines are subsets of guidelines for the core portion of funds required to meet near-term obligations
and cash flow needs following an extreme event. These guidelines add further requirements, including reducing permitted asset classes,
higher credit quality, shorter duration, and higher liquidity. The primary objectives for this portion of assets are capital preservation and
providing liquidity to meet insurance and other near-term obligations. Alongside internally managed cash, the core portfolio holds funds
specifically allocated to cover potential liabilities, aligning their duration with that of the insurance liabilities within an agreed range. The
core portfolio is invested in fixed maturity securities, fixed maturity funds, and cash and cash equivalents. The core portfolio may, at
times, contain assets significantly in excess of those required to meet insurance liabilities or other defined funding needs.
Assets in excess of those required to be held in the core portfolio are typically held in the surplus portfolio. The surplus portfolio is
invested in fixed maturity securities, principal protected products, derivative instruments, cash and cash equivalents, private investment
funds, and hedge funds. In general, the duration of the surplus portfolio is slightly longer than the core portfolio.
The Group reviews the composition, duration and asset allocation of its investment portfolio on a regular basis to respond to changes in
interest rates and other market conditions. If certain asset classes are anticipated to produce a higher return within management\u2019s risk
tolerance, an adjustment in asset allocation may be made. Conversely, if the risk profile is expected to move outside of management's
risk tolerance levels, an adjustment to the asset allocation may be made to reduce the risks in the portfolio.
The investment portfolio is currently structured to perform similarly in risk-on and risk-off environments. The Group endeavours to limit
losses in risk-on, risk-off, and interest rate hike scenarios. The Group models various periods of significant stress to better understand
the investment portfolio\u2019s risks and exposures. The scenarios represent what could, and most likely will, occur (albeit not in the exact
form of the scenarios, which are based on historic periods of volatility). The Group also monitors the portfolio impact of more severe
disaster scenarios consisting of extreme shocks.
The Investment Committee oversees a strategic asset allocation study on a bi-annual basis, which assesses the Group's overall strategy
and seeks to determine if there is an alternative asset allocation to achieve the highest risk-adjusted return within our risk tolerances.
The IRRC meets quarterly to ensure that the Group\u2019s strategic and tactical investment actions are consistent with investment risk
preferences, appetite, risk and return objectives and tolerances. The IRRC also helps further develop the risk tolerances to be
incorporated into the ERM framework.
The investment mix of the Group's investment portfolio is as follows:
Core
Surplus
Total
As at 31 December 2024
$m
$m
$m
\u2022 Short-term investments
27.9
4.6
32.5
\u2022 Fixed maturity funds
23.1
\u2014
23.1
\u2022 US treasuries
382.8
127.1
509.9
\u2022 Other government bonds
31.5
33.8
65.3
\u2022 US municipal bonds
9.1
6.7
15.8
\u2022 US government agency debt
0.2
17.0
17.2
\u2022 Asset backed securities
81.6
190.1
271.7
\u2022 US government agency mortgage backed securities
181.3
145.2
326.5
\u2022 Non-agency mortgage backed securities
22.5
33.0
55.5
\u2022 Non-agency commercial mortgage backed securities
\u2014
20.5
20.5
\u2022 Bank loans
\u2014
153.4
153.4
\u2022 Corporate bonds
827.9
280.1
1,108.0
\u2022 Other fixed maturities
\u2014
4.4
4.4
Total fixed maturity securities
1,587.9
1,015.9
2,603.8
Private investment funds
\u2014
253.1
253.1
Hedge funds
\u2014
7.9
7.9
Other investments
\u2014
0.1
0.1
Total investments
1,587.9
1,277.0
2,864.9
Core
Surplus
Total
As at 31 December 2023
$m
$m
$m
\u2022 Short-term investments
20.7
53.2
73.9
\u2022 Fixed maturity funds
27.1
\u2014
27.1
\u2022 US treasuries
479.2
106.7
585.9
\u2022 Other government bonds
18.7
28.5
47.2
\u2022 US municipal bonds
10.1
3.4
13.5
\u2022 US government agency debt
6.3
50.8
57.1
\u2022 Asset backed securities
98.5
138.2
236.7
\u2022 US government agency mortgage backed securities
80.5
36.9
117.4
\u2022 Non-agency mortgage backed securities
0.6
10.9
11.5
\u2022 Non-agency commercial mortgage backed securities
\u2014
21.3
21.3
\u2022 Bank loans
\u2014
142.6
142.6
\u2022 Corporate bonds
675.5
260.9
936.4
\u2022 Other fixed maturities
\u2014
9.5
9.5
Total fixed maturity securities
1,417.2
862.9
2,280.1
Private investment funds
\u2014
165.6
165.6
Hedge funds
\u2014
9.9
9.9
Other investments
\u2014
(0.1)
(0.1)
Total investments
1,417.2
1,038.3
2,455.5
The concentration risk of the Group's fixed maturity securities by country and sector is as follows:
As at 31 December 2024
Financials\u00a0
$m
Industrial
$m
Utility\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
$m
Government &
Government
Agencies
$m
Structured1
$m
Other2
$m
Total\u00a0
$m
United States
316.3
635.5
12.6
869.3
138.5
27.3
1,999.5
Cayman Islands
\u2014
1.2
\u2014
\u2014
151.8
\u2014
153.0
Canada
37.0
17.4
\u2014
27.8
\u2014
\u2014
82.2
United Kingdom
41.5
20.2
\u2014
2.2
\u2014
\u2014
63.9
Jersey
\u2014
0.6
\u2014
\u2014
38.0
\u2014
38.6
France
22.9
2.7
\u2014
1.1
0.9
2.3
29.9
Japan
11.6
8.0
\u2014
\u2014
\u2014
\u2014
19.6
Bermuda
\u2014
\u2014
\u2014
1.7
16.7
\u2014
18.4
Netherlands
4.7
9.0
\u2014
0.1
\u2014
\u2014
13.8
India
3.1
5.1
0.5
3.5
\u2014
\u2014
12.2
Germany
3.2
8.5
\u2014
0.3
\u2014
\u2014
12.0
Spain
10.4
1.4
\u2014
\u2014
\u2014
\u2014
11.8
Chile
\u2014
2.8
2.4
3.6
\u2014
\u2014
8.8
Singapore
0.3
7.4
0.4
0.5
\u2014
\u2014
8.6
Luxembourg
0.6
7.2
\u2014
\u2014
\u2014
\u2014
7.8
Other
31.1
35.6
4.6
24.6
1.8
26.0
123.7
Total fixed maturity securities
482.7
762.6
20.5
934.7
347.7
55.6
2,603.8
1. Structured products excludes any Government structured products.
2. Other includes Lloyd's overseas deposits and short-term investments.
As at 31 December 2023
Financials\u00a0
$m
Industrial
$m
Utility\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
$m
Government &
Government
Agencies
$m
Structured1
$m
Other2
$m
Total\u00a0
$m
United States
270.6
523.2
18.7
773.5
123.9
20.3
1,730.2
United Kingdom
35.9
17.5
\u2014
1.6
0.3
50.0
105.3
Cayman Islands
\u2014
1.8
\u2014
\u2014
100.7
\u2014
102.5
Canada
26.0
16.2
0.5
18.0
\u2014
0.5
61.2
Jersey
\u2014
0.8
\u2014
\u2014
32.3
\u2014
33.1
France
25.2
2.5
\u2014
\u2014
2.2
\u2014
29.9
Japan
13.4
10.0
\u2014
\u2014
\u2014
\u2014
23.4
Netherlands
6.7
2.3
3.7
\u2014
\u2014
0.4
13.1
Mexico
3.4
6.8
0.4
1.3
\u2014
\u2014
11.9
Singapore
0.3
10.3
0.4
0.5
\u2014
\u2014
11.5
India
1.8
4.5
\u2014
2.9
\u2014
1.3
10.5
Germany
2.7
7.7
\u2014
\u2014
\u2014
\u2014
10.4
Switzerland
9.3
\u2014
\u2014
\u2014
\u2014
\u2014
9.3
Bermuda
\u2014
\u2014
\u2014
1.7
7.0
\u2014
8.7
Finland
8.3
\u2014
\u2014
\u2014
\u2014
\u2014
8.3
Other
23.8
29.5
4.3
21.6
3.1
28.5
110.8
Total fixed maturity securities
427.4
633.1
28.0
821.1
269.5
101.0
2,280.1
1. Structured products excludes any Government structured products.
2. Other includes Lloyd's overseas deposits and short-term investments.
The Group's net asset value is directly impacted by movements in the fair value of investments held. Fair values can be impacted by
movements in interest rates, credit ratings, exchange rates, the current economic environment and outlook.
Interest rate risk
(i) Investments
Interest rate risk is the risk that movements in market interest rates, which are typically correlated with the interest rates set by central
banks, have a detrimental financial impact on the value of the Group's assets and liabilities. The Group\u2019s investment portfolio is mainly
comprised of fixed maturity securities and cash and cash equivalents. Fixed maturity funds are overseas deposits held by the syndicates
in trust for the benefit of the policyholders in those overseas jurisdictions. They consist of high quality, short duration fixed maturity
securities. The fair value of the Group\u2019s fixed maturity portfolio is generally inversely correlated to movements in market interest rates. If
market interest rates fall, the fair value of the Group\u2019s fixed maturity securities would tend to rise, and vice versa.
The sensitivity of the price of fixed maturity securities, and certain derivatives, to movements in interest rates is indicated by their
duration. The greater a security\u2019s duration, the greater its price volatility to movements in interest rates. The sensitivity of the Group\u2019s
fixed maturity investment portfolio to interest rate movements is detailed below, assuming linear movements in interest rates:
2024
2023
As at 31 December
$m
%
$m
%
Immediate shift in yield (basis points)
100
(62.2)
(2.4)
(39.5)
(1.7)
75
(46.6)
(1.8)
(29.6)
(1.3)
50
(31.1)
(1.2)
(19.8)
(0.9)
25
(15.5)
(0.6)
(9.9)
(0.4)
(25)
13.7
0.5
10.0
0.4
(50)
27.5
1.1
20.0
0.9
(75)
41.2
1.6
29.9
1.3
(100)
54.9
2.1
39.9
1.8
The Group mitigates interest rate risk on the investment portfolio by establishing and monitoring duration ranges in its investment
guidelines. The Group may also manage interest rate risk through the use of interest rate futures and swaptions. The duration of the
core portfolio is matched to the modelled duration of the net insurance contract liabilities, within a permitted range. The permitted
duration range for the surplus portfolio is between one and five years.
The overall duration for fixed maturity securities, managed cash and cash equivalents is 2.0 years (31 December 2023 \u2013 1.6 years).
In addition to duration management, the Group monitors VaR to measure potential losses in the estimated fair values of its cash and
invested assets and to understand and monitor risk. The VaR calculation is performed using variance/covariance risk modelling to
capture the cash flows and embedded optionality of the investment portfolio. Securities are valued individually using standard market
pricing models. These security valuations serve as the input to risk analytics, including full valuation risk analyses, as well as parametric
methods that rely on option-adjusted risk sensitivities to approximate the risk and return profiles of the portfolio.
The principal VaR measure that is produced is an annual VaR at the 99th percentile confidence level. Under normal conditions, the
investment portfolio value is not expected to decrease more than the VaR metric listed in the table below 99% of the time over a one-
year time horizon. The appropriateness of this measure is considered by the Investment Committee on behalf of the Board of Directors
on an annual basis.
The Group\u2019s annual VaR calculations are as follows:
2024
2023
As at 31 December
$m
% of shareholders'
equity
$m
% of shareholders'
equity
99th percentile confidence level1
157.8
10.6
110.0
7.3
1. Including the impact of internal foreign exchange hedges.
(ii) Discounting approach on LIC and AIC
The Group's LIC and AIC are discounted on initial recognition and re-measured to current interest rates at each quarter end date, and
are therefore sensitive to changes in market interest rates.
The Group applies the bottom-up approach when deriving its rates for discounting the LIC and AIC. This approach requires the use of
an appropriate (liquid) risk-free yield curve, plus a specific illiquidity premium above the risk-free yield curve to represent the reduced
liquidity of the insurance contract cash flows compared to the observable risk-free rates. The risk-free yields and illiquidity premium are
derived using reference data supplied by third parties with management judgement applied where appropriate, in particular in the
derivation of the illiquidity premium, which is informed by the implied illiquidity premium of a representative portfolio of corporate
bonds determined using the top-down method.
The following table sets out the one, three, five and seven-year yield curves (risk-free rate plus illiquidity premium) used to discount the
cash flows of insurance contracts issued and reinsurance contracts held for the Group's major currencies:
2024
2023
As at 31 December
1 year
3 years
5 years
7 years
1 year
3 years
5 years
7 years
USD
4.78%
4.88%
4.98%
5.07%
5.33%
4.40%
4.29%
4.34%
GBP
5.06%
4.98%
4.97%
5.03%
5.31%
4.34%
4.14%
4.16%
EUR
2.93%
3.02%
3.18%
3.31%
4.03%
3.21%
3.21%
3.33%
CAD
3.48%
3.54%
3.68%
3.84%
5.23%
4.51%
4.25%
4.27%
JPY
1.12%
1.52%
1.71%
1.88%
0.65%
0.96%
1.24%
1.52%
ZAR
8.25%
8.44%
8.97%
9.63%
8.92%
8.63%
9.15%
9.86%
AUD
4.65%
4.74%
5.03%
5.26%
4.77%
4.55%
4.76%
4.99%
The following table presents information on how reasonably possible changes in the yield curve could impact the valuation of the net
insurance contract liabilities, profit after tax and shareholders' equity. Under the PAA, and given the current amount of the Group's loss
component, only the LIC component of insurance contract liabilities and the AIC component of reinsurance contract assets are
sensitive to possible changes in insurance risk and interest rate risk variables.
LIC as at
31 December 2024\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
$m
Impact on profit after
tax and shareholders'
equity\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
$m
LIC as at
31 December 2023
$m
Impact on profit after
tax and shareholders'
equity\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
$m
Insurance contract liabilities
2,237.7
1,765.9
Reinsurance contracts assets
(608.5)
(430.3)
Net insurance contract liabilities
1,629.2
1,335.6
1% increase in yield curves
Insurance contract liabilities
2,195.6
37.9
1,733.3
28.9
Reinsurance contract assets
(600.6)
(6.7)
(422.3)
(6.7)
Net insurance contract liabilities
1,595.0
31.2
1,311.0
22.2
The analysis is based on a change in an assumption while holding all other assumptions constant. In practice, this is unlikely to occur,
and changes in some of the assumptions may be correlated.
Price risk
Price risk is the risk that the fair value of the Group's investment portfolio will fluctuate because of changes in market prices (other than
those arising from interest rate or foreign exchange rate risk), whether those changes are caused by factors specific to the individual
investment or other market factors.
The Group's price risk exposure relates to private investment funds and hedge funds. Listed investments that are quoted in an active
market are recognised at quoted bid price, which is deemed to be the approximate exit price. If the market for the investment is not
considered to be active, then the Group establishes fair value using valuation techniques (refer to note 11). This includes comparison to
comparable orderly transactions between active market participants, reference to benchmarks or other indices to assess
reasonableness, and other valuation techniques that are commonly used by market participants.
A 10% asset price decrease at 31 December 2024 would reduce the value of our private investment funds and hedge funds by
approximately $26.1 million (31 December 2023 \u2013 $17.6 million).
Derivative financial instruments
The Group\u2019s investment guidelines permit the investment managers to utilise forward foreign currency contracts to manage foreign
currency exposure. These positions are monitored regularly. The Group may also use OTC or exchange-traded managed derivatives to
mitigate interest rate risk and foreign currency exposures. The Group principally has exposure to derivatives related to the following
types of risks: interest rate risk, foreign currency risk, and credit risk.
\u00a0 \u00a0 Forward foreign currency contracts
A forward foreign currency contract is a commitment to purchase or sell a foreign currency at a future date, at a defined rate. The
Group may utilise forward foreign currency contracts to gain exposure to a certain currency or market rate, to manage the impact of
fluctuations in foreign currencies on the value of its foreign currency denominated investments, debt, insurance-related currency
exposures and/or expenses.
Forward contracts expose the Group to credit, market and liquidity risks. Credit risk arises from the potential inability of counterparties
to perform under the terms of the contract. The Group is exposed to market risk to the extent that adverse changes occur in the
exchange rate of the underlying foreign currency. Liquidity risk represents the possibility that the Group may not be able to rapidly
adjust the size of its forward positions at a reasonable price in times of high volatility and financial stress. These risks are mitigated by
requiring a minimum counterparty credit quality, restricting the maximum notional exposure as a percentage of the investment
portfolio\u2019s estimated fair value, and restricting exposures to foreign currencies, individually and in aggregate, as a percentage of the
investment portfolio\u2019s estimated fair value.
Where forward foreign currency contracts are within externally managed investment portfolios, they are disclosed as other investments.
Where they are managed directly by the Group, they are disclosed as either other receivables, or other payables, as appropriate.\u00a0
The notional amount of a derivative contract is the underlying quantity upon which payment obligations are calculated. A long position
is equivalent to buying the underlying currency, whereas a short position is equivalent to having sold the underlying currency.
The net (losses) gains on the Group\u2019s derivative financial instruments recognised in the consolidated statement of comprehensive
income are as follows:
For the year ended 31 December
2024
$m
2023
$m
Net foreign exchange (losses) gains on forward foreign currency contracts
(2.3)
1.9
The estimated fair values of the Group\u2019s derivative instruments are as follows:
2024
2023
As at 31 December
Other\u00a0
investments\u00a0
$m
Other\u00a0
receivables\u00a0
$m
Other
payables
$m
Other\u00a0
investments\u00a0
$m
Other\u00a0
receivables\u00a0
$m
Other
payables
$m
Forward foreign currency contracts
0.1
0.2
(0.4)
(0.1)
2.0
(0.7)
The Group has the following open forward foreign currency contracts:
2024
2023
As at 31 December
Notional\u00a0
long\u00a0
$m
Notional\u00a0
short\u00a0
$m
Net notional\u00a0
long (short)\u00a0
$m
Notional\u00a0
long\u00a0
$m
Notional
short
$m
Net notional\u00a0
long (short)\u00a0
$m
Canadian Dollar
\u2014
25.3
(25.3)
\u2014
28.7
(28.7)
Euro
31.6
2.3
29.3
49.0
3.6
45.4
Sterling
\u2014
0.5
(0.5)
77.8
0.7
77.1
Danish Krone
\u2014
0.2
(0.2)
\u2014
0.2
(0.2)
Total
31.6
28.3
3.3
126.8
33.2
93.6
III. Debt risk
Debt risk is the risk that the Group will not be able to service either the interest payment, or the principal repayment, amounts on its
external borrowings as they fall due. In 2021, the Group issued $450.0 million (in aggregate principal amount) of 5.625% fixed-rate reset
junior subordinated notes, repayable on 18 September 2041 (see note 18). The fixed interest rate will reset on 18 September 2031 at a
rate per annum equal to the prevailing five-year treasury rate, plus a credit spread of 4.08% and a 100 basis point step up.
The Group is exposed to interest rate risk in the future if prevailing rates at the time of reset are materially different from the existing
rates on the debt issue.
IV. Currency risk
Currency risk is the risk that movements in currency exchange rates have a detrimental financial impact on the Group. The Group
underwrites from multiple locations and risks are assumed on a worldwide basis. Risks assumed are predominantly denominated in US
dollars. The Group is exposed to currency risk to the extent its assets and liabilities are denominated in different currencies to its US
dollar reporting currency. The exchange gains and losses which arise on these assets and liabilities impact the consolidated statement
of comprehensive income.
The Group hedges monetary non-US dollar liabilities primarily with non-US dollar assets, but may also use derivatives to mitigate foreign
currency exposures. The Group's main foreign currency exposure relates to its insurance contract liabilities and reinsurance contract
assets, investments and cash and cash equivalents, and other monetary assets and liabilities. The Group uses forward foreign currency
contracts for the purposes of managing currency exposures. The Group\u2019s assets and liabilities, categorised by currency at their
translated carrying amount, are as follows:
Assets
US $\u00a0
$m
Sterling\u00a0
$m
Euro\u00a0
$m
Japanese Yen\u00a0
$m
Other\u00a0
$m
Total\u00a0
$m
Cash and cash equivalents
449.8
141.0
21.5
17.9
54.1
684.3
Accrued interest receivable
21.3
\u2014
0.4
\u2014
0.3
22.0
Investments
2,721.4
27.0
59.1
\u2014
57.4
2,864.9
Reinsurance contract assets
497.9
25.3
36.4
(0.2)
(2.2)
557.2
Other receivables
8.9
10.5
\u2014
\u2014
1.1
20.5
Investment in associate
9.1
\u2014
\u2014
\u2014
\u2014
9.1
Right-of-use assets
1.4
14.8
\u2014
\u2014
\u2014
16.2
Property, plant and equipment
0.8
7.9
\u2014
\u2014
\u2014
8.7
Intangible assets
153.8
43.2
\u2014
\u2014
\u2014
197.0
Total assets as at 31 December 2024
3,864.4
269.7
117.4
17.7
110.7
4,379.9
Liabilities
US $\u00a0
$m
Sterling\u00a0
$m
Euro\u00a0
$m
Japanese Yen\u00a0
$m
Other\u00a0
$m
Total\u00a0
$m
Insurance contract liabilities
1,948.7
117.5
129.0
15.6
89.6
2,300.4
Other payables
43.8
46.2
\u2014
\u2014
1.9
91.9
Corporation tax payable
(0.3)
3.0
\u2014
\u2014
\u2014
2.7
Deferred tax liability
11.3
11.2
\u2014
\u2014
(0.2)
22.3
Lease liabilities
1.4
20.8
\u2014
\u2014
0.1
22.3
Long-term debt
447.0
\u2014
\u2014
\u2014
\u2014
447.0
Total liabilities as at 31 December 2024
2,451.9
198.7
129.0
15.6
91.4
2,886.6
Assets
US $\u00a0
$m
Sterling\u00a0
$m
Euro
$m
Japanese Yen\u00a0
$m
Other\u00a0
$m
Total\u00a0
$m
Cash and cash equivalents
504.4
88.5
65.6
25.9
72.5
756.9
Accrued interest receivable
16.6
\u2014
\u2014
\u2014
0.1
16.7
Investments
2,404.9
3.1
0.2
\u2014
47.3
2,455.5
Reinsurance contract assets
340.6
20.8
27.2
\u2014
(0.8)
387.8
Other receivables
44.7
12.6
\u2014
\u2014
1.1
58.4
Investment in associate
16.2
\u2014
\u2014
\u2014
\u2014
16.2
Right-of-use assets
2.4
16.8
\u2014
\u2014
0.1
19.3
Property, plant and equipment
0.6
9.2
\u2014
\u2014
\u2014
9.8
Intangible assets
153.8
27.3
\u2014
\u2014
\u2014
181.1
Total assets as at 31 December 2023
3,484.2
178.3
93.0
25.9
120.3
3,901.7
Liabilities
US $\u00a0
$m
Sterling\u00a0
$m
Euro\u00a0
$m
Japanese Yen\u00a0
$m
Other\u00a0
$m
Total\u00a0
$m
Insurance contract liabilities
1,504.9
96.0
135.3
18.5
69.0
1,823.7
Other payables
28.7
50.6
\u2014
\u2014
1.3
80.6
Corporation tax payable
\u2014
2.0
\u2014
\u2014
\u2014
2.0
Deferred tax liability
9.9
6.3
\u2014
\u2014
\u2014
16.2
Lease liabilities
2.4
22.2
\u2014
\u2014
0.1
24.7
Long-term debt
446.6
\u2014
\u2014
\u2014
\u2014
446.6
Total liabilities as at 31 December 2023
1,992.5
177.1
135.3
18.5
70.4
2,393.8
The impact on net income of a proportional foreign exchange movement of 10.0% up and 10.0% down for the aggregated total of all
non-US dollar currencies against the US dollar, taken at the year-end spot rates, would be an increase or decrease of $1.5 million
(31 December 2023 \u2013 $3.1 million).
C. Liquidity risk
Liquidity risk is the risk that cash may not be available to pay obligations when they are due without incurring an unreasonable cost. The
Group's main exposures to liquidity risk are with respect to its insurance, investment, and operational activities. The Group is exposed to
such risk if proceeds from financial assets are not sufficient to fund obligations arising from its insurance contracts issued. The Group
can be exposed to daily calls on its available investment assets, principally to settle insurance claims and to fund trust accounts
following a large catastrophe loss.
Exposures in relation to insurance activities are as follows:
\u2022 large catastrophic events, or multiple medium-sized events in quick succession, resulting in a requirement to pay a large value of
claims within a relatively short time frame, or to fund trust accounts;
\u2022 failure of insureds or cedants to meet their contractual obligations with respect to the payment of premiums in a timely manner; and
\u2022 failure of reinsurers to meet their contractual obligations with respect to the payment of claims in a timely manner.
Exposures in relation to investment activities are as follows:
\u2022 adverse market movements and/or a duration mismatch to obligations, resulting in investments being disposed of at a significant
realised loss; and
\u2022 an inability to liquidate investments due to market conditions.
The maturity dates of the Group\u2019s fixed maturity portfolio are as follows:
2024
2023
As at 31 December
Core
$m
Surplus
$m
Total\u00a0
$m
Core
$m
Surplus
$m
Total\u00a0
$m
Less than one year
255.3
39.7
295.0
377.5
116.4
493.9
Between one and two years
346.1
77.3
423.4
295.7
123.5
419.2
Between two and three years
263.7
67.9
331.6
285.1
106.9
392.0
Between three and four years
195.5
120.4
315.9
90.7
73.3
164.0
Between four and five years
80.7
88.9
169.6
139.2
105.1
244.3
Over five years
161.2
232.9
394.1
49.4
130.4
179.8
Asset backed and mortgage backed securities
285.4
388.8
674.2
179.6
207.3
386.9
Total fixed maturity securities
1,587.9
1,015.9
2,603.8
1,417.2
862.9
2,280.1
The maturity profile of the insurance contracts issued and financial liabilities of the Group is as follows:
Years until liability becomes due - undiscounted values
As at 31 December 2024
Statement of
financial position\u00a0
$m
Less than one\u00a0
$m
One to three\u00a0
$m
Three to five\u00a0
$m
Over five\u00a0
$m
Total\u00a0
$m
Liabilities
Insurance contract liabilities1
2,300.4
1,017.5
861.4
342.0
248.8
2,469.7
Other payables
91.9
91.9
\u2014
\u2014
\u2014
91.9
Lease liabilities
22.3
5.8
7.4
7.2
5.8
26.2
Long-term debt2
447.0
25.3
50.6
50.6
500.6
627.1
Total
2,861.6
1,140.5
919.4
399.8
755.2
3,214.9
1. Since the Group applies the PAA model for all insurance contracts issued, the maturity profile represents only the liability for incurred claims, and has
been presented on an undiscounted basis.
2. The maturity profile of long-term debt includes accrued interest.
Years until liability becomes due - undiscounted values
As at 31 December 2023
Statement of
financial position
$m
Less than one\u00a0
$m
One to three\u00a0
$m
Three to five\u00a0
$m
Over five\u00a0
$m
Total\u00a0
$m
Liabilities
Insurance contract liabilities1
1,823.7
795.3
705.7
263.5
166.9
1,931.4
Other payables
80.6
80.6
\u2014
\u2014
\u2014
80.6
Lease liabilities
24.7
4.5
8.7
7.2
9.5
29.9
Long-term debt2
446.6
25.3
50.6
50.6
525.9
652.4
Total
2,375.6
905.7
765.0
321.3
702.3
2,694.3
1. Since the Group applies the PAA model for all insurance contracts issued, the maturity profile represents only the liability for incurred claims, and has
been presented on an undiscounted basis.
2. The maturity profile of long-term debt includes accrued interest.
Within the tables shown above, the insurance contract liabilities balance discloses the period when the claims in respect of insurance
contracts issued by the Group are expected to be settled. All other liability balances within the table disclose the earliest period in which
the relevant counterparty could contractually require the Group to make payment. Actual maturities of the above may differ from
contractual maturities because certain counterparties have the right to call or prepay certain obligations with or without call or
prepayment penalties.
While the estimation of future cash flows in relation to ultimate claims settlement is complex and incorporates a significant amount of
judgement, the timing of the payment of claims is also uncertain and cannot be predicted as simply as for other financial liabilities.
Actuarial and statistical techniques, past experience, and management's judgement have been used to determine a likely settlement
pattern based on the earliest period in which the Group could be required by the relevant counterparty to make payment. There are no
amounts contained within the insurance contract liabilities or reinsurance contract assets as at 31 December 2024 (31 December 2023
\u2013 none) that are payable on demand.
As at 31 December 2024, cash and cash equivalents were $684.3 million (31 December 2023 \u2013 $756.9 million). The Group manages its
liquidity risks through its investment strategy to hold high quality, liquid securities, sufficient to meet its insurance liabilities and other
near-term liquidity requirements. The core portfolio, with its subset of guidelines, aims to ensure funds are readily available to meet
potential insurance liabilities, plus other liquidity requirements, in an extreme event. In addition, the Group has established asset
allocation and duration parameters within the investment guidelines, such that the majority of the investments are in high-quality assets
which could be converted into cash promptly and at minimal expense. The Group monitors market changes and outlook, and
reallocates assets as deemed necessary.
As at 31 December 2024, the Group considers that it has more than adequate liquidity to pay its obligations as they fall due.
D. Credit risk
Credit risk is the risk that a counterparty may fail to pay, or repay, a debt or obligation.
The Group is exposed to credit risk in respect of its fixed maturity investment portfolio, cash and cash equivalents, accrued interest
receivable, derivative financial instruments, amounts recoverable from reinsurers within reinsurance contract assets, amounts receivable
from insureds and cedants included within insurance contract liabilities, and other receivables.
Credit risk on the fixed maturity portfolio is mitigated through the Group\u2019s policy to invest in instruments of high credit quality issuers,
and to limit the amounts of credit exposure with respect to particular ratings categories and any one issuer. Securities rated below an
S&P or equivalent rating of BBB-/Baa3 may comprise no more than 15.0% of total market value of the fixed maturity portfolio. In
addition, no one issuer, with the exception of US government and agency securities, other G10 government guaranteed securities
(excluding Italy), and Australian sovereign debt, should exceed 5.0% of total market value of the fixed maturity portfolio. The Group is
therefore not exposed to any significant credit concentration risk on either its fixed maturity investment portfolio, or cash and cash
equivalents, except for fixed maturity securities issued by the US government and government agencies, and other highly-rated
governments.
Credit risk on insurance contract cash flows from insureds and cedants is managed by conducting business with reputable broking
organisations, with whom the Group has established relationships, and by rigorous cash collection procedures. The Group also has a
broker approval process in place. Binding authorities are subject to standard market controls, including credit control. Credit risk from
reinsurance contract cash flows is primarily managed by the review and approval of reinsurer security, as discussed on page 139.
Reinsurance contracts held in the table below represent the credit exposed components of reinsurance contract assets. These have
been presented on an undiscounted basis, and represent the maximum exposure to credit risk considering the Group's ability to offset
balances, where applicable, under the relevant reinsurance contracts held.
The table below presents an analysis of the Group\u2019s maximum exposures to counterparty credit risk, based on their rating:
2024
2023
As at 31 December
Cash and cash
equivalents
$m
Fixed maturity
securities\u00a0
$m
Credit exposed
component of
reinsurance\u00a0
contracts held\u00a0
$m
Cash and cash
equivalents
$m
Fixed maturity
securities\u00a0
$m
Credit exposed
component of
reinsurance\u00a0
contracts held\u00a0
$m
AAA
487.9
265.0
\u2014
463.2
246.9
\u2014
AA+, AA, AA-
\u2014
1,073.0
1.8
2.9
931.8
3.6
A+, A, A-
195.9
748.8
593.7
285.7
587.1
410.3
BBB+, BBB, BBB-
0.5
360.2
1.0
5.1
372.4
2.2
Other1
\u2014
156.8
41.6
\u2014
141.9
51.9
Total
684.3
2,603.8
638.1
756.9
2,280.1
468.0
1. Reinsurance contracts held classified as 'other' include $32.1 million as at 31 December 2024 (2023 \u2013 $43.4 million) which are fully collateralised.
Reinsurance is ceded across all geographic regions in which the Group operates. The Group does not have a significant concentration
of credit risk with any single reinsurer.
The Group's maximum exposure to credit risk arising from insurance contracts issued is $777.5 million (31 December 2023 \u2013 $747.1
million), which relates to the elements of the insurance contract liabilities balance which are considered to be exposed to credit risk,
specifically, premium receivables and reinstatement premium receivables, net of profit commissions payable on inwards reinsurance
business.
ECL have been determined to be immaterial as at 31 December 2024 and 31 December 2023.
E. Operational risk
Operational risk is the risk of loss resulting from inadequate or failed internal processes, personnel, systems, or non-insurance external
events. The Group and its subsidiaries have identified and evaluated their key operational risks, and these are incorporated in the risk
registers and modelled within the subsidiaries' capital models. The Group has also established, and monitors compliance with, internal
operational risk tolerances. The RRC reviews operational risk on at least an annual basis and operational risk is covered in the Group
CRO's quarterly ORSA report to the LHL Board of Directors, entity level boards, and in the LSL RCC reporting.
To manage operational risks, the Group has implemented a robust governance framework. Policies and procedures are documented
and identify the key risks and controls within processes. Key risk indicators have been established and are monitored on a regular basis,
and a formal loss event and near-miss reporting process has been implemented. The risk management function facilitates a quarterly
risk and control affirmation process and performs detailed control testing, the outcomes of which inform the CRO's quarterly opinion of
the overall control environment. The Group's internal audit function provides independent feedback with regard to the accuracy and
completeness of key risks and controls, and independently verifies the effective operation of these through sample testing. All higher
risk areas are subject to an annual audit, while compliance with tax operating guidelines is reviewed quarterly. Frequency of
consideration for audit for all other areas varies from quarterly at the most frequent, to a minimum of once every four years, on a
rotational basis.
It is widely recognised that the current increasing geopolitical risks have also increased the risk of cyber attacks. Whilst the Group does
not write standalone cyber as a separate class of business, it does have some limited exposure within broader policy coverage of
existing classes of business. The Group's main exposure comes from the operational risk of suffering a cyber attack on its systems, the
resultant downtime of systems, the expense in getting back up and running and the potential for missed business opportunities during
the downtime.
To mitigate this risk, the Group has established an information security function which works with a specialist third-party to identify,
assess, monitor and manage cyber risk. A robust cyber risk framework has been developed, this includes a range of key risk and
performance indicators which are monitored and reported against regularly.\u00a0 A cyber incident response plan has been developed and is
tested on an annual basis.
The operational cyber risk that comes with employees working from home is managed through enhanced monitoring of network
activity, targeted staff training, a quarterly risk and control affirmation process, annual testing of business continuity plans and disaster
recovery plans, and a cyber security incident response plan. The risk is monitored on an ongoing basis through the use of a series of
quantitative key risk indicators, which are the aggregate of key performance indicators monitored by the Group\u2019s information security
function.\u00a0
Management continue to closely monitor the progress of the legislative process in the jurisdictions in which it operates as it relates to
OECD global minimum tax and Bermuda corporate income tax. Further details are outlined in note 14.
F. Strategic risk
Strategic risk is the risk that the Group does not develop and implement an appropriate long-term strategy to meet its business goals.
The Group has identified several strategic risks. These include: i) business planning risk, ii) inflation risk, iii) capital management risk, iv)
retention risk, v) growth risk and vi) climate change risk.
I. Business planning risk
Business planning risk is the risk that either the poor execution of the business plan or an inappropriate business plan, results in a
strategy that fails to adequately consider and reflect the current trading environment, resulting in an inability of the Group to optimise
performance, increasing reputational risk. The Group addresses the risks associated with the planning and execution of the business
plan through a combination of the following:
\u2022 an iterative annual forward-looking business planning process with cross departmental involvement;
\u2022 evaluation and approval of the annual business plan by the Board of Directors;
\u2022 regular monitoring of actual versus planned results;
\u2022 periodic review and re-forecasting as market conditions change; and
\u2022 evaluation of climate change and the potential short, medium and long-term implications/considerations for the business.
The forward-looking business planning process covers a three-year period from 2025 to 2027, and applies a number of sensitivity,
stress and scenario tests. These tests include consideration of climate change risks. The sensitivity and stress testing has confirmed that
even under the more extreme stress scenarios, the Group had more than adequate liquidity and regulatory solvency capital headroom.
II. Inflation risk
Both UK and worldwide inflation measures have increased significantly in recent years. Whilst the Group has already been monitoring
inflation, macro-economic factors, together with the actions of central banks and the views of economists, indicate that a period of
sustained high inflation may be likely. On this basis, inflation is now an increased focus for management and those charged with
governance at both the Board of Directors and the appropriate committees.
III. Capital management risk
Capital management risk is the risk of the Group failing to maintain adequate capital, accessing capital at an inflated cost, or the inability
to access capital. This includes unanticipated changes in vendor, regulatory and/or rating agency models, that could result in an
increase in capital requirements, or a change in the type of capital required. The total capital of the Group is as follows:
As at 31 December
2024
$m
2023
$m
Shareholders' equity
1,493.3
1,507.9
Long-term debt
447.0
446.6
Total capital
1,940.3
1,954.5
Less: intangible assets
197.0
181.1
Total tangible capital
1,743.3
1,773.4
Risks associated with the effectiveness of the Group's capital management are mitigated as follows:
\u2022 regular monitoring of current and prospective regulatory and rating agency capital requirements;
\u2022 regular discussion with the LSL management team regarding Lloyd's capital requirements;
\u2022 oversight of capital requirements by the Board of Directors, including regulatory capital requirements;
\u2022 ability to purchase sufficient, cost-effective reinsurance;
\u2022 maintaining contact with vendors, regulators and rating agencies to stay abreast of upcoming developments; and
\u2022 participation in industry groups such as the International Underwriters Association, the Association of Bermuda Insurers and
Reinsurers and the Lloyd's Market Association.
The Group reviews the level and composition of capital on an ongoing basis with a view to:
\u2022 maintaining sufficient capital for underwriting opportunities and to meet obligations to policyholders;
\u2022 maximising the risk-adjusted return to shareholders within predetermined risk tolerances;
\u2022 maintaining adequate financial strength ratings; and
\u2022 meeting internal, rating agency and regulatory capital requirements.
Increases in the Group's capital are held within the Group, invested, or returned to shareholders as appropriate. The retention of
earnings generated by the Group leads to an increase in capital. Capital raising can include debt or equity, and returns of capital may be
made through dividends, share repurchases, a redemption of debt, or any combination thereof. All capital actions require approval by
the Board of Directors.
Internal methods have been developed to review the profitability of classes of business and their estimated capital requirements, and the
capital requirements of the combination of a wide range of other business activities. These approaches are used by management in
decision making.
The Group's long-term debt held is approved as 'Tier 2 Ancillary Capital' by the BMA.
The Group's aim is to maximise risk-adjusted returns for its shareholders across the cycle. The return is measured by management in
terms of the change in DBVS in the period. This aim is a long-term goal, acknowledging that management expects both higher and
lower results in the shorter term. The cyclicality and volatility of the insurance market is expected to be the largest driver of this pattern.
Management monitors these peaks and troughs by adjusting the Group's insurance portfolio to make the most effective use of available
capital and seeking to maximise the risk-adjusted return.
The source of capital used by the Group is equity shareholders' funds and borrowings. As a holding company, LHL relies on dividends
from its operating entities to provide the cash flow required for debt service and dividends to shareholders. The operating entities\u2019 ability
to pay dividends and make capital distributions is subject to the legal and regulatory restrictions of the jurisdictions in which they
operate.
Both the Group and LICL are regulated by the BMA, and are required to monitor their enhanced capital requirement under the BMA's
regulatory framework, which has been assessed as equivalent to the Solvency II regime. Bermuda is also recognised as a qualified and
reciprocal jurisdiction by the US NAIC, and LICL is approved as a reciprocal reinsurer. The Group and LICL's capital requirements are
calculated using the BSCR standard formula model. For the years ended 31 December 2024 and 31 December 2023, both the Group
and LICL were more than adequately capitalised under the BMA\u2019s regulatory regime.
The Group's UK-regulated insurance companies are required to comply with the Solvency II regime and are regulated by the PRA and
FCA. LSL is also regulated by Lloyd's. Under Solvency II, the basis for assessing regulatory capital and solvency comprises a market-
consistent economic balance sheet and a SCR, determined using either an internal model or the standard formula.
LUK calculates its SCR using the standard formula. LUK's Solvency II own funds that comprise Tier 1 items for the years ended
31 December 2024 and 31 December 2023. Tier 1 capital is the highest-quality capital under Solvency II with the greatest loss-absorbing
capacity, comprising share capital and retained earnings.\u00a0For the years ended 31 December 2024 and 31 December 2023, LUK was
more than adequately capitalised under the Solvency II regime.
The Group's underwriting capacity in its Lloyd's syndicates must be supported by providing a deposit in the form of cash, investment
securities, or LOCs, which are referred to as FAL. The capital framework at Lloyd's requires each managing agent to calculate the capital
requirement for each syndicate they manage. Solvency II internal models are used to determine capital requirements for Syndicate 2010
and Syndicate 3010 based on the uSCR. Lloyd's has the discretion to take into account other factors at syndicate or member level to
uplift the calculated uSCR. This may include perceived deficiencies in the internal model result, as well as the need to maintain Lloyd\u2019s
overall security rating. Currently, as a minimum, Lloyd's applies a 35.0% uplift to each syndicate's uSCR to arrive at the ECA.
Lloyd's then uses each syndicate\u2019s ECA as a basis for determining member level capital requirements, which is backed by FAL. For the
2025 calendar year, the Group's corporate member's FAL requirement was set at 66.6% (2024 \u2013 67.0%) of underwriting capacity. Further
solvency adjustments are made to allow for open-year profits and losses of the syndicates on which the corporate member participates.
The Group has a FAL requirement of \u00a3478.7 million as at 31 December 2024 (31 December 2023 \u2013 \u00a3461.2 million).
For the years ended 31 December 2024 and 31 December 2023, the regulatory capital requirements of all the Group\u2019s regulatory
jurisdictions were met.
IV. Retention risk
Retention risk is the risk of inappropriate succession planning, poor staff retention in key roles, and poor management of key person
risks. Risks associated with succession planning, staff retention and key person risks are mitigated through a combination of resource
planning processes and controls, including:
\u2022 the identification of key personnel, together with appropriate succession plans;
\u2022 documented recruitment procedures, position descriptions and employment contracts;
\u2022 resource monitoring and the provision of appropriate compensation, including equity based compensation which vests over a
defined time horizon;
\u2022 the use of KRIs for the voluntary turnover of members of staff; and
\u2022 training schemes.
V. Growth risk
Growth risk is the risk of organisational stretch as the Group grows, in terms of volume of business written and number of employees, as
well as from transformation programmes to ensure the Group has appropriate systems, infrastructure and data in place to support
business activities. Growth risk is mitigated through continuous monitoring of the Group's current state against the Group's business
plan and goals, together with engagement with individual management teams within the Group to validate that they have the resources
they require to deliver their own business objectives.\u00a0
VI. Climate change risk
The Group is exposed to both climate change-related risks and opportunities. The two major categories of risk being transition risk and
physical risk.
Transition risks are those risks relating to the transition to a lower carbon economy and include risks such as policy and legal risk,
technology risk, market risk and reputation risk. Physical risks are those relating to the physical impacts of climate change which can be
acute (those from increased frequency and severity of climate-related events) or chronic (due to longer-term shifts in climate patterns).
As a (re)insurance company, the Group is more significantly affected by physical risk through its potential exposure to acute and chronic
climate change. The potential financial impact from these climate-related risks is assessed through scenario testing and mitigated by the
Group's strategic and risk management decisions around managing these risks. A risk radar has been prepared to illustrate the risks
identified and the likelihood and magnitude of these risks; this diagram can be found on page 53. The risk assessment also considers the
products currently offered by the Group and how these might change over time during the transition to a lower carbon economy. A
table summarising potential opportunities, their time frame, likelihood and magnitude is included on page 50. The Group's current
assessment of risk in relation to climate change is discussed in more detail within the TCFD report on pages 46 to 57.
The Group's process in identifying, assessing and managing climate risk with respect to insurance risk, investment risk (a component of
market risk) and business plan risk (a component of strategic risk) is discussed further within the relevant sections above.
", "dimensions": { "concept": "ifrs-full:DisclosureOfFinancialRiskManagementExplanatory", "language": "en", "entity": "scheme:5493002UNUYXLHOWF752", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-234": { "value": "
A. Insurance risk
Insurance risk is the risk that the Group's underwriting, reserving, claims management, or reinsurance decisions and judgements result in
a detrimental financial impact to the Group. The Group underwrites worldwide insurance and reinsurance contracts that transfer
insurance risk, including risks exposed to both natural and man-made catastrophes. The Group's exposure in connection with insurance
contracts or reinsurance contracts underwritten is whether, in the event of insured losses, premiums will be sufficient to cover the loss
payments and expenses. Insurance and reinsurance markets are cyclical and premium rates and terms and conditions vary by line of
business depending on market conditions and the stage of the underwriting cycle. Market conditions are impacted by capacity and
recent loss events, and broader economic cycle impacts, amongst other factors. The Group\u2019s underwriters assess likely losses using
their experience and knowledge of past loss experience, industry trends, and current circumstances. This allows them to estimate the
premiums sufficient to meet likely losses and expenses and desired levels of profitability.
The Group considers insurance risk at an individual contract level, at a segment level, at a geographic level, and at an aggregate
portfolio level. This ensures that careful risk selection, limits on concentration and appropriate portfolio diversification are
accomplished. The level of insurance risk tolerance per peril is set by the Board and the boards of directors at individual entity level.
A number of controls are deployed by the Group to manage the amount of insurance exposure assumed:
\u2022 a rolling strategic plan that helps establish the business goals that the Board of Directors aims to achieve;
\u2022 a detailed three-year business plan is produced annually. The plan is approved by the Board of Directors and is monitored, reviewed
and updated on an ongoing basis;
\u2022 for LSL, the syndicates' business forecasts and business plans are subject to review and approval by Lloyd's;
\u2022 economic capital models are used to model risk levels and capital requirements;
\u2022 each authorised class has a predetermined normal maximum line structure;
\u2022 each underwriter has a clearly defined limit of underwriting authority;
\u2022 the Group and individual operating entities have predetermined tolerances on probabilistic and deterministic losses of capital for
certain single events, which are monitored on a regular basis;
\u2022 pricing and aggregation models are used to assist with the underwriting process; and
\u2022 reinsurance is purchased to mitigate both frequency and severity of losses on a facultative, excess of loss treaty or proportional treaty
basis.
Some of the Group's business provides coverage for natural catastrophes (for example, hurricanes, earthquakes, wildfires and floods)
and is subject to potential seasonal variation and the effects of climate change. A proportion of the Group\u2019s business is exposed to large
catastrophe losses in North America, Europe and Japan as a result of windstorms. The level of windstorm activity, and landfall thereof,
during the North American, European and Japanese wind seasons may materially impact the Group\u2019s loss experience. The North
American and Japanese wind seasons are typically June to November, and the European wind season November to March. The Group
also has exposure to large losses arising from other non-seasonal natural catastrophes, such as earthquakes, tsunamis, droughts, floods
and tornadoes, from risk losses throughout the year and from war, terrorism and political risk, and other events.
Climate change may expose the Group to the risk of heightened severity and frequency of weather-related losses. Climate-related risks
are identified and assessed as part of the usual risk identification and management process, which includes, but is not limited to,
discussions with risk owners and subject matter experts across the Group, discussions at the Emerging Risk Forum, and the ESG
Committee.
Climate-related risks specific to the (re)insurance portfolios are identified and assessed as part of the day-to-day underwriting process
by individual underwriters in their analysis of specific risk information, and more broadly in the context of the wider portfolio during the
individual class of business QBR process, and through the RRC meetings. These reviews include: the physical location of assets insured,
weather-related perils that have impacted the location and their historical frequency and severity, as well as expected short-term and
long-term changes. The insurance and reinsurance underwriting strategy days assess climate-related risks of both current and
anticipated future risks, which include but are not limited to transition risk arising from a decline in the value of assets to be insured,
changing energy costs, and liability risks that could arise from climate-related litigation. Physical, transition and liability risks are
considered by business segment and geographical location, and the expected impact from the risks identified is considered with respect
to both magnitude and timescale.
The Group manages climate risk by using stochastic models from third-party vendors that have a long history of data quality
governance. We adapt these models based upon our views of climate risk, as well as our clients' exposure data, to create aggregate loss
scenarios. Underwriting guidelines support the underwriting process and provide guidance to assist underwriters in their decision
making. Performance against guidelines is monitored through the regular meetings, QBRs and related reporting. We have clear
tolerances and preferences in place to actively manage exposures, and the Board regularly monitors our PMLs.
The Group accepts risks for periods primarily of one year, which mitigates the potential short-term impacts of climate risk. The Group
has the ability to re-evaluate the portfolio on an annual basis and therefore reprice physical risk and reset exposure levels to consider
new data regarding the frequency and severity of elemental catastrophe events.
Catastrophe management
The Group actively monitors risk levels and manages catastrophe risk accumulations using reinsurance and PML based risk tolerances,
which are monitored as part of our climate-related risks. The Group's exposures to certain peak zone elemental losses, as a percentage
of tangible capital, including long-term debt, are shown below. Net loss estimates are undiscounted before income tax and net of
reinstatement premiums and outwards reinsurance on a first occurrence return period basis.
31 December 2024
31 December 2023
100 year return period estimated net loss1
$m
% of
tangible capital
$m
% of
tangible capital
Zones
Perils
Gulf of Mexico2
Hurricane
335.8
19.3%
300.5
16.9%
California
Earthquake
247.6
14.2%
256.0
14.4%
Non-Gulf of Mexico \u2013 US
Hurricane
233.4
13.4%
237.9
13.4%
Pan-European
Windstorm
129.4
7.4%
161.4
9.1%
Japan
Earthquake
107.3
6.2%
137.6
7.8%
Japan
Typhoon
102.3
5.9%
134.0
7.6%
Pacific North West
Earthquake
34.3
2.0%
31.5
1.8%
31 December 2024
31 December 2023
250 year return period estimated net loss1
$m
% of
tangible capital
$m
% of
tangible capital
Zones
Perils
Gulf of Mexico2
Hurricane
435.4
25.0%
364.6
20.6%
California
Earthquake
302.6
17.4%
311.2
17.5%
Non-Gulf of Mexico \u2013 US
Hurricane
525.9
30.2%
448.0
25.3%
Pan-European
Windstorm
195.9
11.2%
201.2
11.3%
Japan
Earthquake
189.5
10.9%
244.1
13.8%
Japan
Typhoon
155.0
8.9%
181.2
10.2%
Pacific North West
Earthquake
170.9
9.8%
123.0
6.9%
1. Estimated net loss balances presented in the table are unaudited.
2. Landing hurricane from Florida to Texas.
There can be no guarantee that the modelled assumptions and techniques deployed in calculating these figures are accurate. There
could also be an unmodelled loss which exceeds these figures. In addition, any modelled loss scenario could cause a larger loss to
capital than the modelled expectation from the above return periods.
Geopolitical conflict
We continue to monitor our loss exposure with regard to the ongoing conflict between the Ukraine and Russia, which remains a
complex and fluid situation. With the ongoing tensions in the Middle East, focus remains on monitoring our exposures in this area, and
seeking to ensure that such exposures are within an acceptable risk tolerance. As geopolitical risks can change and evolve rapidly, these
are factors that we carefully consider in our underwriting decisions. Where appropriate, thematic reviews are performed to provide a
more detailed analysis of the risk and potential impact.
Insurance revenue geographical split and operating segment
The following table provides an analysis of the Group's insurance revenue by operating segment and geographical location:
2024
2023
For the year ended 31 December
Reinsurance
$m
Insurance
$m
Total
$m
Reinsurance
$m
Insurance
$m
Total
$m
US and Canada
437.7
318.7
756.4
339.6
269.4
609.0
Worldwide - multi territory
314.2
311.6
625.8
257.4
276.5
533.9
Europe
58.8
99.2
158.0
62.1
83.2
145.3
Rest of world
44.4
180.5
224.9
55.8
175.9
231.7
Total insurance revenue
855.1
910.0
1,765.1
714.9
805.0
1,519.9
I. Reinsurance segment
The Group's reinsurance segment comprises property reinsurance, specialty reinsurance and casualty reinsurance. The property
reinsurance portfolio is predominantly written on an excess of loss basis with the 'catastrophe' portfolio exposed to large natural
disasters and the 'risk' portfolio exposed to individual, man-made losses such as fire and explosion. The specialty reinsurance portfolio
has a mix of exposure, with natural disasters exposing the retrocession portfolio and large, man-made risks from complex exposures,
such as offshore energy platforms, exposing the marine, energy, terror and aviation portfolios. This is underwritten through a
combination of excess of loss and proportional reinsurance. Casualty reinsurance is written through quota share reinsurance, assuming
a mix of general liability and professional lines exposures, predominantly from within the US.
II. Insurance segment
The Group's insurance segment is usually written on a direct or facultative basis and comprises aviation insurance, casualty insurance,
energy and marine insurance, property insurance and specialty insurance. Within aviation, aviation deductible, aviation hull, aviation
liability, aviation war, and AV52 are the main exposures. Casualty insurance covers accident and health policies, as well as a small
number of consortia arrangements within Lloyd's. Energy insurance covers a variety of energy exposures, from upstream and energy
construction, downstream processing and storage risks, power generation, and energy liability. Marine risks include cargo and specie
risks, as well as liability, hull and war. The property insurance account contains a worldwide property exposure with a mix of Fortune
500 business and smaller accounts with exposure in an individual location. Specialty insurance includes political risk, terror and credit
exposures and is often written on a multi-year basis.
Outwards reinsurance
The Group, in the normal course of business and in accordance with its risk management practices, seeks to reduce certain types of
losses that may arise from events that could cause unfavourable underwriting results by entering into external outwards reinsurance
arrangements. Reinsurance does not relieve the Group of its obligations to policyholders. Under the Group's reinsurance security policy,
reinsurers are assessed and approved based on their financial strength ratings, together with other factors. The Group RSC considers
reinsurers that are not rated or do not fall within the predefined rating categories on a case-by-case basis, and may require collateral to
be provided to support the reinsurer's obligations. There are specific guidelines for these collateralised contracts. The Group ORIF
monitors the Group's reinsurers on an ongoing basis, and formally reviews the Group's reinsurance arrangements as deemed necessary.
Exposure to the Group's reinsurance counterparties, compared to the Board-approved tolerances, is reported to the Board of Directors
on a quarterly basis.
Reinsurance protection is typically purchased on an excess of loss basis; however, it may also include ILW covers, or proportional treaty
arrangements. The mix of reinsurance cover is dependent on the specific loss mitigation requirements, market conditions, and available
capacity. Reinsurance may also be purchased to optimise the risk-adjusted return of the underwriting portfolio. The structure varies
between types of peril and sub-class. The Group regularly reviews its catastrophe and other exposures and may purchase reinsurance to
reduce its net exposure to a large natural catastrophe loss and/or to reduce net exposures to other large losses. The Group can
purchase both facultative and treaty reinsurance with varying cover and attachment points. The reinsurance coverage is not intended to
be available to meet all potential loss circumstances. The Group will retain some losses, as the cover purchased is unlikely to transfer the
totality of the Group\u2019s exposure. Any loss amount which exceeds the Group's reinsurance programme is retained by the Group. Some
parts of the reinsurance programme have limited reinstatements, therefore the number of claims which may be recovered from second
or subsequent losses in those particular circumstances is restricted.
Reserving
Estimates of future cash flows to fulfil insurance contracts issued
The Group measures the carrying amount of the LIC and the AIC at the end of each reporting period, being the amount of the FCF. The
FCF in respect of the LIC and AIC comprises:
\u2022 unbiased probability-weighted best estimates of future cash flows within the boundary of each insurance and reinsurance contract;
\u2022 an adjustment to reflect the time value of money and the financial risks related to future cash flows, to the extent that the financial
risks are not included in the estimates of future cash flows (see interest rate risk section); and
\u2022 a risk adjustment for non-financial risk.
Further detail on each of these is provided in the section below.
Probability-weighted best estimate of future cash flows
In estimating future cash flows, the Group incorporates, in an unbiased way, all reasonable and supportable information that is available
at the reporting date. The Group uses internal and external information about past events, current conditions and forecasts of future
conditions. The Group's estimate of future cash flows is the mean of a range of scenarios that reflect the full range of possible
outcomes.
Cash flows within the boundary of an insurance contract relate directly to the fulfilment of the contract, including those for which the
Group has discretion over the amount and timing. These include payments to or on behalf of policyholders, including, where relevant,
those made to intermediaries, together with other costs incurred in fulfilling contracts.
Other costs that are incurred in fulfilling contracts comprise both direct costs and an allocation of fixed and variable overheads. Where expenses
are contract specific, these costs are taken directly and aggregated, as required, to groups of insurance contracts. Where expenses are not
contract specific (for example overheads), these are allocated to groups of insurance contracts in a systematic and rational way.
For the Group's insurance contracts, uncertainty in the estimation of future claims and benefit payments arises primarily from the
severity and frequency of claims and uncertainties regarding future inflation rates.
The Group estimates the ultimate costs of settling claims incurred but unpaid at the reporting date, and the value of salvage and other
expected recoveries, by reviewing individual claims reported and making allowance for claims incurred but not yet reported. The
ultimate cost of settling claims is estimated using a range of loss reserving techniques (including the Bornhuetter-Ferguson, loss ratio
and chain-ladder methods). Often actuarial techniques assume that historic claims experience is indicative of future claims
development patterns, and therefore, the ultimate claims cost. The ultimate cost of settling attritional losses and large claims is
estimated separately for each class of business.
The assumptions used, including loss ratios and future claims inflation, are derived from a combination of historical information and
judgement where past trends may not apply in the future and future trends are expected to emerge.
For each nominal fulfilment amount, the timing of future cash flows is determined by applying cash flow assumptions based, where
available, on the Group\u2019s historical experience for the given portfolio of contracts. Where there is insufficient historical experience,
reliance may be placed on external benchmarks or portfolios which are believed to exhibit similar cash flow characteristics.
Methods used to measure the risk adjustment for non-financial risk
The risk adjustment for non-financial risk is the compensation that is required for bearing the uncertainty about the amount and timing
of cash flows that arises from non-financial risk as the insurance contract is fulfilled. The Group estimates an adjustment for non-
financial risk separately from all other estimates.
Under the PAA, the risk adjustment for non-financial risk is limited to the LIC and the AIC, with the exception of an onerous contract,
where it is implicitly considered in determining the required adjustment to the LRC and ARC. The undiscounted risk adjustment within
the LIC and AIC is set with reference to the Group\u2019s reserve risk appetite and aligns with the management margin, which depends on the
prevailing uncertainty in the FCF of the LIC and AIC at each reporting date. The management margin is set through a combination of
initial expected loss ratio uplifts for IBNR provisions and on a case-by-case basis for individual reported events. This process is overseen
by the Reserve and Audit Committees. Given this granular approach, no further allocation of the risk adjustment to groups of insurance
contracts is required. The undiscounted risk adjustment is then discounted to allow for the time value of money alongside the wider FCF
within the LIC and AIC. Changes in the risk adjustment for non-financial risk are disaggregated into insurance services and insurance
financing components in the same way as the best estimate FCF.
The Group estimates that FCF within the net of reinsurance LIC (including the risk adjustment for non-financial risks) correspond to a
confidence level of 86% (31 December 2023 \u2013 88%) on an ultimate time horizon.
The risk adjustment for non-financial risk is subject to discounting, and the confidence level is inferred for the purpose of disclosure.
The inference of the confidence level requires assumptions around the perceived volatility of each portfolio and the aggregation to the
overall entity level. Volatility parameters are set with reference to historical internal and external data but may be adjusted at each
reporting date to reflect the prevailing environment and associated reserve uncertainties. Given the inference of the confidence level,
the Group generally expects this to fall within the range of the 80th-90th percentile. Movements within this range between periods are
to be expected due to, for example, specific loss events or a change in the mix of business such as an increase in longer tail casualty
business written. The Group would expect to remain within this range, unless there is a change in reserving risk appetite. The Group\u2019s
reserve risk appetite and methods used to determine the risk adjustment for non-financial risk and resulting confidence level were not
changed for the current financial year.
Sensitivity analysis
The following table presents information on how reasonably possible changes in assumptions made by the Group impact the valuation
of the net insurance contract liabilities, profit after tax and shareholders' equity. Under the PAA, and given the current amount of the
Group's loss component, only the LIC component of insurance contract liabilities and the AIC component of reinsurance contract
assets are considered sensitive to possible changes in insurance risk and interest rate risk variables.
LIC as at 31
December 2024
$m
Impact on profit
after tax and
shareholders'
equity
$m
LIC as at 31
December 2023
$m
Impact on profit
after tax and
shareholders'
equity
$m
Insurance contract liabilities
2,237.7
1,765.9
Reinsurance contracts assets
(608.5)
(430.3)
Net insurance contract liabilities
1,629.2
1,335.6
20% increase in unpaid claims and expenses
Insurance contract liabilities
2,685.2
(391.2)
2,119.1
(307.9)
Reinsurance contract assets
(730.2)
99.6
(516.4)
72.0
Net insurance contract liabilities
1,955.0
(291.6)
1,602.7
(235.9)
The analysis is based on a change in an assumption while holding all other assumptions constant. In practice, this is unlikely to occur,
and changes in some of the assumptions may be correlated.
", "dimensions": { "concept": "ifrs-full:DisclosureOfNatureAndExtentOfRisksThatAriseFromContractsWithinScopeOfIFRS17Explanatory", "language": "en", "entity": "scheme:5493002UNUYXLHOWF752", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-236": { "value": "
B. Market risk
Market risk is the risk that decisions, movements, trends, or other factors in financial markets impact the Group in a way that is
financially detrimental. The main market risks include:
I. Insurance market risk;
II. Investment risk;
III. Debt risk; and
IV. Currency risk.
These risks, and the management thereof, are described below.
I. Insurance market risk
Insurance market risk is the risk that factors within either the global insurance market, or the relevant local insurance markets in which
the Group operates, have a detrimental financial impact on the Group. The Group is exposed to insurance market risk from several
sources, including the following:
\u2022 the advent or continuation of a soft market, which may result in a stabilisation or decline in premium rates and/or terms and
conditions for certain lines, or across all lines;
\u2022 the actions and reactions of key competitors, which may directly result in volatility in premium volumes and rates, fee levels and other
input costs;
\u2022 market events, including unusual inflation in rates, which may result in a limit in the availability of cover, resulting in political
intervention or national remedies;
\u2022 failure to maintain broker, binding authority and client relationships, leading to a limited or substandard choice of risks which are
inconsistent with the Group\u2019s risk appetite;
\u2022 changes in regulation including capital, governance or licensing requirements; and
\u2022 changes in the geopolitical environment.
The most important method to mitigate insurance market risk is to maintain strict underwriting standards. The Group manages
insurance market risk in numerous ways, including the following:
\u2022 reviews and amends underwriting plans and outlook as necessary;
\u2022 reduces exposure to market sectors where conditions have reached unattractive levels;
\u2022 purchases appropriate, cost-effective reinsurance cover to mitigate loss exposures;
\u2022 closely monitors changes in premium rates and terms and conditions;
\u2022 ensures through continuous regulatory capital management that it does not allow surplus capital to unduly influence underwriting
appetite;
\u2022 has a collegiate approach towards taking risk, with most authority requiring at least 4 eyes and pre-authorisation peer review;
\u2022 reviews all new and renewal business post-underwriting for LSL;
\u2022 reviews outputs from the economic capital models to assess up-to-date profitability of classes and sectors;
\u2022 holds a monthly RRC meeting to discuss risk and reinsurance;
\u2022 holds a quarterly UURC meeting to review underwriting strategy; and
\u2022 holds regular meetings with regulators.
II. Investment risk
Investment risk is the risk that movements, trends or other factors, within either public or private investment markets, have a detrimental
financial impact on the price of securities within the Group's investment portfolio. Movements in investments resulting from changes in
prices, interest rates, inflation rates, and currency exchange rates, amongst other factors, may lead to an adverse impact on the value of
the Group\u2019s investment portfolio.
Investment guidelines are established by the Investment Committee of the Board of Directors to manage this risk. Investment guidelines
set parameters within which the Group's external investment managers must operate. All of the Group's fixed income managers and the
majority of the private investment managers are signatories of the UNPRI, which approximates to 96.7% (31 December 2023 \u2013 96.7%) of
the Group's externally managed assets. Important parameters include guidelines on permissible asset classes, duration ranges, credit
quality, currency, maturity, sectors, geographical, sovereign and issuer exposures. Compliance with guidelines is monitored on a
monthly basis. Any adjustments to the investment guidelines are approved by the Investment Committee and the Board of Directors.
The Group's fixed maturity portfolios are managed by external investment managers. The Group also has a portfolio consisting of a
hedge fund, principal protected products, and private investment funds. The performance of the managers is monitored on an ongoing
basis.
During the period, the investment portfolio was restructured by merging the core and core plus categories due to their similar risk-
return profiles. This consolidation simplifies the investment strategy, enhances portfolio management, and optimises returns without
altering the overall risk exposure. The unified 'core' portfolio remains aligned with the company\u2019s long-term financial goals and risk
tolerance while the 'surplus' portfolio will aim for higher returns and greater diversification by investing in a wider array of assets with
higher risk-return profiles, such as high-yield securities, private investment funds, hedge funds, and equities.
Within the Group\u2019s investment guidelines are subsets of guidelines for the core portion of funds required to meet near-term obligations
and cash flow needs following an extreme event. These guidelines add further requirements, including reducing permitted asset classes,
higher credit quality, shorter duration, and higher liquidity. The primary objectives for this portion of assets are capital preservation and
providing liquidity to meet insurance and other near-term obligations. Alongside internally managed cash, the core portfolio holds funds
specifically allocated to cover potential liabilities, aligning their duration with that of the insurance liabilities within an agreed range. The
core portfolio is invested in fixed maturity securities, fixed maturity funds, and cash and cash equivalents. The core portfolio may, at
times, contain assets significantly in excess of those required to meet insurance liabilities or other defined funding needs.
Assets in excess of those required to be held in the core portfolio are typically held in the surplus portfolio. The surplus portfolio is
invested in fixed maturity securities, principal protected products, derivative instruments, cash and cash equivalents, private investment
funds, and hedge funds. In general, the duration of the surplus portfolio is slightly longer than the core portfolio.
The Group reviews the composition, duration and asset allocation of its investment portfolio on a regular basis to respond to changes in
interest rates and other market conditions. If certain asset classes are anticipated to produce a higher return within management\u2019s risk
tolerance, an adjustment in asset allocation may be made. Conversely, if the risk profile is expected to move outside of management's
risk tolerance levels, an adjustment to the asset allocation may be made to reduce the risks in the portfolio.
The investment portfolio is currently structured to perform similarly in risk-on and risk-off environments. The Group endeavours to limit
losses in risk-on, risk-off, and interest rate hike scenarios. The Group models various periods of significant stress to better understand
the investment portfolio\u2019s risks and exposures. The scenarios represent what could, and most likely will, occur (albeit not in the exact
form of the scenarios, which are based on historic periods of volatility). The Group also monitors the portfolio impact of more severe
disaster scenarios consisting of extreme shocks.
The Investment Committee oversees a strategic asset allocation study on a bi-annual basis, which assesses the Group's overall strategy
and seeks to determine if there is an alternative asset allocation to achieve the highest risk-adjusted return within our risk tolerances.
The IRRC meets quarterly to ensure that the Group\u2019s strategic and tactical investment actions are consistent with investment risk
preferences, appetite, risk and return objectives and tolerances. The IRRC also helps further develop the risk tolerances to be
incorporated into the ERM framework.
The investment mix of the Group's investment portfolio is as follows:
Core
Surplus
Total
As at 31 December 2024
$m
$m
$m
\u2022 Short-term investments
27.9
4.6
32.5
\u2022 Fixed maturity funds
23.1
\u2014
23.1
\u2022 US treasuries
382.8
127.1
509.9
\u2022 Other government bonds
31.5
33.8
65.3
\u2022 US municipal bonds
9.1
6.7
15.8
\u2022 US government agency debt
0.2
17.0
17.2
\u2022 Asset backed securities
81.6
190.1
271.7
\u2022 US government agency mortgage backed securities
181.3
145.2
326.5
\u2022 Non-agency mortgage backed securities
22.5
33.0
55.5
\u2022 Non-agency commercial mortgage backed securities
\u2014
20.5
20.5
\u2022 Bank loans
\u2014
153.4
153.4
\u2022 Corporate bonds
827.9
280.1
1,108.0
\u2022 Other fixed maturities
\u2014
4.4
4.4
Total fixed maturity securities
1,587.9
1,015.9
2,603.8
Private investment funds
\u2014
253.1
253.1
Hedge funds
\u2014
7.9
7.9
Other investments
\u2014
0.1
0.1
Total investments
1,587.9
1,277.0
2,864.9
Core
Surplus
Total
As at 31 December 2023
$m
$m
$m
\u2022 Short-term investments
20.7
53.2
73.9
\u2022 Fixed maturity funds
27.1
\u2014
27.1
\u2022 US treasuries
479.2
106.7
585.9
\u2022 Other government bonds
18.7
28.5
47.2
\u2022 US municipal bonds
10.1
3.4
13.5
\u2022 US government agency debt
6.3
50.8
57.1
\u2022 Asset backed securities
98.5
138.2
236.7
\u2022 US government agency mortgage backed securities
80.5
36.9
117.4
\u2022 Non-agency mortgage backed securities
0.6
10.9
11.5
\u2022 Non-agency commercial mortgage backed securities
\u2014
21.3
21.3
\u2022 Bank loans
\u2014
142.6
142.6
\u2022 Corporate bonds
675.5
260.9
936.4
\u2022 Other fixed maturities
\u2014
9.5
9.5
Total fixed maturity securities
1,417.2
862.9
2,280.1
Private investment funds
\u2014
165.6
165.6
Hedge funds
\u2014
9.9
9.9
Other investments
\u2014
(0.1)
(0.1)
Total investments
1,417.2
1,038.3
2,455.5
The concentration risk of the Group's fixed maturity securities by country and sector is as follows:
As at 31 December 2024
Financials\u00a0
$m
Industrial
$m
Utility\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
$m
Government &
Government
Agencies
$m
Structured1
$m
Other2
$m
Total\u00a0
$m
United States
316.3
635.5
12.6
869.3
138.5
27.3
1,999.5
Cayman Islands
\u2014
1.2
\u2014
\u2014
151.8
\u2014
153.0
Canada
37.0
17.4
\u2014
27.8
\u2014
\u2014
82.2
United Kingdom
41.5
20.2
\u2014
2.2
\u2014
\u2014
63.9
Jersey
\u2014
0.6
\u2014
\u2014
38.0
\u2014
38.6
France
22.9
2.7
\u2014
1.1
0.9
2.3
29.9
Japan
11.6
8.0
\u2014
\u2014
\u2014
\u2014
19.6
Bermuda
\u2014
\u2014
\u2014
1.7
16.7
\u2014
18.4
Netherlands
4.7
9.0
\u2014
0.1
\u2014
\u2014
13.8
India
3.1
5.1
0.5
3.5
\u2014
\u2014
12.2
Germany
3.2
8.5
\u2014
0.3
\u2014
\u2014
12.0
Spain
10.4
1.4
\u2014
\u2014
\u2014
\u2014
11.8
Chile
\u2014
2.8
2.4
3.6
\u2014
\u2014
8.8
Singapore
0.3
7.4
0.4
0.5
\u2014
\u2014
8.6
Luxembourg
0.6
7.2
\u2014
\u2014
\u2014
\u2014
7.8
Other
31.1
35.6
4.6
24.6
1.8
26.0
123.7
Total fixed maturity securities
482.7
762.6
20.5
934.7
347.7
55.6
2,603.8
1. Structured products excludes any Government structured products.
2. Other includes Lloyd's overseas deposits and short-term investments.
As at 31 December 2023
Financials\u00a0
$m
Industrial
$m
Utility\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
$m
Government &
Government
Agencies
$m
Structured1
$m
Other2
$m
Total\u00a0
$m
United States
270.6
523.2
18.7
773.5
123.9
20.3
1,730.2
United Kingdom
35.9
17.5
\u2014
1.6
0.3
50.0
105.3
Cayman Islands
\u2014
1.8
\u2014
\u2014
100.7
\u2014
102.5
Canada
26.0
16.2
0.5
18.0
\u2014
0.5
61.2
Jersey
\u2014
0.8
\u2014
\u2014
32.3
\u2014
33.1
France
25.2
2.5
\u2014
\u2014
2.2
\u2014
29.9
Japan
13.4
10.0
\u2014
\u2014
\u2014
\u2014
23.4
Netherlands
6.7
2.3
3.7
\u2014
\u2014
0.4
13.1
Mexico
3.4
6.8
0.4
1.3
\u2014
\u2014
11.9
Singapore
0.3
10.3
0.4
0.5
\u2014
\u2014
11.5
India
1.8
4.5
\u2014
2.9
\u2014
1.3
10.5
Germany
2.7
7.7
\u2014
\u2014
\u2014
\u2014
10.4
Switzerland
9.3
\u2014
\u2014
\u2014
\u2014
\u2014
9.3
Bermuda
\u2014
\u2014
\u2014
1.7
7.0
\u2014
8.7
Finland
8.3
\u2014
\u2014
\u2014
\u2014
\u2014
8.3
Other
23.8
29.5
4.3
21.6
3.1
28.5
110.8
Total fixed maturity securities
427.4
633.1
28.0
821.1
269.5
101.0
2,280.1
1. Structured products excludes any Government structured products.
2. Other includes Lloyd's overseas deposits and short-term investments.
The Group's net asset value is directly impacted by movements in the fair value of investments held. Fair values can be impacted by
movements in interest rates, credit ratings, exchange rates, the current economic environment and outlook.
Interest rate risk
(i) Investments
Interest rate risk is the risk that movements in market interest rates, which are typically correlated with the interest rates set by central
banks, have a detrimental financial impact on the value of the Group's assets and liabilities. The Group\u2019s investment portfolio is mainly
comprised of fixed maturity securities and cash and cash equivalents. Fixed maturity funds are overseas deposits held by the syndicates
in trust for the benefit of the policyholders in those overseas jurisdictions. They consist of high quality, short duration fixed maturity
securities. The fair value of the Group\u2019s fixed maturity portfolio is generally inversely correlated to movements in market interest rates. If
market interest rates fall, the fair value of the Group\u2019s fixed maturity securities would tend to rise, and vice versa.
The sensitivity of the price of fixed maturity securities, and certain derivatives, to movements in interest rates is indicated by their
duration. The greater a security\u2019s duration, the greater its price volatility to movements in interest rates. The sensitivity of the Group\u2019s
fixed maturity investment portfolio to interest rate movements is detailed below, assuming linear movements in interest rates:
2024
2023
As at 31 December
$m
%
$m
%
Immediate shift in yield (basis points)
100
(62.2)
(2.4)
(39.5)
(1.7)
75
(46.6)
(1.8)
(29.6)
(1.3)
50
(31.1)
(1.2)
(19.8)
(0.9)
25
(15.5)
(0.6)
(9.9)
(0.4)
(25)
13.7
0.5
10.0
0.4
(50)
27.5
1.1
20.0
0.9
(75)
41.2
1.6
29.9
1.3
(100)
54.9
2.1
39.9
1.8
The Group mitigates interest rate risk on the investment portfolio by establishing and monitoring duration ranges in its investment
guidelines. The Group may also manage interest rate risk through the use of interest rate futures and swaptions. The duration of the
core portfolio is matched to the modelled duration of the net insurance contract liabilities, within a permitted range. The permitted
duration range for the surplus portfolio is between one and five years.
The overall duration for fixed maturity securities, managed cash and cash equivalents is 2.0 years (31 December 2023 \u2013 1.6 years).
In addition to duration management, the Group monitors VaR to measure potential losses in the estimated fair values of its cash and
invested assets and to understand and monitor risk. The VaR calculation is performed using variance/covariance risk modelling to
capture the cash flows and embedded optionality of the investment portfolio. Securities are valued individually using standard market
pricing models. These security valuations serve as the input to risk analytics, including full valuation risk analyses, as well as parametric
methods that rely on option-adjusted risk sensitivities to approximate the risk and return profiles of the portfolio.
The principal VaR measure that is produced is an annual VaR at the 99th percentile confidence level. Under normal conditions, the
investment portfolio value is not expected to decrease more than the VaR metric listed in the table below 99% of the time over a one-
year time horizon. The appropriateness of this measure is considered by the Investment Committee on behalf of the Board of Directors
on an annual basis.
The Group\u2019s annual VaR calculations are as follows:
2024
2023
As at 31 December
$m
% of shareholders'
equity
$m
% of shareholders'
equity
99th percentile confidence level1
157.8
10.6
110.0
7.3
1. Including the impact of internal foreign exchange hedges.
(ii) Discounting approach on LIC and AIC
The Group's LIC and AIC are discounted on initial recognition and re-measured to current interest rates at each quarter end date, and
are therefore sensitive to changes in market interest rates.
The Group applies the bottom-up approach when deriving its rates for discounting the LIC and AIC. This approach requires the use of
an appropriate (liquid) risk-free yield curve, plus a specific illiquidity premium above the risk-free yield curve to represent the reduced
liquidity of the insurance contract cash flows compared to the observable risk-free rates. The risk-free yields and illiquidity premium are
derived using reference data supplied by third parties with management judgement applied where appropriate, in particular in the
derivation of the illiquidity premium, which is informed by the implied illiquidity premium of a representative portfolio of corporate
bonds determined using the top-down method.
The following table sets out the one, three, five and seven-year yield curves (risk-free rate plus illiquidity premium) used to discount the
cash flows of insurance contracts issued and reinsurance contracts held for the Group's major currencies:
2024
2023
As at 31 December
1 year
3 years
5 years
7 years
1 year
3 years
5 years
7 years
USD
4.78%
4.88%
4.98%
5.07%
5.33%
4.40%
4.29%
4.34%
GBP
5.06%
4.98%
4.97%
5.03%
5.31%
4.34%
4.14%
4.16%
EUR
2.93%
3.02%
3.18%
3.31%
4.03%
3.21%
3.21%
3.33%
CAD
3.48%
3.54%
3.68%
3.84%
5.23%
4.51%
4.25%
4.27%
JPY
1.12%
1.52%
1.71%
1.88%
0.65%
0.96%
1.24%
1.52%
ZAR
8.25%
8.44%
8.97%
9.63%
8.92%
8.63%
9.15%
9.86%
AUD
4.65%
4.74%
5.03%
5.26%
4.77%
4.55%
4.76%
4.99%
The following table presents information on how reasonably possible changes in the yield curve could impact the valuation of the net
insurance contract liabilities, profit after tax and shareholders' equity. Under the PAA, and given the current amount of the Group's loss
component, only the LIC component of insurance contract liabilities and the AIC component of reinsurance contract assets are
sensitive to possible changes in insurance risk and interest rate risk variables.
LIC as at
31 December 2024\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
$m
Impact on profit after
tax and shareholders'
equity\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
$m
LIC as at
31 December 2023
$m
Impact on profit after
tax and shareholders'
equity\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
$m
Insurance contract liabilities
2,237.7
1,765.9
Reinsurance contracts assets
(608.5)
(430.3)
Net insurance contract liabilities
1,629.2
1,335.6
1% increase in yield curves
Insurance contract liabilities
2,195.6
37.9
1,733.3
28.9
Reinsurance contract assets
(600.6)
(6.7)
(422.3)
(6.7)
Net insurance contract liabilities
1,595.0
31.2
1,311.0
22.2
The analysis is based on a change in an assumption while holding all other assumptions constant. In practice, this is unlikely to occur,
and changes in some of the assumptions may be correlated.
Price risk
Price risk is the risk that the fair value of the Group's investment portfolio will fluctuate because of changes in market prices (other than
those arising from interest rate or foreign exchange rate risk), whether those changes are caused by factors specific to the individual
investment or other market factors.
The Group's price risk exposure relates to private investment funds and hedge funds. Listed investments that are quoted in an active
market are recognised at quoted bid price, which is deemed to be the approximate exit price. If the market for the investment is not
considered to be active, then the Group establishes fair value using valuation techniques (refer to note 11). This includes comparison to
comparable orderly transactions between active market participants, reference to benchmarks or other indices to assess
reasonableness, and other valuation techniques that are commonly used by market participants.
A 10% asset price decrease at 31 December 2024 would reduce the value of our private investment funds and hedge funds by
approximately $26.1 million (31 December 2023 \u2013 $17.6 million).
Derivative financial instruments
The Group\u2019s investment guidelines permit the investment managers to utilise forward foreign currency contracts to manage foreign
currency exposure. These positions are monitored regularly. The Group may also use OTC or exchange-traded managed derivatives to
mitigate interest rate risk and foreign currency exposures. The Group principally has exposure to derivatives related to the following
types of risks: interest rate risk, foreign currency risk, and credit risk.
\u00a0 \u00a0 Forward foreign currency contracts
A forward foreign currency contract is a commitment to purchase or sell a foreign currency at a future date, at a defined rate. The
Group may utilise forward foreign currency contracts to gain exposure to a certain currency or market rate, to manage the impact of
fluctuations in foreign currencies on the value of its foreign currency denominated investments, debt, insurance-related currency
exposures and/or expenses.
Forward contracts expose the Group to credit, market and liquidity risks. Credit risk arises from the potential inability of counterparties
to perform under the terms of the contract. The Group is exposed to market risk to the extent that adverse changes occur in the
exchange rate of the underlying foreign currency. Liquidity risk represents the possibility that the Group may not be able to rapidly
adjust the size of its forward positions at a reasonable price in times of high volatility and financial stress. These risks are mitigated by
requiring a minimum counterparty credit quality, restricting the maximum notional exposure as a percentage of the investment
portfolio\u2019s estimated fair value, and restricting exposures to foreign currencies, individually and in aggregate, as a percentage of the
investment portfolio\u2019s estimated fair value.
Where forward foreign currency contracts are within externally managed investment portfolios, they are disclosed as other investments.
Where they are managed directly by the Group, they are disclosed as either other receivables, or other payables, as appropriate.\u00a0
The notional amount of a derivative contract is the underlying quantity upon which payment obligations are calculated. A long position
is equivalent to buying the underlying currency, whereas a short position is equivalent to having sold the underlying currency.
The net (losses) gains on the Group\u2019s derivative financial instruments recognised in the consolidated statement of comprehensive
income are as follows:
For the year ended 31 December
2024
$m
2023
$m
Net foreign exchange (losses) gains on forward foreign currency contracts
(2.3)
1.9
The estimated fair values of the Group\u2019s derivative instruments are as follows:
2024
2023
As at 31 December
Other\u00a0
investments\u00a0
$m
Other\u00a0
receivables\u00a0
$m
Other
payables
$m
Other\u00a0
investments\u00a0
$m
Other\u00a0
receivables\u00a0
$m
Other
payables
$m
Forward foreign currency contracts
0.1
0.2
(0.4)
(0.1)
2.0
(0.7)
The Group has the following open forward foreign currency contracts:
2024
2023
As at 31 December
Notional\u00a0
long\u00a0
$m
Notional\u00a0
short\u00a0
$m
Net notional\u00a0
long (short)\u00a0
$m
Notional\u00a0
long\u00a0
$m
Notional
short
$m
Net notional\u00a0
long (short)\u00a0
$m
Canadian Dollar
\u2014
25.3
(25.3)
\u2014
28.7
(28.7)
Euro
31.6
2.3
29.3
49.0
3.6
45.4
Sterling
\u2014
0.5
(0.5)
77.8
0.7
77.1
Danish Krone
\u2014
0.2
(0.2)
\u2014
0.2
(0.2)
Total
31.6
28.3
3.3
126.8
33.2
93.6
III. Debt risk
Debt risk is the risk that the Group will not be able to service either the interest payment, or the principal repayment, amounts on its
external borrowings as they fall due. In 2021, the Group issued $450.0 million (in aggregate principal amount) of 5.625% fixed-rate reset
junior subordinated notes, repayable on 18 September 2041 (see note 18). The fixed interest rate will reset on 18 September 2031 at a
rate per annum equal to the prevailing five-year treasury rate, plus a credit spread of 4.08% and a 100 basis point step up.
The Group is exposed to interest rate risk in the future if prevailing rates at the time of reset are materially different from the existing
rates on the debt issue.
IV. Currency risk
Currency risk is the risk that movements in currency exchange rates have a detrimental financial impact on the Group. The Group
underwrites from multiple locations and risks are assumed on a worldwide basis. Risks assumed are predominantly denominated in US
dollars. The Group is exposed to currency risk to the extent its assets and liabilities are denominated in different currencies to its US
dollar reporting currency. The exchange gains and losses which arise on these assets and liabilities impact the consolidated statement
of comprehensive income.
The Group hedges monetary non-US dollar liabilities primarily with non-US dollar assets, but may also use derivatives to mitigate foreign
currency exposures. The Group's main foreign currency exposure relates to its insurance contract liabilities and reinsurance contract
assets, investments and cash and cash equivalents, and other monetary assets and liabilities. The Group uses forward foreign currency
contracts for the purposes of managing currency exposures. The Group\u2019s assets and liabilities, categorised by currency at their
translated carrying amount, are as follows:
Assets
US $\u00a0
$m
Sterling\u00a0
$m
Euro\u00a0
$m
Japanese Yen\u00a0
$m
Other\u00a0
$m
Total\u00a0
$m
Cash and cash equivalents
449.8
141.0
21.5
17.9
54.1
684.3
Accrued interest receivable
21.3
\u2014
0.4
\u2014
0.3
22.0
Investments
2,721.4
27.0
59.1
\u2014
57.4
2,864.9
Reinsurance contract assets
497.9
25.3
36.4
(0.2)
(2.2)
557.2
Other receivables
8.9
10.5
\u2014
\u2014
1.1
20.5
Investment in associate
9.1
\u2014
\u2014
\u2014
\u2014
9.1
Right-of-use assets
1.4
14.8
\u2014
\u2014
\u2014
16.2
Property, plant and equipment
0.8
7.9
\u2014
\u2014
\u2014
8.7
Intangible assets
153.8
43.2
\u2014
\u2014
\u2014
197.0
Total assets as at 31 December 2024
3,864.4
269.7
117.4
17.7
110.7
4,379.9
Liabilities
US $\u00a0
$m
Sterling\u00a0
$m
Euro\u00a0
$m
Japanese Yen\u00a0
$m
Other\u00a0
$m
Total\u00a0
$m
Insurance contract liabilities
1,948.7
117.5
129.0
15.6
89.6
2,300.4
Other payables
43.8
46.2
\u2014
\u2014
1.9
91.9
Corporation tax payable
(0.3)
3.0
\u2014
\u2014
\u2014
2.7
Deferred tax liability
11.3
11.2
\u2014
\u2014
(0.2)
22.3
Lease liabilities
1.4
20.8
\u2014
\u2014
0.1
22.3
Long-term debt
447.0
\u2014
\u2014
\u2014
\u2014
447.0
Total liabilities as at 31 December 2024
2,451.9
198.7
129.0
15.6
91.4
2,886.6
Assets
US $\u00a0
$m
Sterling\u00a0
$m
Euro
$m
Japanese Yen\u00a0
$m
Other\u00a0
$m
Total\u00a0
$m
Cash and cash equivalents
504.4
88.5
65.6
25.9
72.5
756.9
Accrued interest receivable
16.6
\u2014
\u2014
\u2014
0.1
16.7
Investments
2,404.9
3.1
0.2
\u2014
47.3
2,455.5
Reinsurance contract assets
340.6
20.8
27.2
\u2014
(0.8)
387.8
Other receivables
44.7
12.6
\u2014
\u2014
1.1
58.4
Investment in associate
16.2
\u2014
\u2014
\u2014
\u2014
16.2
Right-of-use assets
2.4
16.8
\u2014
\u2014
0.1
19.3
Property, plant and equipment
0.6
9.2
\u2014
\u2014
\u2014
9.8
Intangible assets
153.8
27.3
\u2014
\u2014
\u2014
181.1
Total assets as at 31 December 2023
3,484.2
178.3
93.0
25.9
120.3
3,901.7
Liabilities
US $\u00a0
$m
Sterling\u00a0
$m
Euro\u00a0
$m
Japanese Yen\u00a0
$m
Other\u00a0
$m
Total\u00a0
$m
Insurance contract liabilities
1,504.9
96.0
135.3
18.5
69.0
1,823.7
Other payables
28.7
50.6
\u2014
\u2014
1.3
80.6
Corporation tax payable
\u2014
2.0
\u2014
\u2014
\u2014
2.0
Deferred tax liability
9.9
6.3
\u2014
\u2014
\u2014
16.2
Lease liabilities
2.4
22.2
\u2014
\u2014
0.1
24.7
Long-term debt
446.6
\u2014
\u2014
\u2014
\u2014
446.6
Total liabilities as at 31 December 2023
1,992.5
177.1
135.3
18.5
70.4
2,393.8
The impact on net income of a proportional foreign exchange movement of 10.0% up and 10.0% down for the aggregated total of all
non-US dollar currencies against the US dollar, taken at the year-end spot rates, would be an increase or decrease of $1.5 million
(31 December 2023 \u2013 $3.1 million).
", "dimensions": { "concept": "ifrs-full:SensitivityAnalysisForEachTypeOfMarketRisk", "language": "en", "entity": "scheme:5493002UNUYXLHOWF752", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-235": { "value": "
B. Market risk
Market risk is the risk that decisions, movements, trends, or other factors in financial markets impact the Group in a way that is
financially detrimental. The main market risks include:
I. Insurance market risk;
II. Investment risk;
III. Debt risk; and
IV. Currency risk.
These risks, and the management thereof, are described below.
I. Insurance market risk
Insurance market risk is the risk that factors within either the global insurance market, or the relevant local insurance markets in which
the Group operates, have a detrimental financial impact on the Group. The Group is exposed to insurance market risk from several
sources, including the following:
\u2022 the advent or continuation of a soft market, which may result in a stabilisation or decline in premium rates and/or terms and
conditions for certain lines, or across all lines;
\u2022 the actions and reactions of key competitors, which may directly result in volatility in premium volumes and rates, fee levels and other
input costs;
\u2022 market events, including unusual inflation in rates, which may result in a limit in the availability of cover, resulting in political
intervention or national remedies;
\u2022 failure to maintain broker, binding authority and client relationships, leading to a limited or substandard choice of risks which are
inconsistent with the Group\u2019s risk appetite;
\u2022 changes in regulation including capital, governance or licensing requirements; and
\u2022 changes in the geopolitical environment.
The most important method to mitigate insurance market risk is to maintain strict underwriting standards. The Group manages
insurance market risk in numerous ways, including the following:
\u2022 reviews and amends underwriting plans and outlook as necessary;
\u2022 reduces exposure to market sectors where conditions have reached unattractive levels;
\u2022 purchases appropriate, cost-effective reinsurance cover to mitigate loss exposures;
\u2022 closely monitors changes in premium rates and terms and conditions;
\u2022 ensures through continuous regulatory capital management that it does not allow surplus capital to unduly influence underwriting
appetite;
\u2022 has a collegiate approach towards taking risk, with most authority requiring at least 4 eyes and pre-authorisation peer review;
\u2022 reviews all new and renewal business post-underwriting for LSL;
\u2022 reviews outputs from the economic capital models to assess up-to-date profitability of classes and sectors;
\u2022 holds a monthly RRC meeting to discuss risk and reinsurance;
\u2022 holds a quarterly UURC meeting to review underwriting strategy; and
\u2022 holds regular meetings with regulators.
II. Investment risk
Investment risk is the risk that movements, trends or other factors, within either public or private investment markets, have a detrimental
financial impact on the price of securities within the Group's investment portfolio. Movements in investments resulting from changes in
prices, interest rates, inflation rates, and currency exchange rates, amongst other factors, may lead to an adverse impact on the value of
the Group\u2019s investment portfolio.
Investment guidelines are established by the Investment Committee of the Board of Directors to manage this risk. Investment guidelines
set parameters within which the Group's external investment managers must operate. All of the Group's fixed income managers and the
majority of the private investment managers are signatories of the UNPRI, which approximates to 96.7% (31 December 2023 \u2013 96.7%) of
the Group's externally managed assets. Important parameters include guidelines on permissible asset classes, duration ranges, credit
quality, currency, maturity, sectors, geographical, sovereign and issuer exposures. Compliance with guidelines is monitored on a
monthly basis. Any adjustments to the investment guidelines are approved by the Investment Committee and the Board of Directors.
The Group's fixed maturity portfolios are managed by external investment managers. The Group also has a portfolio consisting of a
hedge fund, principal protected products, and private investment funds. The performance of the managers is monitored on an ongoing
basis.
During the period, the investment portfolio was restructured by merging the core and core plus categories due to their similar risk-
return profiles. This consolidation simplifies the investment strategy, enhances portfolio management, and optimises returns without
altering the overall risk exposure. The unified 'core' portfolio remains aligned with the company\u2019s long-term financial goals and risk
tolerance while the 'surplus' portfolio will aim for higher returns and greater diversification by investing in a wider array of assets with
higher risk-return profiles, such as high-yield securities, private investment funds, hedge funds, and equities.
Within the Group\u2019s investment guidelines are subsets of guidelines for the core portion of funds required to meet near-term obligations
and cash flow needs following an extreme event. These guidelines add further requirements, including reducing permitted asset classes,
higher credit quality, shorter duration, and higher liquidity. The primary objectives for this portion of assets are capital preservation and
providing liquidity to meet insurance and other near-term obligations. Alongside internally managed cash, the core portfolio holds funds
specifically allocated to cover potential liabilities, aligning their duration with that of the insurance liabilities within an agreed range. The
core portfolio is invested in fixed maturity securities, fixed maturity funds, and cash and cash equivalents. The core portfolio may, at
times, contain assets significantly in excess of those required to meet insurance liabilities or other defined funding needs.
Assets in excess of those required to be held in the core portfolio are typically held in the surplus portfolio. The surplus portfolio is
invested in fixed maturity securities, principal protected products, derivative instruments, cash and cash equivalents, private investment
funds, and hedge funds. In general, the duration of the surplus portfolio is slightly longer than the core portfolio.
The Group reviews the composition, duration and asset allocation of its investment portfolio on a regular basis to respond to changes in
interest rates and other market conditions. If certain asset classes are anticipated to produce a higher return within management\u2019s risk
tolerance, an adjustment in asset allocation may be made. Conversely, if the risk profile is expected to move outside of management's
risk tolerance levels, an adjustment to the asset allocation may be made to reduce the risks in the portfolio.
The investment portfolio is currently structured to perform similarly in risk-on and risk-off environments. The Group endeavours to limit
losses in risk-on, risk-off, and interest rate hike scenarios. The Group models various periods of significant stress to better understand
the investment portfolio\u2019s risks and exposures. The scenarios represent what could, and most likely will, occur (albeit not in the exact
form of the scenarios, which are based on historic periods of volatility). The Group also monitors the portfolio impact of more severe
disaster scenarios consisting of extreme shocks.
The Investment Committee oversees a strategic asset allocation study on a bi-annual basis, which assesses the Group's overall strategy
and seeks to determine if there is an alternative asset allocation to achieve the highest risk-adjusted return within our risk tolerances.
The IRRC meets quarterly to ensure that the Group\u2019s strategic and tactical investment actions are consistent with investment risk
preferences, appetite, risk and return objectives and tolerances. The IRRC also helps further develop the risk tolerances to be
incorporated into the ERM framework.
The investment mix of the Group's investment portfolio is as follows:
Core
Surplus
Total
As at 31 December 2024
$m
$m
$m
\u2022 Short-term investments
27.9
4.6
32.5
\u2022 Fixed maturity funds
23.1
\u2014
23.1
\u2022 US treasuries
382.8
127.1
509.9
\u2022 Other government bonds
31.5
33.8
65.3
\u2022 US municipal bonds
9.1
6.7
15.8
\u2022 US government agency debt
0.2
17.0
17.2
\u2022 Asset backed securities
81.6
190.1
271.7
\u2022 US government agency mortgage backed securities
181.3
145.2
326.5
\u2022 Non-agency mortgage backed securities
22.5
33.0
55.5
\u2022 Non-agency commercial mortgage backed securities
\u2014
20.5
20.5
\u2022 Bank loans
\u2014
153.4
153.4
\u2022 Corporate bonds
827.9
280.1
1,108.0
\u2022 Other fixed maturities
\u2014
4.4
4.4
Total fixed maturity securities
1,587.9
1,015.9
2,603.8
Private investment funds
\u2014
253.1
253.1
Hedge funds
\u2014
7.9
7.9
Other investments
\u2014
0.1
0.1
Total investments
1,587.9
1,277.0
2,864.9
Core
Surplus
Total
As at 31 December 2023
$m
$m
$m
\u2022 Short-term investments
20.7
53.2
73.9
\u2022 Fixed maturity funds
27.1
\u2014
27.1
\u2022 US treasuries
479.2
106.7
585.9
\u2022 Other government bonds
18.7
28.5
47.2
\u2022 US municipal bonds
10.1
3.4
13.5
\u2022 US government agency debt
6.3
50.8
57.1
\u2022 Asset backed securities
98.5
138.2
236.7
\u2022 US government agency mortgage backed securities
80.5
36.9
117.4
\u2022 Non-agency mortgage backed securities
0.6
10.9
11.5
\u2022 Non-agency commercial mortgage backed securities
\u2014
21.3
21.3
\u2022 Bank loans
\u2014
142.6
142.6
\u2022 Corporate bonds
675.5
260.9
936.4
\u2022 Other fixed maturities
\u2014
9.5
9.5
Total fixed maturity securities
1,417.2
862.9
2,280.1
Private investment funds
\u2014
165.6
165.6
Hedge funds
\u2014
9.9
9.9
Other investments
\u2014
(0.1)
(0.1)
Total investments
1,417.2
1,038.3
2,455.5
The concentration risk of the Group's fixed maturity securities by country and sector is as follows:
As at 31 December 2024
Financials\u00a0
$m
Industrial
$m
Utility\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
$m
Government &
Government
Agencies
$m
Structured1
$m
Other2
$m
Total\u00a0
$m
United States
316.3
635.5
12.6
869.3
138.5
27.3
1,999.5
Cayman Islands
\u2014
1.2
\u2014
\u2014
151.8
\u2014
153.0
Canada
37.0
17.4
\u2014
27.8
\u2014
\u2014
82.2
United Kingdom
41.5
20.2
\u2014
2.2
\u2014
\u2014
63.9
Jersey
\u2014
0.6
\u2014
\u2014
38.0
\u2014
38.6
France
22.9
2.7
\u2014
1.1
0.9
2.3
29.9
Japan
11.6
8.0
\u2014
\u2014
\u2014
\u2014
19.6
Bermuda
\u2014
\u2014
\u2014
1.7
16.7
\u2014
18.4
Netherlands
4.7
9.0
\u2014
0.1
\u2014
\u2014
13.8
India
3.1
5.1
0.5
3.5
\u2014
\u2014
12.2
Germany
3.2
8.5
\u2014
0.3
\u2014
\u2014
12.0
Spain
10.4
1.4
\u2014
\u2014
\u2014
\u2014
11.8
Chile
\u2014
2.8
2.4
3.6
\u2014
\u2014
8.8
Singapore
0.3
7.4
0.4
0.5
\u2014
\u2014
8.6
Luxembourg
0.6
7.2
\u2014
\u2014
\u2014
\u2014
7.8
Other
31.1
35.6
4.6
24.6
1.8
26.0
123.7
Total fixed maturity securities
482.7
762.6
20.5
934.7
347.7
55.6
2,603.8
1. Structured products excludes any Government structured products.
2. Other includes Lloyd's overseas deposits and short-term investments.
As at 31 December 2023
Financials\u00a0
$m
Industrial
$m
Utility\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
$m
Government &
Government
Agencies
$m
Structured1
$m
Other2
$m
Total\u00a0
$m
United States
270.6
523.2
18.7
773.5
123.9
20.3
1,730.2
United Kingdom
35.9
17.5
\u2014
1.6
0.3
50.0
105.3
Cayman Islands
\u2014
1.8
\u2014
\u2014
100.7
\u2014
102.5
Canada
26.0
16.2
0.5
18.0
\u2014
0.5
61.2
Jersey
\u2014
0.8
\u2014
\u2014
32.3
\u2014
33.1
France
25.2
2.5
\u2014
\u2014
2.2
\u2014
29.9
Japan
13.4
10.0
\u2014
\u2014
\u2014
\u2014
23.4
Netherlands
6.7
2.3
3.7
\u2014
\u2014
0.4
13.1
Mexico
3.4
6.8
0.4
1.3
\u2014
\u2014
11.9
Singapore
0.3
10.3
0.4
0.5
\u2014
\u2014
11.5
India
1.8
4.5
\u2014
2.9
\u2014
1.3
10.5
Germany
2.7
7.7
\u2014
\u2014
\u2014
\u2014
10.4
Switzerland
9.3
\u2014
\u2014
\u2014
\u2014
\u2014
9.3
Bermuda
\u2014
\u2014
\u2014
1.7
7.0
\u2014
8.7
Finland
8.3
\u2014
\u2014
\u2014
\u2014
\u2014
8.3
Other
23.8
29.5
4.3
21.6
3.1
28.5
110.8
Total fixed maturity securities
427.4
633.1
28.0
821.1
269.5
101.0
2,280.1
1. Structured products excludes any Government structured products.
2. Other includes Lloyd's overseas deposits and short-term investments.
The Group's net asset value is directly impacted by movements in the fair value of investments held. Fair values can be impacted by
movements in interest rates, credit ratings, exchange rates, the current economic environment and outlook.
Interest rate risk
(i) Investments
Interest rate risk is the risk that movements in market interest rates, which are typically correlated with the interest rates set by central
banks, have a detrimental financial impact on the value of the Group's assets and liabilities. The Group\u2019s investment portfolio is mainly
comprised of fixed maturity securities and cash and cash equivalents. Fixed maturity funds are overseas deposits held by the syndicates
in trust for the benefit of the policyholders in those overseas jurisdictions. They consist of high quality, short duration fixed maturity
securities. The fair value of the Group\u2019s fixed maturity portfolio is generally inversely correlated to movements in market interest rates. If
market interest rates fall, the fair value of the Group\u2019s fixed maturity securities would tend to rise, and vice versa.
The sensitivity of the price of fixed maturity securities, and certain derivatives, to movements in interest rates is indicated by their
duration. The greater a security\u2019s duration, the greater its price volatility to movements in interest rates. The sensitivity of the Group\u2019s
fixed maturity investment portfolio to interest rate movements is detailed below, assuming linear movements in interest rates:
2024
2023
As at 31 December
$m
%
$m
%
Immediate shift in yield (basis points)
100
(62.2)
(2.4)
(39.5)
(1.7)
75
(46.6)
(1.8)
(29.6)
(1.3)
50
(31.1)
(1.2)
(19.8)
(0.9)
25
(15.5)
(0.6)
(9.9)
(0.4)
(25)
13.7
0.5
10.0
0.4
(50)
27.5
1.1
20.0
0.9
(75)
41.2
1.6
29.9
1.3
(100)
54.9
2.1
39.9
1.8
The Group mitigates interest rate risk on the investment portfolio by establishing and monitoring duration ranges in its investment
guidelines. The Group may also manage interest rate risk through the use of interest rate futures and swaptions. The duration of the
core portfolio is matched to the modelled duration of the net insurance contract liabilities, within a permitted range. The permitted
duration range for the surplus portfolio is between one and five years.
The overall duration for fixed maturity securities, managed cash and cash equivalents is 2.0 years (31 December 2023 \u2013 1.6 years).
In addition to duration management, the Group monitors VaR to measure potential losses in the estimated fair values of its cash and
invested assets and to understand and monitor risk. The VaR calculation is performed using variance/covariance risk modelling to
capture the cash flows and embedded optionality of the investment portfolio. Securities are valued individually using standard market
pricing models. These security valuations serve as the input to risk analytics, including full valuation risk analyses, as well as parametric
methods that rely on option-adjusted risk sensitivities to approximate the risk and return profiles of the portfolio.
The principal VaR measure that is produced is an annual VaR at the 99th percentile confidence level. Under normal conditions, the
investment portfolio value is not expected to decrease more than the VaR metric listed in the table below 99% of the time over a one-
year time horizon. The appropriateness of this measure is considered by the Investment Committee on behalf of the Board of Directors
on an annual basis.
The Group\u2019s annual VaR calculations are as follows:
2024
2023
As at 31 December
$m
% of shareholders'
equity
$m
% of shareholders'
equity
99th percentile confidence level1
157.8
10.6
110.0
7.3
1. Including the impact of internal foreign exchange hedges.
(ii) Discounting approach on LIC and AIC
The Group's LIC and AIC are discounted on initial recognition and re-measured to current interest rates at each quarter end date, and
are therefore sensitive to changes in market interest rates.
The Group applies the bottom-up approach when deriving its rates for discounting the LIC and AIC. This approach requires the use of
an appropriate (liquid) risk-free yield curve, plus a specific illiquidity premium above the risk-free yield curve to represent the reduced
liquidity of the insurance contract cash flows compared to the observable risk-free rates. The risk-free yields and illiquidity premium are
derived using reference data supplied by third parties with management judgement applied where appropriate, in particular in the
derivation of the illiquidity premium, which is informed by the implied illiquidity premium of a representative portfolio of corporate
bonds determined using the top-down method.
The following table sets out the one, three, five and seven-year yield curves (risk-free rate plus illiquidity premium) used to discount the
cash flows of insurance contracts issued and reinsurance contracts held for the Group's major currencies:
2024
2023
As at 31 December
1 year
3 years
5 years
7 years
1 year
3 years
5 years
7 years
USD
4.78%
4.88%
4.98%
5.07%
5.33%
4.40%
4.29%
4.34%
GBP
5.06%
4.98%
4.97%
5.03%
5.31%
4.34%
4.14%
4.16%
EUR
2.93%
3.02%
3.18%
3.31%
4.03%
3.21%
3.21%
3.33%
CAD
3.48%
3.54%
3.68%
3.84%
5.23%
4.51%
4.25%
4.27%
JPY
1.12%
1.52%
1.71%
1.88%
0.65%
0.96%
1.24%
1.52%
ZAR
8.25%
8.44%
8.97%
9.63%
8.92%
8.63%
9.15%
9.86%
AUD
4.65%
4.74%
5.03%
5.26%
4.77%
4.55%
4.76%
4.99%
The following table presents information on how reasonably possible changes in the yield curve could impact the valuation of the net
insurance contract liabilities, profit after tax and shareholders' equity. Under the PAA, and given the current amount of the Group's loss
component, only the LIC component of insurance contract liabilities and the AIC component of reinsurance contract assets are
sensitive to possible changes in insurance risk and interest rate risk variables.
LIC as at
31 December 2024\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
$m
Impact on profit after
tax and shareholders'
equity\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
$m
LIC as at
31 December 2023
$m
Impact on profit after
tax and shareholders'
equity\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
$m
Insurance contract liabilities
2,237.7
1,765.9
Reinsurance contracts assets
(608.5)
(430.3)
Net insurance contract liabilities
1,629.2
1,335.6
1% increase in yield curves
Insurance contract liabilities
2,195.6
37.9
1,733.3
28.9
Reinsurance contract assets
(600.6)
(6.7)
(422.3)
(6.7)
Net insurance contract liabilities
1,595.0
31.2
1,311.0
22.2
The analysis is based on a change in an assumption while holding all other assumptions constant. In practice, this is unlikely to occur,
and changes in some of the assumptions may be correlated.
Price risk
Price risk is the risk that the fair value of the Group's investment portfolio will fluctuate because of changes in market prices (other than
those arising from interest rate or foreign exchange rate risk), whether those changes are caused by factors specific to the individual
investment or other market factors.
The Group's price risk exposure relates to private investment funds and hedge funds. Listed investments that are quoted in an active
market are recognised at quoted bid price, which is deemed to be the approximate exit price. If the market for the investment is not
considered to be active, then the Group establishes fair value using valuation techniques (refer to note 11). This includes comparison to
comparable orderly transactions between active market participants, reference to benchmarks or other indices to assess
reasonableness, and other valuation techniques that are commonly used by market participants.
A 10% asset price decrease at 31 December 2024 would reduce the value of our private investment funds and hedge funds by
approximately $26.1 million (31 December 2023 \u2013 $17.6 million).
Derivative financial instruments
The Group\u2019s investment guidelines permit the investment managers to utilise forward foreign currency contracts to manage foreign
currency exposure. These positions are monitored regularly. The Group may also use OTC or exchange-traded managed derivatives to
mitigate interest rate risk and foreign currency exposures. The Group principally has exposure to derivatives related to the following
types of risks: interest rate risk, foreign currency risk, and credit risk.
\u00a0 \u00a0 Forward foreign currency contracts
A forward foreign currency contract is a commitment to purchase or sell a foreign currency at a future date, at a defined rate. The
Group may utilise forward foreign currency contracts to gain exposure to a certain currency or market rate, to manage the impact of
fluctuations in foreign currencies on the value of its foreign currency denominated investments, debt, insurance-related currency
exposures and/or expenses.
Forward contracts expose the Group to credit, market and liquidity risks. Credit risk arises from the potential inability of counterparties
to perform under the terms of the contract. The Group is exposed to market risk to the extent that adverse changes occur in the
exchange rate of the underlying foreign currency. Liquidity risk represents the possibility that the Group may not be able to rapidly
adjust the size of its forward positions at a reasonable price in times of high volatility and financial stress. These risks are mitigated by
requiring a minimum counterparty credit quality, restricting the maximum notional exposure as a percentage of the investment
portfolio\u2019s estimated fair value, and restricting exposures to foreign currencies, individually and in aggregate, as a percentage of the
investment portfolio\u2019s estimated fair value.
Where forward foreign currency contracts are within externally managed investment portfolios, they are disclosed as other investments.
Where they are managed directly by the Group, they are disclosed as either other receivables, or other payables, as appropriate.\u00a0
The notional amount of a derivative contract is the underlying quantity upon which payment obligations are calculated. A long position
is equivalent to buying the underlying currency, whereas a short position is equivalent to having sold the underlying currency.
The net (losses) gains on the Group\u2019s derivative financial instruments recognised in the consolidated statement of comprehensive
income are as follows:
For the year ended 31 December
2024
$m
2023
$m
Net foreign exchange (losses) gains on forward foreign currency contracts
(2.3)
1.9
The estimated fair values of the Group\u2019s derivative instruments are as follows:
2024
2023
As at 31 December
Other\u00a0
investments\u00a0
$m
Other\u00a0
receivables\u00a0
$m
Other
payables
$m
Other\u00a0
investments\u00a0
$m
Other\u00a0
receivables\u00a0
$m
Other
payables
$m
Forward foreign currency contracts
0.1
0.2
(0.4)
(0.1)
2.0
(0.7)
The Group has the following open forward foreign currency contracts:
2024
2023
As at 31 December
Notional\u00a0
long\u00a0
$m
Notional\u00a0
short\u00a0
$m
Net notional\u00a0
long (short)\u00a0
$m
Notional\u00a0
long\u00a0
$m
Notional
short
$m
Net notional\u00a0
long (short)\u00a0
$m
Canadian Dollar
\u2014
25.3
(25.3)
\u2014
28.7
(28.7)
Euro
31.6
2.3
29.3
49.0
3.6
45.4
Sterling
\u2014
0.5
(0.5)
77.8
0.7
77.1
Danish Krone
\u2014
0.2
(0.2)
\u2014
0.2
(0.2)
Total
31.6
28.3
3.3
126.8
33.2
93.6
III. Debt risk
Debt risk is the risk that the Group will not be able to service either the interest payment, or the principal repayment, amounts on its
external borrowings as they fall due. In 2021, the Group issued $450.0 million (in aggregate principal amount) of 5.625% fixed-rate reset
junior subordinated notes, repayable on 18 September 2041 (see note 18). The fixed interest rate will reset on 18 September 2031 at a
rate per annum equal to the prevailing five-year treasury rate, plus a credit spread of 4.08% and a 100 basis point step up.
The Group is exposed to interest rate risk in the future if prevailing rates at the time of reset are materially different from the existing
rates on the debt issue.
IV. Currency risk
Currency risk is the risk that movements in currency exchange rates have a detrimental financial impact on the Group. The Group
underwrites from multiple locations and risks are assumed on a worldwide basis. Risks assumed are predominantly denominated in US
dollars. The Group is exposed to currency risk to the extent its assets and liabilities are denominated in different currencies to its US
dollar reporting currency. The exchange gains and losses which arise on these assets and liabilities impact the consolidated statement
of comprehensive income.
The Group hedges monetary non-US dollar liabilities primarily with non-US dollar assets, but may also use derivatives to mitigate foreign
currency exposures. The Group's main foreign currency exposure relates to its insurance contract liabilities and reinsurance contract
assets, investments and cash and cash equivalents, and other monetary assets and liabilities. The Group uses forward foreign currency
contracts for the purposes of managing currency exposures. The Group\u2019s assets and liabilities, categorised by currency at their
translated carrying amount, are as follows:
Assets
US $\u00a0
$m
Sterling\u00a0
$m
Euro\u00a0
$m
Japanese Yen\u00a0
$m
Other\u00a0
$m
Total\u00a0
$m
Cash and cash equivalents
449.8
141.0
21.5
17.9
54.1
684.3
Accrued interest receivable
21.3
\u2014
0.4
\u2014
0.3
22.0
Investments
2,721.4
27.0
59.1
\u2014
57.4
2,864.9
Reinsurance contract assets
497.9
25.3
36.4
(0.2)
(2.2)
557.2
Other receivables
8.9
10.5
\u2014
\u2014
1.1
20.5
Investment in associate
9.1
\u2014
\u2014
\u2014
\u2014
9.1
Right-of-use assets
1.4
14.8
\u2014
\u2014
\u2014
16.2
Property, plant and equipment
0.8
7.9
\u2014
\u2014
\u2014
8.7
Intangible assets
153.8
43.2
\u2014
\u2014
\u2014
197.0
Total assets as at 31 December 2024
3,864.4
269.7
117.4
17.7
110.7
4,379.9
Liabilities
US $\u00a0
$m
Sterling\u00a0
$m
Euro\u00a0
$m
Japanese Yen\u00a0
$m
Other\u00a0
$m
Total\u00a0
$m
Insurance contract liabilities
1,948.7
117.5
129.0
15.6
89.6
2,300.4
Other payables
43.8
46.2
\u2014
\u2014
1.9
91.9
Corporation tax payable
(0.3)
3.0
\u2014
\u2014
\u2014
2.7
Deferred tax liability
11.3
11.2
\u2014
\u2014
(0.2)
22.3
Lease liabilities
1.4
20.8
\u2014
\u2014
0.1
22.3
Long-term debt
447.0
\u2014
\u2014
\u2014
\u2014
447.0
Total liabilities as at 31 December 2024
2,451.9
198.7
129.0
15.6
91.4
2,886.6
Assets
US $\u00a0
$m
Sterling\u00a0
$m
Euro
$m
Japanese Yen\u00a0
$m
Other\u00a0
$m
Total\u00a0
$m
Cash and cash equivalents
504.4
88.5
65.6
25.9
72.5
756.9
Accrued interest receivable
16.6
\u2014
\u2014
\u2014
0.1
16.7
Investments
2,404.9
3.1
0.2
\u2014
47.3
2,455.5
Reinsurance contract assets
340.6
20.8
27.2
\u2014
(0.8)
387.8
Other receivables
44.7
12.6
\u2014
\u2014
1.1
58.4
Investment in associate
16.2
\u2014
\u2014
\u2014
\u2014
16.2
Right-of-use assets
2.4
16.8
\u2014
\u2014
0.1
19.3
Property, plant and equipment
0.6
9.2
\u2014
\u2014
\u2014
9.8
Intangible assets
153.8
27.3
\u2014
\u2014
\u2014
181.1
Total assets as at 31 December 2023
3,484.2
178.3
93.0
25.9
120.3
3,901.7
Liabilities
US $\u00a0
$m
Sterling\u00a0
$m
Euro\u00a0
$m
Japanese Yen\u00a0
$m
Other\u00a0
$m
Total\u00a0
$m
Insurance contract liabilities
1,504.9
96.0
135.3
18.5
69.0
1,823.7
Other payables
28.7
50.6
\u2014
\u2014
1.3
80.6
Corporation tax payable
\u2014
2.0
\u2014
\u2014
\u2014
2.0
Deferred tax liability
9.9
6.3
\u2014
\u2014
\u2014
16.2
Lease liabilities
2.4
22.2
\u2014
\u2014
0.1
24.7
Long-term debt
446.6
\u2014
\u2014
\u2014
\u2014
446.6
Total liabilities as at 31 December 2023
1,992.5
177.1
135.3
18.5
70.4
2,393.8
The impact on net income of a proportional foreign exchange movement of 10.0% up and 10.0% down for the aggregated total of all
non-US dollar currencies against the US dollar, taken at the year-end spot rates, would be an increase or decrease of $1.5 million
(31 December 2023 \u2013 $3.1 million).
", "dimensions": { "concept": "ifrs-full:DisclosureOfMarketRiskExplanatory", "language": "en", "entity": "scheme:5493002UNUYXLHOWF752", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-237": { "value": "
Derivative financial instruments
The Group\u2019s investment guidelines permit the investment managers to utilise forward foreign currency contracts to manage foreign
currency exposure. These positions are monitored regularly. The Group may also use OTC or exchange-traded managed derivatives to
mitigate interest rate risk and foreign currency exposures. The Group principally has exposure to derivatives related to the following
types of risks: interest rate risk, foreign currency risk, and credit risk.
\u00a0 \u00a0 Forward foreign currency contracts
A forward foreign currency contract is a commitment to purchase or sell a foreign currency at a future date, at a defined rate. The
Group may utilise forward foreign currency contracts to gain exposure to a certain currency or market rate, to manage the impact of
fluctuations in foreign currencies on the value of its foreign currency denominated investments, debt, insurance-related currency
exposures and/or expenses.
Forward contracts expose the Group to credit, market and liquidity risks. Credit risk arises from the potential inability of counterparties
to perform under the terms of the contract. The Group is exposed to market risk to the extent that adverse changes occur in the
exchange rate of the underlying foreign currency. Liquidity risk represents the possibility that the Group may not be able to rapidly
adjust the size of its forward positions at a reasonable price in times of high volatility and financial stress. These risks are mitigated by
requiring a minimum counterparty credit quality, restricting the maximum notional exposure as a percentage of the investment
portfolio\u2019s estimated fair value, and restricting exposures to foreign currencies, individually and in aggregate, as a percentage of the
investment portfolio\u2019s estimated fair value.
Where forward foreign currency contracts are within externally managed investment portfolios, they are disclosed as other investments.
Where they are managed directly by the Group, they are disclosed as either other receivables, or other payables, as appropriate.\u00a0
The notional amount of a derivative contract is the underlying quantity upon which payment obligations are calculated. A long position
is equivalent to buying the underlying currency, whereas a short position is equivalent to having sold the underlying currency.
The net (losses) gains on the Group\u2019s derivative financial instruments recognised in the consolidated statement of comprehensive
income are as follows:
For the year ended 31 December
2024
$m
2023
$m
Net foreign exchange (losses) gains on forward foreign currency contracts
(2.3)
1.9
The estimated fair values of the Group\u2019s derivative instruments are as follows:
2024
2023
As at 31 December
Other\u00a0
investments\u00a0
$m
Other\u00a0
receivables\u00a0
$m
Other
payables
$m
Other\u00a0
investments\u00a0
$m
Other\u00a0
receivables\u00a0
$m
Other
payables
$m
Forward foreign currency contracts
0.1
0.2
(0.4)
(0.1)
2.0
(0.7)
The Group has the following open forward foreign currency contracts:
2024
2023
As at 31 December
Notional\u00a0
long\u00a0
$m
Notional\u00a0
short\u00a0
$m
Net notional\u00a0
long (short)\u00a0
$m
Notional\u00a0
long\u00a0
$m
Notional
short
$m
Net notional\u00a0
long (short)\u00a0
$m
Canadian Dollar
\u2014
25.3
(25.3)
\u2014
28.7
(28.7)
Euro
31.6
2.3
29.3
49.0
3.6
45.4
Sterling
\u2014
0.5
(0.5)
77.8
0.7
77.1
Danish Krone
\u2014
0.2
(0.2)
\u2014
0.2
(0.2)
Total
31.6
28.3
3.3
126.8
33.2
93.6
", "dimensions": { "concept": "ifrs-full:DisclosureOfDerivativeFinancialInstrumentsExplanatory", "language": "en", "entity": "scheme:5493002UNUYXLHOWF752", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-239": { "value": "
C. Liquidity risk
Liquidity risk is the risk that cash may not be available to pay obligations when they are due without incurring an unreasonable cost. The
Group's main exposures to liquidity risk are with respect to its insurance, investment, and operational activities. The Group is exposed to
such risk if proceeds from financial assets are not sufficient to fund obligations arising from its insurance contracts issued. The Group
can be exposed to daily calls on its available investment assets, principally to settle insurance claims and to fund trust accounts
following a large catastrophe loss.
Exposures in relation to insurance activities are as follows:
\u2022 large catastrophic events, or multiple medium-sized events in quick succession, resulting in a requirement to pay a large value of
claims within a relatively short time frame, or to fund trust accounts;
\u2022 failure of insureds or cedants to meet their contractual obligations with respect to the payment of premiums in a timely manner; and
\u2022 failure of reinsurers to meet their contractual obligations with respect to the payment of claims in a timely manner.
Exposures in relation to investment activities are as follows:
\u2022 adverse market movements and/or a duration mismatch to obligations, resulting in investments being disposed of at a significant
realised loss; and
\u2022 an inability to liquidate investments due to market conditions.
The maturity dates of the Group\u2019s fixed maturity portfolio are as follows:
2024
2023
As at 31 December
Core
$m
Surplus
$m
Total\u00a0
$m
Core
$m
Surplus
$m
Total\u00a0
$m
Less than one year
255.3
39.7
295.0
377.5
116.4
493.9
Between one and two years
346.1
77.3
423.4
295.7
123.5
419.2
Between two and three years
263.7
67.9
331.6
285.1
106.9
392.0
Between three and four years
195.5
120.4
315.9
90.7
73.3
164.0
Between four and five years
80.7
88.9
169.6
139.2
105.1
244.3
Over five years
161.2
232.9
394.1
49.4
130.4
179.8
Asset backed and mortgage backed securities
285.4
388.8
674.2
179.6
207.3
386.9
Total fixed maturity securities
1,587.9
1,015.9
2,603.8
1,417.2
862.9
2,280.1
The maturity profile of the insurance contracts issued and financial liabilities of the Group is as follows:
Years until liability becomes due - undiscounted values
As at 31 December 2024
Statement of
financial position\u00a0
$m
Less than one\u00a0
$m
One to three\u00a0
$m
Three to five\u00a0
$m
Over five\u00a0
$m
Total\u00a0
$m
Liabilities
Insurance contract liabilities1
2,300.4
1,017.5
861.4
342.0
248.8
2,469.7
Other payables
91.9
91.9
\u2014
\u2014
\u2014
91.9
Lease liabilities
22.3
5.8
7.4
7.2
5.8
26.2
Long-term debt2
447.0
25.3
50.6
50.6
500.6
627.1
Total
2,861.6
1,140.5
919.4
399.8
755.2
3,214.9
1. Since the Group applies the PAA model for all insurance contracts issued, the maturity profile represents only the liability for incurred claims, and has
been presented on an undiscounted basis.
2. The maturity profile of long-term debt includes accrued interest.
Years until liability becomes due - undiscounted values
As at 31 December 2023
Statement of
financial position
$m
Less than one\u00a0
$m
One to three\u00a0
$m
Three to five\u00a0
$m
Over five\u00a0
$m
Total\u00a0
$m
Liabilities
Insurance contract liabilities1
1,823.7
795.3
705.7
263.5
166.9
1,931.4
Other payables
80.6
80.6
\u2014
\u2014
\u2014
80.6
Lease liabilities
24.7
4.5
8.7
7.2
9.5
29.9
Long-term debt2
446.6
25.3
50.6
50.6
525.9
652.4
Total
2,375.6
905.7
765.0
321.3
702.3
2,694.3
1. Since the Group applies the PAA model for all insurance contracts issued, the maturity profile represents only the liability for incurred claims, and has
been presented on an undiscounted basis.
2. The maturity profile of long-term debt includes accrued interest.
Within the tables shown above, the insurance contract liabilities balance discloses the period when the claims in respect of insurance
contracts issued by the Group are expected to be settled. All other liability balances within the table disclose the earliest period in which
the relevant counterparty could contractually require the Group to make payment. Actual maturities of the above may differ from
contractual maturities because certain counterparties have the right to call or prepay certain obligations with or without call or
prepayment penalties.
While the estimation of future cash flows in relation to ultimate claims settlement is complex and incorporates a significant amount of
judgement, the timing of the payment of claims is also uncertain and cannot be predicted as simply as for other financial liabilities.
Actuarial and statistical techniques, past experience, and management's judgement have been used to determine a likely settlement
pattern based on the earliest period in which the Group could be required by the relevant counterparty to make payment. There are no
amounts contained within the insurance contract liabilities or reinsurance contract assets as at 31 December 2024 (31 December 2023
\u2013 none) that are payable on demand.
As at 31 December 2024, cash and cash equivalents were $684.3 million (31 December 2023 \u2013 $756.9 million). The Group manages its
liquidity risks through its investment strategy to hold high quality, liquid securities, sufficient to meet its insurance liabilities and other
near-term liquidity requirements. The core portfolio, with its subset of guidelines, aims to ensure funds are readily available to meet
potential insurance liabilities, plus other liquidity requirements, in an extreme event. In addition, the Group has established asset
allocation and duration parameters within the investment guidelines, such that the majority of the investments are in high-quality assets
which could be converted into cash promptly and at minimal expense. The Group monitors market changes and outlook, and
reallocates assets as deemed necessary.
As at 31 December 2024, the Group considers that it has more than adequate liquidity to pay its obligations as they fall due.
", "dimensions": { "concept": "ifrs-full:DescriptionOfManagingLiquidityRisk", "language": "en", "entity": "scheme:5493002UNUYXLHOWF752", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-238": { "value": "
C. Liquidity risk
Liquidity risk is the risk that cash may not be available to pay obligations when they are due without incurring an unreasonable cost. The
Group's main exposures to liquidity risk are with respect to its insurance, investment, and operational activities. The Group is exposed to
such risk if proceeds from financial assets are not sufficient to fund obligations arising from its insurance contracts issued. The Group
can be exposed to daily calls on its available investment assets, principally to settle insurance claims and to fund trust accounts
following a large catastrophe loss.
Exposures in relation to insurance activities are as follows:
\u2022 large catastrophic events, or multiple medium-sized events in quick succession, resulting in a requirement to pay a large value of
claims within a relatively short time frame, or to fund trust accounts;
\u2022 failure of insureds or cedants to meet their contractual obligations with respect to the payment of premiums in a timely manner; and
\u2022 failure of reinsurers to meet their contractual obligations with respect to the payment of claims in a timely manner.
Exposures in relation to investment activities are as follows:
\u2022 adverse market movements and/or a duration mismatch to obligations, resulting in investments being disposed of at a significant
realised loss; and
\u2022 an inability to liquidate investments due to market conditions.
The maturity dates of the Group\u2019s fixed maturity portfolio are as follows:
2024
2023
As at 31 December
Core
$m
Surplus
$m
Total\u00a0
$m
Core
$m
Surplus
$m
Total\u00a0
$m
Less than one year
255.3
39.7
295.0
377.5
116.4
493.9
Between one and two years
346.1
77.3
423.4
295.7
123.5
419.2
Between two and three years
263.7
67.9
331.6
285.1
106.9
392.0
Between three and four years
195.5
120.4
315.9
90.7
73.3
164.0
Between four and five years
80.7
88.9
169.6
139.2
105.1
244.3
Over five years
161.2
232.9
394.1
49.4
130.4
179.8
Asset backed and mortgage backed securities
285.4
388.8
674.2
179.6
207.3
386.9
Total fixed maturity securities
1,587.9
1,015.9
2,603.8
1,417.2
862.9
2,280.1
The maturity profile of the insurance contracts issued and financial liabilities of the Group is as follows:
Years until liability becomes due - undiscounted values
As at 31 December 2024
Statement of
financial position\u00a0
$m
Less than one\u00a0
$m
One to three\u00a0
$m
Three to five\u00a0
$m
Over five\u00a0
$m
Total\u00a0
$m
Liabilities
Insurance contract liabilities1
2,300.4
1,017.5
861.4
342.0
248.8
2,469.7
Other payables
91.9
91.9
\u2014
\u2014
\u2014
91.9
Lease liabilities
22.3
5.8
7.4
7.2
5.8
26.2
Long-term debt2
447.0
25.3
50.6
50.6
500.6
627.1
Total
2,861.6
1,140.5
919.4
399.8
755.2
3,214.9
1. Since the Group applies the PAA model for all insurance contracts issued, the maturity profile represents only the liability for incurred claims, and has
been presented on an undiscounted basis.
2. The maturity profile of long-term debt includes accrued interest.
Years until liability becomes due - undiscounted values
As at 31 December 2023
Statement of
financial position
$m
Less than one\u00a0
$m
One to three\u00a0
$m
Three to five\u00a0
$m
Over five\u00a0
$m
Total\u00a0
$m
Liabilities
Insurance contract liabilities1
1,823.7
795.3
705.7
263.5
166.9
1,931.4
Other payables
80.6
80.6
\u2014
\u2014
\u2014
80.6
Lease liabilities
24.7
4.5
8.7
7.2
9.5
29.9
Long-term debt2
446.6
25.3
50.6
50.6
525.9
652.4
Total
2,375.6
905.7
765.0
321.3
702.3
2,694.3
1. Since the Group applies the PAA model for all insurance contracts issued, the maturity profile represents only the liability for incurred claims, and has
been presented on an undiscounted basis.
2. The maturity profile of long-term debt includes accrued interest.
Within the tables shown above, the insurance contract liabilities balance discloses the period when the claims in respect of insurance
contracts issued by the Group are expected to be settled. All other liability balances within the table disclose the earliest period in which
the relevant counterparty could contractually require the Group to make payment. Actual maturities of the above may differ from
contractual maturities because certain counterparties have the right to call or prepay certain obligations with or without call or
prepayment penalties.
While the estimation of future cash flows in relation to ultimate claims settlement is complex and incorporates a significant amount of
judgement, the timing of the payment of claims is also uncertain and cannot be predicted as simply as for other financial liabilities.
Actuarial and statistical techniques, past experience, and management's judgement have been used to determine a likely settlement
pattern based on the earliest period in which the Group could be required by the relevant counterparty to make payment. There are no
amounts contained within the insurance contract liabilities or reinsurance contract assets as at 31 December 2024 (31 December 2023
\u2013 none) that are payable on demand.
As at 31 December 2024, cash and cash equivalents were $684.3 million (31 December 2023 \u2013 $756.9 million). The Group manages its
liquidity risks through its investment strategy to hold high quality, liquid securities, sufficient to meet its insurance liabilities and other
near-term liquidity requirements. The core portfolio, with its subset of guidelines, aims to ensure funds are readily available to meet
potential insurance liabilities, plus other liquidity requirements, in an extreme event. In addition, the Group has established asset
allocation and duration parameters within the investment guidelines, such that the majority of the investments are in high-quality assets
which could be converted into cash promptly and at minimal expense. The Group monitors market changes and outlook, and
reallocates assets as deemed necessary.
As at 31 December 2024, the Group considers that it has more than adequate liquidity to pay its obligations as they fall due.
", "dimensions": { "concept": "ifrs-full:DisclosureOfLiquidityRiskExplanatory", "language": "en", "entity": "scheme:5493002UNUYXLHOWF752", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-240": { "value": "
D. Credit risk
Credit risk is the risk that a counterparty may fail to pay, or repay, a debt or obligation.
The Group is exposed to credit risk in respect of its fixed maturity investment portfolio, cash and cash equivalents, accrued interest
receivable, derivative financial instruments, amounts recoverable from reinsurers within reinsurance contract assets, amounts receivable
from insureds and cedants included within insurance contract liabilities, and other receivables.
Credit risk on the fixed maturity portfolio is mitigated through the Group\u2019s policy to invest in instruments of high credit quality issuers,
and to limit the amounts of credit exposure with respect to particular ratings categories and any one issuer. Securities rated below an
S&P or equivalent rating of BBB-/Baa3 may comprise no more than 15.0% of total market value of the fixed maturity portfolio. In
addition, no one issuer, with the exception of US government and agency securities, other G10 government guaranteed securities
(excluding Italy), and Australian sovereign debt, should exceed 5.0% of total market value of the fixed maturity portfolio. The Group is
therefore not exposed to any significant credit concentration risk on either its fixed maturity investment portfolio, or cash and cash
equivalents, except for fixed maturity securities issued by the US government and government agencies, and other highly-rated
governments.
Credit risk on insurance contract cash flows from insureds and cedants is managed by conducting business with reputable broking
organisations, with whom the Group has established relationships, and by rigorous cash collection procedures. The Group also has a
broker approval process in place. Binding authorities are subject to standard market controls, including credit control. Credit risk from
reinsurance contract cash flows is primarily managed by the review and approval of reinsurer security, as discussed on page 139.
Reinsurance contracts held in the table below represent the credit exposed components of reinsurance contract assets. These have
been presented on an undiscounted basis, and represent the maximum exposure to credit risk considering the Group's ability to offset
balances, where applicable, under the relevant reinsurance contracts held.
The table below presents an analysis of the Group\u2019s maximum exposures to counterparty credit risk, based on their rating:
2024
2023
As at 31 December
Cash and cash
equivalents
$m
Fixed maturity
securities\u00a0
$m
Credit exposed
component of
reinsurance\u00a0
contracts held\u00a0
$m
Cash and cash
equivalents
$m
Fixed maturity
securities\u00a0
$m
Credit exposed
component of
reinsurance\u00a0
contracts held\u00a0
$m
AAA
487.9
265.0
\u2014
463.2
246.9
\u2014
AA+, AA, AA-
\u2014
1,073.0
1.8
2.9
931.8
3.6
A+, A, A-
195.9
748.8
593.7
285.7
587.1
410.3
BBB+, BBB, BBB-
0.5
360.2
1.0
5.1
372.4
2.2
Other1
\u2014
156.8
41.6
\u2014
141.9
51.9
Total
684.3
2,603.8
638.1
756.9
2,280.1
468.0
1. Reinsurance contracts held classified as 'other' include $32.1 million as at 31 December 2024 (2023 \u2013 $43.4 million) which are fully collateralised.
Reinsurance is ceded across all geographic regions in which the Group operates. The Group does not have a significant concentration
of credit risk with any single reinsurer.
The Group's maximum exposure to credit risk arising from insurance contracts issued is $777.5 million (31 December 2023 \u2013 $747.1
million), which relates to the elements of the insurance contract liabilities balance which are considered to be exposed to credit risk,
specifically, premium receivables and reinstatement premium receivables, net of profit commissions payable on inwards reinsurance
business.
ECL have been determined to be immaterial as at 31 December 2024 and 31 December 2023.
", "dimensions": { "concept": "ifrs-full:DisclosureOfCreditRiskExplanatory", "language": "en", "entity": "scheme:5493002UNUYXLHOWF752", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-241": { "value": "ECL have been determined to be immaterial as at 31 December 2024 and 31 December 2023", "dimensions": { "concept": "ifrs-full:DisclosureOfAllowanceForCreditLossesExplanatory", "language": "en", "entity": "scheme:5493002UNUYXLHOWF752", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-242": { "value": "
E. Operational risk
Operational risk is the risk of loss resulting from inadequate or failed internal processes, personnel, systems, or non-insurance external
events. The Group and its subsidiaries have identified and evaluated their key operational risks, and these are incorporated in the risk
registers and modelled within the subsidiaries' capital models. The Group has also established, and monitors compliance with, internal
operational risk tolerances. The RRC reviews operational risk on at least an annual basis and operational risk is covered in the Group
CRO's quarterly ORSA report to the LHL Board of Directors, entity level boards, and in the LSL RCC reporting.
To manage operational risks, the Group has implemented a robust governance framework. Policies and procedures are documented
and identify the key risks and controls within processes. Key risk indicators have been established and are monitored on a regular basis,
and a formal loss event and near-miss reporting process has been implemented. The risk management function facilitates a quarterly
risk and control affirmation process and performs detailed control testing, the outcomes of which inform the CRO's quarterly opinion of
the overall control environment. The Group's internal audit function provides independent feedback with regard to the accuracy and
completeness of key risks and controls, and independently verifies the effective operation of these through sample testing. All higher
risk areas are subject to an annual audit, while compliance with tax operating guidelines is reviewed quarterly. Frequency of
consideration for audit for all other areas varies from quarterly at the most frequent, to a minimum of once every four years, on a
rotational basis.
It is widely recognised that the current increasing geopolitical risks have also increased the risk of cyber attacks. Whilst the Group does
not write standalone cyber as a separate class of business, it does have some limited exposure within broader policy coverage of
existing classes of business. The Group's main exposure comes from the operational risk of suffering a cyber attack on its systems, the
resultant downtime of systems, the expense in getting back up and running and the potential for missed business opportunities during
the downtime.
To mitigate this risk, the Group has established an information security function which works with a specialist third-party to identify,
assess, monitor and manage cyber risk. A robust cyber risk framework has been developed, this includes a range of key risk and
performance indicators which are monitored and reported against regularly.\u00a0 A cyber incident response plan has been developed and is
tested on an annual basis.
The operational cyber risk that comes with employees working from home is managed through enhanced monitoring of network
activity, targeted staff training, a quarterly risk and control affirmation process, annual testing of business continuity plans and disaster
recovery plans, and a cyber security incident response plan. The risk is monitored on an ongoing basis through the use of a series of
quantitative key risk indicators, which are the aggregate of key performance indicators monitored by the Group\u2019s information security
function.\u00a0
Management continue to closely monitor the progress of the legislative process in the jurisdictions in which it operates as it relates to
OECD global minimum tax and Bermuda corporate income tax. Further details are outlined in note 14.
", "dimensions": { "concept": "lancashire:DisclosureOfOperationalRiskTextBlock", "language": "en", "entity": "scheme:5493002UNUYXLHOWF752", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-243": { "value": "
F. Strategic risk
Strategic risk is the risk that the Group does not develop and implement an appropriate long-term strategy to meet its business goals.
The Group has identified several strategic risks. These include: i) business planning risk, ii) inflation risk, iii) capital management risk, iv)
retention risk, v) growth risk and vi) climate change risk.
I. Business planning risk
Business planning risk is the risk that either the poor execution of the business plan or an inappropriate business plan, results in a
strategy that fails to adequately consider and reflect the current trading environment, resulting in an inability of the Group to optimise
performance, increasing reputational risk. The Group addresses the risks associated with the planning and execution of the business
plan through a combination of the following:
\u2022 an iterative annual forward-looking business planning process with cross departmental involvement;
\u2022 evaluation and approval of the annual business plan by the Board of Directors;
\u2022 regular monitoring of actual versus planned results;
\u2022 periodic review and re-forecasting as market conditions change; and
\u2022 evaluation of climate change and the potential short, medium and long-term implications/considerations for the business.
The forward-looking business planning process covers a three-year period from 2025 to 2027, and applies a number of sensitivity,
stress and scenario tests. These tests include consideration of climate change risks. The sensitivity and stress testing has confirmed that
even under the more extreme stress scenarios, the Group had more than adequate liquidity and regulatory solvency capital headroom.
II. Inflation risk
Both UK and worldwide inflation measures have increased significantly in recent years. Whilst the Group has already been monitoring
inflation, macro-economic factors, together with the actions of central banks and the views of economists, indicate that a period of
sustained high inflation may be likely. On this basis, inflation is now an increased focus for management and those charged with
governance at both the Board of Directors and the appropriate committees.
III. Capital management risk
Capital management risk is the risk of the Group failing to maintain adequate capital, accessing capital at an inflated cost, or the inability
to access capital. This includes unanticipated changes in vendor, regulatory and/or rating agency models, that could result in an
increase in capital requirements, or a change in the type of capital required. The total capital of the Group is as follows:
As at 31 December
2024
$m
2023
$m
Shareholders' equity
1,493.3
1,507.9
Long-term debt
447.0
446.6
Total capital
1,940.3
1,954.5
Less: intangible assets
197.0
181.1
Total tangible capital
1,743.3
1,773.4
Risks associated with the effectiveness of the Group's capital management are mitigated as follows:
\u2022 regular monitoring of current and prospective regulatory and rating agency capital requirements;
\u2022 regular discussion with the LSL management team regarding Lloyd's capital requirements;
\u2022 oversight of capital requirements by the Board of Directors, including regulatory capital requirements;
\u2022 ability to purchase sufficient, cost-effective reinsurance;
\u2022 maintaining contact with vendors, regulators and rating agencies to stay abreast of upcoming developments; and
\u2022 participation in industry groups such as the International Underwriters Association, the Association of Bermuda Insurers and
Reinsurers and the Lloyd's Market Association.
The Group reviews the level and composition of capital on an ongoing basis with a view to:
\u2022 maintaining sufficient capital for underwriting opportunities and to meet obligations to policyholders;
\u2022 maximising the risk-adjusted return to shareholders within predetermined risk tolerances;
\u2022 maintaining adequate financial strength ratings; and
\u2022 meeting internal, rating agency and regulatory capital requirements.
Increases in the Group's capital are held within the Group, invested, or returned to shareholders as appropriate. The retention of
earnings generated by the Group leads to an increase in capital. Capital raising can include debt or equity, and returns of capital may be
made through dividends, share repurchases, a redemption of debt, or any combination thereof. All capital actions require approval by
the Board of Directors.
Internal methods have been developed to review the profitability of classes of business and their estimated capital requirements, and the
capital requirements of the combination of a wide range of other business activities. These approaches are used by management in
decision making.
The Group's long-term debt held is approved as 'Tier 2 Ancillary Capital' by the BMA.
The Group's aim is to maximise risk-adjusted returns for its shareholders across the cycle. The return is measured by management in
terms of the change in DBVS in the period. This aim is a long-term goal, acknowledging that management expects both higher and
lower results in the shorter term. The cyclicality and volatility of the insurance market is expected to be the largest driver of this pattern.
Management monitors these peaks and troughs by adjusting the Group's insurance portfolio to make the most effective use of available
capital and seeking to maximise the risk-adjusted return.
The source of capital used by the Group is equity shareholders' funds and borrowings. As a holding company, LHL relies on dividends
from its operating entities to provide the cash flow required for debt service and dividends to shareholders. The operating entities\u2019 ability
to pay dividends and make capital distributions is subject to the legal and regulatory restrictions of the jurisdictions in which they
operate.
Both the Group and LICL are regulated by the BMA, and are required to monitor their enhanced capital requirement under the BMA's
regulatory framework, which has been assessed as equivalent to the Solvency II regime. Bermuda is also recognised as a qualified and
reciprocal jurisdiction by the US NAIC, and LICL is approved as a reciprocal reinsurer. The Group and LICL's capital requirements are
calculated using the BSCR standard formula model. For the years ended 31 December 2024 and 31 December 2023, both the Group
and LICL were more than adequately capitalised under the BMA\u2019s regulatory regime.
The Group's UK-regulated insurance companies are required to comply with the Solvency II regime and are regulated by the PRA and
FCA. LSL is also regulated by Lloyd's. Under Solvency II, the basis for assessing regulatory capital and solvency comprises a market-
consistent economic balance sheet and a SCR, determined using either an internal model or the standard formula.
LUK calculates its SCR using the standard formula. LUK's Solvency II own funds that comprise Tier 1 items for the years ended
31 December 2024 and 31 December 2023. Tier 1 capital is the highest-quality capital under Solvency II with the greatest loss-absorbing
capacity, comprising share capital and retained earnings.\u00a0For the years ended 31 December 2024 and 31 December 2023, LUK was
more than adequately capitalised under the Solvency II regime.
The Group's underwriting capacity in its Lloyd's syndicates must be supported by providing a deposit in the form of cash, investment
securities, or LOCs, which are referred to as FAL. The capital framework at Lloyd's requires each managing agent to calculate the capital
requirement for each syndicate they manage. Solvency II internal models are used to determine capital requirements for Syndicate 2010
and Syndicate 3010 based on the uSCR. Lloyd's has the discretion to take into account other factors at syndicate or member level to
uplift the calculated uSCR. This may include perceived deficiencies in the internal model result, as well as the need to maintain Lloyd\u2019s
overall security rating. Currently, as a minimum, Lloyd's applies a 35.0% uplift to each syndicate's uSCR to arrive at the ECA.
Lloyd's then uses each syndicate\u2019s ECA as a basis for determining member level capital requirements, which is backed by FAL. For the
2025 calendar year, the Group's corporate member's FAL requirement was set at 66.6% (2024 \u2013 67.0%) of underwriting capacity. Further
solvency adjustments are made to allow for open-year profits and losses of the syndicates on which the corporate member participates.
The Group has a FAL requirement of \u00a3478.7 million as at 31 December 2024 (31 December 2023 \u2013 \u00a3461.2 million).
For the years ended 31 December 2024 and 31 December 2023, the regulatory capital requirements of all the Group\u2019s regulatory
jurisdictions were met.
IV. Retention risk
Retention risk is the risk of inappropriate succession planning, poor staff retention in key roles, and poor management of key person
risks. Risks associated with succession planning, staff retention and key person risks are mitigated through a combination of resource
planning processes and controls, including:
\u2022 the identification of key personnel, together with appropriate succession plans;
\u2022 documented recruitment procedures, position descriptions and employment contracts;
\u2022 resource monitoring and the provision of appropriate compensation, including equity based compensation which vests over a
defined time horizon;
\u2022 the use of KRIs for the voluntary turnover of members of staff; and
\u2022 training schemes.
V. Growth risk
Growth risk is the risk of organisational stretch as the Group grows, in terms of volume of business written and number of employees, as
well as from transformation programmes to ensure the Group has appropriate systems, infrastructure and data in place to support
business activities. Growth risk is mitigated through continuous monitoring of the Group's current state against the Group's business
plan and goals, together with engagement with individual management teams within the Group to validate that they have the resources
they require to deliver their own business objectives.\u00a0
VI. Climate change risk
The Group is exposed to both climate change-related risks and opportunities. The two major categories of risk being transition risk and
physical risk.
Transition risks are those risks relating to the transition to a lower carbon economy and include risks such as policy and legal risk,
technology risk, market risk and reputation risk. Physical risks are those relating to the physical impacts of climate change which can be
acute (those from increased frequency and severity of climate-related events) or chronic (due to longer-term shifts in climate patterns).
As a (re)insurance company, the Group is more significantly affected by physical risk through its potential exposure to acute and chronic
climate change. The potential financial impact from these climate-related risks is assessed through scenario testing and mitigated by the
Group's strategic and risk management decisions around managing these risks. A risk radar has been prepared to illustrate the risks
identified and the likelihood and magnitude of these risks; this diagram can be found on page 53. The risk assessment also considers the
products currently offered by the Group and how these might change over time during the transition to a lower carbon economy. A
table summarising potential opportunities, their time frame, likelihood and magnitude is included on page 50. The Group's current
assessment of risk in relation to climate change is discussed in more detail within the TCFD report on pages 46 to 57.
The Group's process in identifying, assessing and managing climate risk with respect to insurance risk, investment risk (a component of
market risk) and business plan risk (a component of strategic risk) is discussed further within the relevant sections above.
", "dimensions": { "concept": "lancashire:DisclosureOfStrategicRiskTextBlock", "language": "en", "entity": "scheme:5493002UNUYXLHOWF752", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-244": { "value": "
1. General information
The Group is a provider of global specialty (re)insurance products with operations in London, Bermuda, the US, and Australia. LHL
(registered number 37415) was incorporated under the laws of Bermuda and its common shares trade on the main market of the LSE.
LHL\u2019s head office and registered office is Power House, 7 Par-la-Ville Road, Hamilton HM 11, Bermuda .
The consolidated financial statements for the year ended 31 December 2024 include LHL's subsidiary companies, the Group's
investment in associate, and the Group's share of the syndicates' assets and liabilities, and income and expenses. A full listing of the
Group\u2019s related parties can be found in note 22.
", "dimensions": { "concept": "ifrs-full:DisclosureOfGeneralInformationAboutFinancialStatementsExplanatory", "language": "en", "entity": "scheme:5493002UNUYXLHOWF752", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-245": { "value": "The Group is a provider of global specialty (re)insurance products with operations in London, Bermuda, the US, and Australia.", "dimensions": { "concept": "ifrs-full:DescriptionOfNatureOfEntitysOperationsAndPrincipalActivities", "language": "en", "entity": "scheme:5493002UNUYXLHOWF752", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-246": { "value": "Bermuda", "dimensions": { "concept": "ifrs-full:DomicileOfEntity", "language": "en", "entity": "scheme:5493002UNUYXLHOWF752", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-247": { "value": "Bermuda", "dimensions": { "concept": "ifrs-full:CountryOfIncorporation", "language": "en", "entity": "scheme:5493002UNUYXLHOWF752", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-248": { "value": "Power House, 7 Par-la-Ville Road, Hamilton HM 11, Bermuda", "dimensions": { "concept": "ifrs-full:AddressOfRegisteredOfficeOfEntity", "language": "en", "entity": "scheme:5493002UNUYXLHOWF752", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-249": { "value": "
2. Segmental reporting
Management and the Board of Directors review the Group's business primarily by its two principal segments: reinsurance and insurance.
These segments are therefore deemed to be the Group's operating segments for the purposes of segmental reporting. Lines of business
are underwritten within each operating segment. These lines of business are written primarily, but not exclusively, on a reinsurance or
insurance basis.
Operating segment performance is measured by the insurance service result and net insurance ratio. The performance of the overall
Group is measured by the combined ratio on both an undiscounted and discounted basis.
All amounts reported are transactions with external parties and the Group's associate, see note 15. There are no significant inter-
segmental transactions, and there are no significant insurance or reinsurance contracts that insure or reinsure risks located in Bermuda,
the Group's country of domicile.
2024
2023
For the year ended 31 December
Reinsurance
$m
Insurance
$m
Total\u00a0
$m
Reinsurance
$m
Insurance
$m
Total\u00a0
$m
Insurance revenue
855.1
910.0
1,765.1
714.9
805.0
1,519.9
Insurance service expenses
(420.0)
(766.1)
(1,186.1)
(254.2)
(442.0)
(696.2)
Insurance service result before reinsurance contracts held
435.1
143.9
579.0
460.7
363.0
823.7
Allocation of reinsurance premium
(168.2)
(271.2)
(439.4)
(174.6)
(250.2)
(424.8)
Amounts recoverable from reinsurers
(2.8)
243.1
240.3
(78.2)
61.4
(16.8)
Net expense from reinsurance contracts held
(171.0)
(28.1)
(199.1)
(252.8)
(188.8)
(441.6)
Insurance service result
264.1
115.8
379.9
207.9
174.2
382.1
Finance expense from insurance contracts issued
(41.0)
(36.9)
(77.9)
(56.6)
(41.7)
(98.3)
Finance income from reinsurance contracts held
11.9
12.1
24.0
16.8
14.9
31.7
Net insurance financing result
(29.1)
(24.8)
(53.9)
(39.8)
(26.8)
(66.6)
Net investment return
162.2
160.5
Other operating expenses
(115.9)
(107.4)
Net other unallocated (expenses) and income
(35.6)
(35.9)
Profit before tax
336.7
332.7
Net insurance ratio
61.6%
81.9%
71.3%
61.5%
68.6%
65.1%
Net operating expense ratio
8.7%
9.8%
Combined ratio (discounted)
80.0%
74.9%
Discounting impact on combined ratio
9.1%
7.7%
Combined ratio (undiscounted)
89.1%
82.6%
", "dimensions": { "concept": "ifrs-full:DisclosureOfEntitysReportableSegmentsExplanatory", "language": "en", "entity": "scheme:5493002UNUYXLHOWF752", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-251": { "value": "
3. Net insurance financing result
IFRS 17 requires insurance contracts issued and reinsurance contracts held to be accounted for on a discounted basis. The table below
shows the total impact of discounting recognised in the consolidated statement of comprehensive income for the years ended
31 December 2024 and 31 December 2023 :
2024
2023
For the year ended 31 December
Insurance\u00a0
contracts issued
$m
Reinsurance
contracts held
$m
Total
$m
Insurance\u00a0
contracts issued
$m
Reinsurance
contracts held
$m
Total
$m
Initial discount included in insurance service result
144.4
(24.1)
120.3
101.9
(17.2)
84.7
Unwind of discount
(95.5)
26.9
(68.6)
(84.2)
28.4
(55.8)
Impact of change in assumptions
17.6
(2.9)
14.7
(14.1)
3.3
(10.8)
Finance (expense) income
(77.9)
24.0
(53.9)
(98.3)
31.7
(66.6)
.
Total net discounting income (expense)
66.5
(0.1)
66.4
3.6
14.5
18.1
The discounting approach and the yield curves used to discount the cash flows of insurance contracts issued and reinsurance contracts
held for our major currencies are provided in the interest rate risk disclosures.
The relationship between the Group's total finance income and expense from insurance contracts issued, and reinsurance contracts
held, is not typically expected to correlate directly with the Group's net investment return since:
\u2022 the Group's investment portfolio is of greater magnitude than its insurance contract liabilities, net of its reinsurance contract assets;
\u2022 in accordance with the requirements of IFRS 17, the discount rates used in respect of the Group's insurance contract liabilities, and
reinsurance contract assets, are set with specific reference to the Group's insurance contracts, and not its investment portfolio; and
\u2022 there are a mixture of securities within the Group's investment portfolio, certain of which do not have their valuation directly or
primarily affected by changes in interest rates.
", "dimensions": { "concept": "lancashire:DisclosureOfFinanceIncomeExpenseFromInsuranceContractsIssuedRecognisedInProfitOrLossTextBlock", "language": "en", "entity": "scheme:5493002UNUYXLHOWF752", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-250": { "value": "
3. Net insurance financing result
IFRS 17 requires insurance contracts issued and reinsurance contracts held to be accounted for on a discounted basis. The table below
shows the total impact of discounting recognised in the consolidated statement of comprehensive income for the years ended
31 December 2024 and 31 December 2023 :
2024
2023
For the year ended 31 December
Insurance\u00a0
contracts issued
$m
Reinsurance
contracts held
$m
Total
$m
Insurance\u00a0
contracts issued
$m
Reinsurance
contracts held
$m
Total
$m
Initial discount included in insurance service result
144.4
(24.1)
120.3
101.9
(17.2)
84.7
Unwind of discount
(95.5)
26.9
(68.6)
(84.2)
28.4
(55.8)
Impact of change in assumptions
17.6
(2.9)
14.7
(14.1)
3.3
(10.8)
Finance (expense) income
(77.9)
24.0
(53.9)
(98.3)
31.7
(66.6)
.
Total net discounting income (expense)
66.5
(0.1)
66.4
3.6
14.5
18.1
The discounting approach and the yield curves used to discount the cash flows of insurance contracts issued and reinsurance contracts
held for our major currencies are provided in the interest rate risk disclosures.
The relationship between the Group's total finance income and expense from insurance contracts issued, and reinsurance contracts
held, is not typically expected to correlate directly with the Group's net investment return since:
\u2022 the Group's investment portfolio is of greater magnitude than its insurance contract liabilities, net of its reinsurance contract assets;
\u2022 in accordance with the requirements of IFRS 17, the discount rates used in respect of the Group's insurance contract liabilities, and
reinsurance contract assets, are set with specific reference to the Group's insurance contracts, and not its investment portfolio; and
\u2022 there are a mixture of securities within the Group's investment portfolio, certain of which do not have their valuation directly or
primarily affected by changes in interest rates.
", "dimensions": { "concept": "lancashire:DisclosureOfFinanceIncomeExpenseFromReinsuranceContractsHeldRecognisedInProfitOrLossTextBlock", "language": "en", "entity": "scheme:5493002UNUYXLHOWF752", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-252": { "value": "
4. Net investment return
For the year ended 31 December
2024
$m
2023
$m
Interest and dividend income on financial investments
115.3
85.9
Interest on cash and cash equivalents
29.5
22.6
Net realised gains
2.7
3.9
Net unrealised gains
20.4
53.4
Investment income
167.9
165.8
Investment management fees
(5.7)
(5.3)
Total net investment return
162.2
160.5
", "dimensions": { "concept": "lancashire:DisclosureOfNetInvestmentIncomeTextBlock", "language": "en", "entity": "scheme:5493002UNUYXLHOWF752", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-254": { "value": "
5. Other income
For the year ended 31 December
2024
$m
2023
$m
Lancashire Capital Management
Profit commission
0.8
\u2014
Lancashire Syndicates
Managing agency fees
1.0
1.0
Consortium fees
2.0
1.3
Consortium profit commission
1.0
0.3
Coverholder commission income
0.2
0.3
Managing agency profit commission
5.4
\u2014
Total other income
10.4
2.9
As at 31 December 2024 , contract assets in relation to other income amounted to $6.4 million (31 December 2023 \u2013 $2.1 million).
These contract assets are presented within other receivables in the consolidated statement of financial position.
6. Expenses
Expenses incurred by the Group in the reporting period are outlined in the table below:
2024
2023
For the year ended 31 December
Other\u00a0 \u00a0 \u00a0 \u00a0
operating\u00a0
expenses\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
$m
Directly
attributable
expenses\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
$m
Total\u00a0 \u00a0 \u00a0 \u00a0 \u00a0
expenses\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
$m
Other\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
operating\u00a0
expenses\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
$m
Directly
attributable
expenses\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
$m
Total\u00a0 \u00a0 \u00a0 \u00a0 \u00a0
expenses\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
$m
Employee remuneration costs
70.5
61.2
131.7
70.5
49.4
119.9
Operating expenses
45.4
44.1
89.5
36.9
32.8
69.7
Total
115.9
105.3
221.2
107.4
82.2
189.6
Directly attributable expenses comprise fixed and variable expenses incurred by the Group in the reporting period that relate directly to
fulfilling insurance contracts issued, and have been allocated to insurance service expenses within the consolidated statement of
comprehensive income.
Auditor's remuneration included within other operating expenses incurred by the Group in the reporting period is outlined in the table
below:
For the year ended 31 December
2024
$m
2023
$m
Group audit fees
4.4
4.9
Other services
0.6
0.6
Total
5.0
5.5
During the years ended 31 December 2024 and 31 December 2023, KPMG LLP provided non-audit services in relation to the Group's
half-year reporting review, Solvency II reporting and regulatory reporting. Fees for non-audit services provided in 2024 totalled
$0.6 million ( 2023 \u2013 $0.6 million).
", "dimensions": { "concept": "ifrs-full:DisclosureOfOtherOperatingIncomeExpenseExplanatory", "language": "en", "entity": "scheme:5493002UNUYXLHOWF752", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-253": { "value": "
5. Other income
For the year ended 31 December
2024
$m
2023
$m
Lancashire Capital Management
Profit commission
0.8
\u2014
Lancashire Syndicates
Managing agency fees
1.0
1.0
Consortium fees
2.0
1.3
Consortium profit commission
1.0
0.3
Coverholder commission income
0.2
0.3
Managing agency profit commission
5.4
\u2014
Total other income
10.4
2.9
As at 31 December 2024 , contract assets in relation to other income amounted to $6.4 million (31 December 2023 \u2013 $2.1 million).
These contract assets are presented within other receivables in the consolidated statement of financial position.", "dimensions": { "concept": "ifrs-full:DisclosureOfOtherOperatingIncomeExplanatory", "language": "en", "entity": "scheme:5493002UNUYXLHOWF752", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-257": { "value": "
6. Expenses
Expenses incurred by the Group in the reporting period are outlined in the table below:
2024
2023
For the year ended 31 December
Other\u00a0 \u00a0 \u00a0 \u00a0
operating\u00a0
expenses\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
$m
Directly
attributable
expenses\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
$m
Total\u00a0 \u00a0 \u00a0 \u00a0 \u00a0
expenses\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
$m
Other\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
operating\u00a0
expenses\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
$m
Directly
attributable
expenses\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
$m
Total\u00a0 \u00a0 \u00a0 \u00a0 \u00a0
expenses\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
$m
Employee remuneration costs
70.5
61.2
131.7
70.5
49.4
119.9
Operating expenses
45.4
44.1
89.5
36.9
32.8
69.7
Total
115.9
105.3
221.2
107.4
82.2
189.6
Directly attributable expenses comprise fixed and variable expenses incurred by the Group in the reporting period that relate directly to
fulfilling insurance contracts issued, and have been allocated to insurance service expenses within the consolidated statement of
comprehensive income.
Auditor's remuneration included within other operating expenses incurred by the Group in the reporting period is outlined in the table
below:
For the year ended 31 December
2024
$m
2023
$m
Group audit fees
4.4
4.9
Other services
0.6
0.6
Total
5.0
5.5
During the years ended 31 December 2024 and 31 December 2023, KPMG LLP provided non-audit services in relation to the Group's
half-year reporting review, Solvency II reporting and regulatory reporting. Fees for non-audit services provided in 2024 totalled
$0.6 million ( 2023 \u2013 $0.6 million).
", "dimensions": { "concept": "ifrs-full:DisclosureOfExpensesByNatureExplanatory", "language": "en", "entity": "scheme:5493002UNUYXLHOWF752", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-256": { "value": "
6. Expenses
Expenses incurred by the Group in the reporting period are outlined in the table below:
2024
2023
For the year ended 31 December
Other\u00a0 \u00a0 \u00a0 \u00a0
operating\u00a0
expenses\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
$m
Directly
attributable
expenses\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
$m
Total\u00a0 \u00a0 \u00a0 \u00a0 \u00a0
expenses\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
$m
Other\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
operating\u00a0
expenses\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
$m
Directly
attributable
expenses\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
$m
Total\u00a0 \u00a0 \u00a0 \u00a0 \u00a0
expenses\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
$m
Employee remuneration costs
70.5
61.2
131.7
70.5
49.4
119.9
Operating expenses
45.4
44.1
89.5
36.9
32.8
69.7
Total
115.9
105.3
221.2
107.4
82.2
189.6
Directly attributable expenses comprise fixed and variable expenses incurred by the Group in the reporting period that relate directly to
fulfilling insurance contracts issued, and have been allocated to insurance service expenses within the consolidated statement of
comprehensive income.
Auditor's remuneration included within other operating expenses incurred by the Group in the reporting period is outlined in the table
below:
For the year ended 31 December
2024
$m
2023
$m
Group audit fees
4.4
4.9
Other services
0.6
0.6
Total
5.0
5.5
During the years ended 31 December 2024 and 31 December 2023, KPMG LLP provided non-audit services in relation to the Group's
half-year reporting review, Solvency II reporting and regulatory reporting. Fees for non-audit services provided in 2024 totalled
$0.6 million ( 2023 \u2013 $0.6 million).
", "dimensions": { "concept": "ifrs-full:DisclosureOfOtherOperatingExpenseExplanatory", "language": "en", "entity": "scheme:5493002UNUYXLHOWF752", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-255": { "value": "
6. Expenses
Expenses incurred by the Group in the reporting period are outlined in the table below:
2024
2023
For the year ended 31 December
Other\u00a0 \u00a0 \u00a0 \u00a0
operating\u00a0
expenses\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
$m
Directly
attributable
expenses\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
$m
Total\u00a0 \u00a0 \u00a0 \u00a0 \u00a0
expenses\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
$m
Other\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
operating\u00a0
expenses\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
$m
Directly
attributable
expenses\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
$m
Total\u00a0 \u00a0 \u00a0 \u00a0 \u00a0
expenses\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
$m
Employee remuneration costs
70.5
61.2
131.7
70.5
49.4
119.9
Operating expenses
45.4
44.1
89.5
36.9
32.8
69.7
Total
115.9
105.3
221.2
107.4
82.2
189.6
Directly attributable expenses comprise fixed and variable expenses incurred by the Group in the reporting period that relate directly to
fulfilling insurance contracts issued, and have been allocated to insurance service expenses within the consolidated statement of
comprehensive income.
Auditor's remuneration included within other operating expenses incurred by the Group in the reporting period is outlined in the table
below:
For the year ended 31 December
2024
$m
2023
$m
Group audit fees
4.4
4.9
Other services
0.6
0.6
Total
5.0
5.5
During the years ended 31 December 2024 and 31 December 2023, KPMG LLP provided non-audit services in relation to the Group's
half-year reporting review, Solvency II reporting and regulatory reporting. Fees for non-audit services provided in 2024 totalled
$0.6 million ( 2023 \u2013 $0.6 million).
", "dimensions": { "concept": "ifrs-full:DisclosureOfExpensesExplanatory", "language": "en", "entity": "scheme:5493002UNUYXLHOWF752", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-258": { "value": "
Auditor's remuneration included within other operating expenses incurred by the Group in the reporting period is outlined in the table
below:
For the year ended 31 December
2024
$m
2023
$m
Group audit fees
4.4
4.9
Other services
0.6
0.6
Total
5.0
5.5
During the years ended 31 December 2024 and 31 December 2023, KPMG LLP provided non-audit services in relation to the Group's
half-year reporting review, Solvency II reporting and regulatory reporting. Fees for non-audit services provided in 2024 totalled
$0.6 million ( 2023 \u2013 $0.6 million).
", "dimensions": { "concept": "ifrs-full:DisclosureOfAuditorsRemunerationExplanatory", "language": "en", "entity": "scheme:5493002UNUYXLHOWF752", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-259": { "value": "
7. Employee benefits
2024
2023
For the year ended 31 December
Other\u00a0 \u00a0 \u00a0 \u00a0
operating\u00a0
expenses\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
$m
Directly
attributable
expenses\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
$m
Total\u00a0 \u00a0 \u00a0 \u00a0 \u00a0
expenses\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
$m
Other\u00a0 \u00a0 \u00a0
operating\u00a0
expenses\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
$m
Directly
attributable
expenses\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
$m
Total\u00a0 \u00a0 \u00a0 \u00a0 \u00a0
expenses\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
$m
Employee remuneration costs
70.5
61.2
131.7
70.5
49.4
119.9
Total cash compensation
70.5
61.2
131.7
70.5
49.4
119.9
RSS \u2013 performance
5.4
\u2014
5.4
4.3
\u2014
4.3
RSS \u2013 ordinary
11.7
\u2014
11.7
10.5
\u2014
10.5
RSS \u2013 bonus deferral
1.9
\u2014
1.9
0.4
\u2014
0.4
Total equity based compensation
19.0
\u2014
19.0
15.2
\u2014
15.2
Total employee benefits
89.5
61.2
150.7
85.7
49.4
135.1
Equity based compensation
The Group's equity based compensation scheme is its RSS. All outstanding and future RSS grants have an exercise price of $nil, and an
exercise period of ten years from the grant date.
The fair value of any TSR component of the nil-cost options is estimated using a stochastic model. For all other components, the Black-
Scholes model is used to estimate the fair value. The following table lists the assumptions used in the stochastic model for the RSS
awards granted during the years ended 31 December 2024 and 31 December 2023:
Assumptions
2024
2023
Expected volatility1
31.2%
33.5%
Risk-free interest rate2
4.1%
3.3%
Expected average life of options
2.9 years
3.0 years
Share price
$8.29
$7.48
1. The expected volatility of the LHL share prices are calculated based on the movement in the share prices over a period prior to the grant date, equal in
length to the expected life of the award.
2.\u00a0 The risk-free interest rate is consistent with three-year UK government bond yields on the date of grant.
The calculation of the equity based compensation expense assumes forfeitures due to employee turnover of 10.0% (2023 \u2013 10.0%) per
annum prior to vesting, with subsequent adjustments to reflect actual experience.
RSS \u2013 Performance
The performance RSS options vest after a three-year period and are dependent on certain performance criteria. A maximum of 85.0%
(2023 \u2013 85.0%) of the performance RSS options will vest only on the achievement of a change in DBVS i n excess of a required amount.
A maximum of 15.0% (2023 \u2013 15.0%) of the performance RSS options will vest only on the achievement of an absolute TSR in excess of
a required amount. An amount equivalent to the dividends paid between the grant date and the exercise date accrues and is paid at the
time of exercise, pro-rata according to the number of RSS options that vest.
2024
2023
Opening total number of restricted shares as of 31 December
3,502,144
3,397,559
Granted
1,014,535
892,049
Exercised
(432,310)
(102,529)
Forfeited
(43,565)
(19,846)
Lapsed
(861,910)
(665,089)
Closing total number of restricted shares as of 31 December
3,178,894
3,502,144
Exercisable
102,053
197,203
Weighted average remaining contractual life
8.0 years
7.9 years
Weighted average fair value at date of grant during the year
$7.02
$6.12
Weighted average share price at date of exercise during the year
$8.04
$7.31
RSS \u2013 Ordinary
The ordinary RSS options vest three years from the date of grant and do not have associated performance criteria. An amount
equivalent to the dividends paid between the grant date and the exercise date accrues and is paid at the time of exercise.
2024
2023
Opening total number of restricted shares
5,502,042
4,176,965
Granted
2,220,400
1,989,850
Exercised
(981,396)
(487,050)
Forfeited
(393,932)
(177,723)
Closing total number of restricted shares
6,347,114
5,502,042
Exercisable
892,331
834,085
Weighted average remaining contractual life
7.9 years
7.8 years
Weighted average fair value at date of grant during the year
$8.29
$7.48
Weighted average share price at date of exercise during the year
$8.12
$7.49
RSS \u2013 Bonus deferral
The vesting periods of the bonus deferral RSS options range from one to three years from the date of grant and do not have associated
performance criteria. An amount equivalent to the dividends paid between the grant date and the exercise date accrues and is paid at
the time of exercise.
2024
2023
Opening total number of restricted shares
230,672
268,548
Granted
395,179
48,515
Exercised
(141,478)
(86,391)
Forfeited
\u2014
\u2014
Closing total number of restricted shares
484,373
230,672
Exercisable
41,300
103,377
Weighted average remaining contractual life
8.8 years
6.7 years
Weighted average fair value at date of grant during the year
$8.29
$6.58
Weighted average share price at date of exercise during the year
$7.99
$7.31
RSS \u2013 Lancashire Syndicates Limited acquisition
The vesting periods of the LSL acquisition RSS options ranged from three to five years and were dependent on certain performance
criteria. These options vested in full on 31 December 2018. An amount equivalent to the dividends paid between the grant date and the
exercise date accrues and is paid at the time of exercise, pro-rata according to the number of RSS options that vested. In the year ended
31 December 2023, a total of 28,437 of LSL acquisition RSS options were exercised and 2,918 forfeited. There were no remaining LSL
acquisition RSS options outstanding or exercisable as at 31 December 2023.
", "dimensions": { "concept": "ifrs-full:DisclosureOfEmployeeBenefitsExplanatory", "language": "en", "entity": "scheme:5493002UNUYXLHOWF752", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-260": { "value": "
Equity based compensation
The Group's equity based compensation scheme is its RSS. All outstanding and future RSS grants have an exercise price of $nil, and an
exercise period of ten years from the grant date.
The fair value of any TSR component of the nil-cost options is estimated using a stochastic model. For all other components, the Black-
Scholes model is used to estimate the fair value. The following table lists the assumptions used in the stochastic model for the RSS
awards granted during the years ended 31 December 2024 and 31 December 2023:
Assumptions
2024
2023
Expected volatility1
31.2%
33.5%
Risk-free interest rate2
4.1%
3.3%
Expected average life of options
2.9 years
3.0 years
Share price
$8.29
$7.48
1. The expected volatility of the LHL share prices are calculated based on the movement in the share prices over a period prior to the grant date, equal in
length to the expected life of the award.
2.\u00a0 The risk-free interest rate is consistent with three-year UK government bond yields on the date of grant.
The calculation of the equity based compensation expense assumes forfeitures due to employee turnover of 10.0% (2023 \u2013 10.0%) per
annum prior to vesting, with subsequent adjustments to reflect actual experience.
RSS \u2013 Performance
The performance RSS options vest after a three-year period and are dependent on certain performance criteria. A maximum of 85.0%
(2023 \u2013 85.0%) of the performance RSS options will vest only on the achievement of a change in DBVS i n excess of a required amount.
A maximum of 15.0% (2023 \u2013 15.0%) of the performance RSS options will vest only on the achievement of an absolute TSR in excess of
a required amount. An amount equivalent to the dividends paid between the grant date and the exercise date accrues and is paid at the
time of exercise, pro-rata according to the number of RSS options that vest.
2024
2023
Opening total number of restricted shares as of 31 December
3,502,144
3,397,559
Granted
1,014,535
892,049
Exercised
(432,310)
(102,529)
Forfeited
(43,565)
(19,846)
Lapsed
(861,910)
(665,089)
Closing total number of restricted shares as of 31 December
3,178,894
3,502,144
Exercisable
102,053
197,203
Weighted average remaining contractual life
8.0 years
7.9 years
Weighted average fair value at date of grant during the year
$7.02
$6.12
Weighted average share price at date of exercise during the year
$8.04
$7.31
RSS \u2013 Ordinary
The ordinary RSS options vest three years from the date of grant and do not have associated performance criteria. An amount
equivalent to the dividends paid between the grant date and the exercise date accrues and is paid at the time of exercise.
2024
2023
Opening total number of restricted shares
5,502,042
4,176,965
Granted
2,220,400
1,989,850
Exercised
(981,396)
(487,050)
Forfeited
(393,932)
(177,723)
Closing total number of restricted shares
6,347,114
5,502,042
Exercisable
892,331
834,085
Weighted average remaining contractual life
7.9 years
7.8 years
Weighted average fair value at date of grant during the year
$8.29
$7.48
Weighted average share price at date of exercise during the year
$8.12
$7.49
RSS \u2013 Bonus deferral
The vesting periods of the bonus deferral RSS options range from one to three years from the date of grant and do not have associated
performance criteria. An amount equivalent to the dividends paid between the grant date and the exercise date accrues and is paid at
the time of exercise.
2024
2023
Opening total number of restricted shares
230,672
268,548
Granted
395,179
48,515
Exercised
(141,478)
(86,391)
Forfeited
\u2014
\u2014
Closing total number of restricted shares
484,373
230,672
Exercisable
41,300
103,377
Weighted average remaining contractual life
8.8 years
6.7 years
Weighted average fair value at date of grant during the year
$8.29
$6.58
Weighted average share price at date of exercise during the year
$7.99
$7.31
RSS \u2013 Lancashire Syndicates Limited acquisition
The vesting periods of the LSL acquisition RSS options ranged from three to five years and were dependent on certain performance
criteria. These options vested in full on 31 December 2018. An amount equivalent to the dividends paid between the grant date and the
exercise date accrues and is paid at the time of exercise, pro-rata according to the number of RSS options that vested. In the year ended
31 December 2023, a total of 28,437 of LSL acquisition RSS options were exercised and 2,918 forfeited. There were no remaining LSL
acquisition RSS options outstanding or exercisable as at 31 December 2023.
", "dimensions": { "concept": "ifrs-full:DisclosureOfSharebasedPaymentArrangementsExplanatory", "language": "en", "entity": "scheme:5493002UNUYXLHOWF752", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-264": { "value": "
8. Financing costs
For the year ended 31 December
2024
$m
2023
$m
Interest expense on long-term debt
25.8
25.8
Interest expense on lease liabilities
1.3
1.5
Other financing costs
5.9
4.3
Total financing costs
33.0
31.6
Refer to note 18 for details of long-term debt and financing arrangements, and to note 16 for details of lease liabilities.
", "dimensions": { "concept": "ifrs-full:DisclosureOfFinanceCostExplanatory", "language": "en", "entity": "scheme:5493002UNUYXLHOWF752", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-263": { "value": "
8. Financing costs
For the year ended 31 December
2024
$m
2023
$m
Interest expense on long-term debt
25.8
25.8
Interest expense on lease liabilities
1.3
1.5
Other financing costs
5.9
4.3
Total financing costs
33.0
31.6
Refer to note 18 for details of long-term debt and financing arrangements, and to note 16 for details of lease liabilities.
", "dimensions": { "concept": "ifrs-full:DisclosureOfFinanceIncomeExpenseExplanatory", "language": "en", "entity": "scheme:5493002UNUYXLHOWF752", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-262": { "value": "
8. Financing costs
For the year ended 31 December
2024
$m
2023
$m
Interest expense on long-term debt
25.8
25.8
Interest expense on lease liabilities
1.3
1.5
Other financing costs
5.9
4.3
Total financing costs
33.0
31.6
Refer to note 18 for details of long-term debt and financing arrangements, and to note 16 for details of lease liabilities.
", "dimensions": { "concept": "ifrs-full:DisclosureOfInterestExpenseExplanatory", "language": "en", "entity": "scheme:5493002UNUYXLHOWF752", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-261": { "value": "
8. Financing costs
For the year ended 31 December
2024
$m
2023
$m
Interest expense on long-term debt
25.8
25.8
Interest expense on lease liabilities
1.3
1.5
Other financing costs
5.9
4.3
Total financing costs
33.0
31.6
Refer to note 18 for details of long-term debt and financing arrangements, and to note 16 for details of lease liabilities.
", "dimensions": { "concept": "ifrs-full:DisclosureOfInterestIncomeExpenseExplanatory", "language": "en", "entity": "scheme:5493002UNUYXLHOWF752", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-265": { "value": "
9. Tax
For the year ended 31 December
2024
$m
2023
$m
Corporation tax charge for the period
9.0
5.8
Adjustments in respect of prior period corporation tax
(0.5)
(0.9)
Deferred tax charge for the period (see note 14)
5.8
3.8
Adjustment in respect of prior period deferred tax (see note 14)
1.1
2.5
Total tax charge
15.4
11.2
Tax reconciliation1
2024
$m
2023
$m
Profit before tax
336.7
332.7
Tax calculated at the standard corporation tax rate applicable in Bermuda 0%
\u2014
\u2014
Non-taxable income
Effect of income taxed at a higher rate
14.1
10.0
Adjustments in respect of prior period
0.6
1.6
Differences related to equity based compensation
0.1
(0.7)
Other expense permanent differences
0.6
0.3
Total tax charge
15.4
11.2
1. All tax reconciling balances have been classified as recurring items.
The current tax charge as a percentage of the Group\u2019s profit before tax is 4.6% ( 2023 \u2013 3.4%).\u00a0
United Kingdom
The UK subsidiaries of LHL are subject to normal UK corporation tax on all their taxable profits.
Bermuda
Refer to note 14 for details of recent OECD global minimum tax and Bermuda corporate income tax developments.
14. Provision for deferred tax
As at 31 December
2024
$m
2023
$m
Equity based compensation
(11.1)
(8.1)
Syndicate underwriting profits
11.8
3.5
Syndicate participation rights
18.8
18.8
Other temporary differences
2.8
2.0
Net deferred tax liability
22.3
16.2
Deferred tax assets are recognised to the extent that realising the related tax benefit through future taxable profits is probable. It is
anticipated that sufficient taxable profits will be available within the Group in 2025 and subsequent years to utilise the deferred tax assets
recognised when the underlying temporary differences reverse, and the tax losses carried forward.
For the years ended 31 December 2024 and 31 December 2023, the Group had no uncertain tax positions (see note 9). The table below
reconciles the movements within the net deferred tax liability. All deferred tax assets and liabilities are classified as non-current.
As at 31 December
2024
$m
2023
$m
Opening net deferred tax liability
16.2
10.3
Deferred tax charge for the period
5.8
3.8
Adjustment in respect of prior period deferred tax
1.1
2.5
Deferred tax in equity
(0.8)
(0.4)
Closing net deferred tax liability
22.3
16.2
OECD global minimum tax and Bermuda corporate income tax
Subsidiary companies in a number of jurisdictions in which the Group operates were subject to a global minimum tax of 15% from 1
January 2024. The legislation brings into effect the Income Inclusion Rule and Qualified Domestic Minimum Top-up Tax, although
these have not had any impact on the Group.
As a response to the Pillar Two reform, legislation was passed in Bermuda to implement a CIT regime from 1 January 2025. To the
extent the Bermuda CIT results in an effective tax rate of less than 15%, the shortfall in tax will be collected by applying the Pillar Two
undertaxed payments rule, which was implemented on 1 January 2025. Any shortfall in tax will be collected in a jurisdiction that has
implemented the undertaxed payments rule and in which the Group has operating subsidiaries. For Lancashire this is likely to be the UK;
however, based on its limited international presence and provided it continues to meet the relevant conditions, Lancashire expects to
benefit from exclusion from the undertaxed payment rule for a period of five years, from 2025 to 2029.
The Group is also not expected to become subject to Bermuda CIT until 1 January 2030, provided it continues to meet the relevant
conditions within the Bermuda CIT rules that means groups with a limited international presence are excluded from scope for a period
of up to five years.
At 31 December 2023, in light of emerging guidance and uncertainty as to the potential impact for the Group, no decision had yet been
taken as to whether to take advantage of available tax deductions arising from the Economic Transition Adjustment, a transitional
measure introduced by Bermuda CIT, or to use the opt out available. Management's current assessment is that these uncertainties have
not diminished and, as a result its position as at 31 December 2024 is unchanged and no deferred tax asset has been recognised.
Management will continue to monitor developments during 2025.
The recently published, post balance sheet, administrative guidance by the OECD in respect of Pillar Two has no impact on the Group's
balance sheet position at 31 December 2024.", "dimensions": { "concept": "ifrs-full:DisclosureOfIncomeTaxExplanatory", "language": "en", "entity": "scheme:5493002UNUYXLHOWF752", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-266": { "value": "
10. Cash and cash equivalents
As at 31 December
2024
$m
2023
$m
Cash at bank and in hand
267.5
324.0
Cash equivalents
416.8
432.9
Total cash and cash equivalents
684.3
756.9
Cash equivalents have an original maturity of three months or less. The carrying amount of these assets approximates their fair value.
Refer to note 18 for the cash and cash equivalent balances on deposit as collateral. Cash and cash equivalents include managed cash of
$294.4 million (31 December 2023 \u2013 $263.8 million).", "dimensions": { "concept": "ifrs-full:DisclosureOfCashAndCashEquivalentsExplanatory", "language": "en", "entity": "scheme:5493002UNUYXLHOWF752", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-269": { "value": "
11. Investments
2024
2023
As at 31 December
Cost\u00a0
$m
Unrealised\u00a0
gains\u00a0
$m
Unrealised\u00a0
losses\u00a0
$m
Fair value\u00a0
$m
Cost\u00a0
$m
Unrealised\u00a0
gains\u00a0
$m
Unrealised\u00a0
losses\u00a0
$m
Fair value\u00a0
$m
Fixed maturity securities1
2,626.6
20.0
(42.8)
2,603.8
2,314.1
22.6
(56.6)
2,280.1
Private investment funds
259.0
10.4
(16.3)
253.1
174.4
4.2
(13.0)
165.6
Hedge funds
5.8
2.1
\u2014
7.9
8.5
1.4
\u2014
9.9
Other investments
\u2014
0.1
\u2014
0.1
\u2014
\u2014
(0.1)
(0.1)
Total investments
2,891.4
32.6
(59.1)
2,864.9
2,497.0
28.2
(69.7)
2,455.5
1. The nature of our fixed maturity securities are presented in the investment risk disclosures.
The Group determines the fair value of each individual security utilising the highest-level inputs of the fair value hierarchy, as defined
below. The fair value of fixed maturity investments is determined from quotations received from third-party recognised pricing services.
The Group receives independence assurance reports to assess the design and operating effectiveness of controls over these processes.
The fair value of private investment funds is estimated based on the most recently available NAV as advised by the external fund
manager or third-party administrator.
The pricing sources use bid prices where available, otherwise indicative prices are quoted based on observable market trade data. The
prices provided are compared to the investment managers' own pricing.
During the year, the Group has changed its independent pricing services provider of the fixed maturity investments. The valuation of
fixed maturity investments is still estimated in accordance with the fair value hierarchy. The Group has not made any adjustments to the
pricing provided by its third-party investment managers for either the year ending 31 December 2024 or the year ending 31 December
2023.
The fair values of securities within the Group\u2019s investment portfolio are estimated using the following valuation techniques in
accordance with the fair value hierarchy:
Level (i)
Level (i) investments are securities with quoted prices in active markets. A financial instrument is regarded as quoted in an active market
if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service, or regulatory
agency, and those prices represent actual and regularly occurring market transactions, on an arm's length basis.
Level (ii)
Level (ii) investments are securities with quoted prices in active markets for similar assets or liabilities, or securities valued using other
valuation techniques for which all significant inputs are based on observable market data. Instruments included in Level (ii) are valued
through independent external sources using directly observable inputs to models or other valuation methods. The valuation methods
used are typically of an industry-accepted standard and include broker-dealer quotes and pricing models, including present values and
future cash flows, together with inputs such as yield curves, interest rates, prepayment profiles, and default rates.
Level (iii)
Level (iii) investments are securities for which valuation techniques are not based on observable market data, and therefore require
significant management judgement to determine an appropriate fair value. The Group determines securities classified as Level (iii) to
include private investment funds, hedge funds and loans made by the Group's Lloyd's syndicate platforms to the Lloyd's central fund.
The fair value of the Group's private investment funds are determined using statements received from each fund's investment managers
on either a monthly or quarterly in arrears basis. In addition, these valuations will be compared with benchmarks or other indices to
assess the reasonableness of the estimated fair value of each fund. Given the Group\u2019s knowledge of the underlying investments and the
size of the Group\u2019s investment therein, the Group would not anticipate any material variance between the statements and the final
actual NAVs reported by the investment managers.
The fair values of the Group's hedge funds are determined using a combination of the most recent NAVs, provided by each fund's
independent administrator, and the estimated performance provided by each hedge fund manager. Independent administrators provide
monthly reported NAVs with up to a one-month delay in valuation. The most recent NAV available for each hedge fund is adjusted for
the estimated performance, as provided by the fund manager, between the NAV date and the reporting date. Historically, estimated fair
values incorporating these performance estimates have not been significantly different from subsequent NAVs. Given the Group's
knowledge of the underlying investments, and the size of the Group's investment therein, we would not anticipate any material variance
between estimated valuations and the final NAVs reported by the administrators.
The Group determines whether transfers have occurred between levels of the fair value hierarchy by re-assessing the categorisation at
the end of each reporting period. Transfers between Level (i) to Level (ii) securities amounted to $40.6 million, and transfers from
Level (ii) to Level (i) securities amounted to $246.2 million during the year ended 31 December 2024.
The fair value hierarchy of the Group\u2019s investment holdings is as follows:
As at 31 December 2024
Level (i)\u00a0
$m
Level (ii)\u00a0
$m
Level (iii)\u00a0
$m
Total\u00a0
$m
\u2022 Short-term investments
27.9
4.6
\u2014
32.5
\u2022 Fixed maturity funds
3.8
19.3
\u2014
23.1
\u2022 US treasuries
509.9
\u2014
\u2014
509.9
\u2022 Other government bonds
19.6
45.7
\u2014
65.3
\u2022 US municipal bonds
3.7
12.1
\u2014
15.8
\u2022 US government agency debt
7.2
10.0
\u2014
17.2
\u2022 Asset backed securities
8.5
263.2
\u2014
271.7
\u2022 US government agency mortgage backed securities
122.1
204.4
\u2014
326.5
\u2022 Non-agency mortgage backed securities
\u2014
55.5
\u2014
55.5
\u2022 Non-agency commercial mortgage backed securities
\u2014
20.5
\u2014
20.5
\u2022 Bank loans
\u2014
153.4
\u2014
153.4
\u2022 Corporate bonds
1,012.6
95.4
\u2014
1,108.0
\u2022 Other fixed maturities
\u2014
2.3
2.1
4.4
Total fixed maturity securities
1,715.3
886.4
2.1
2,603.8
Private investment funds
\u2014
\u2014
253.1
253.1
Hedge funds
\u2014
\u2014
7.9
7.9
Other investments
\u2014
0.1
\u2014
0.1
Total investments
1,715.3
886.5
263.1
2,864.9
As at 31 December 2023
Level (i)\u00a0
$m
Level (ii)\u00a0
$m
Level (iii)\u00a0
$m
Total\u00a0
$m
\u2022 Short-term investments
21.4
52.5
\u2014
73.9
\u2022 Fixed maturity funds
\u2014
27.1
\u2014
27.1
\u2022 US treasuries
585.9
\u2014
\u2014
585.9
\u2022 Other government bonds
24.2
23.0
\u2014
47.2
\u2022 US municipal bonds
\u2014
13.5
\u2014
13.5
\u2022 US government agency debt
41.8
15.3
\u2014
57.1
\u2022 Asset backed securities
\u2014
236.7
\u2014
236.7
\u2022 US government agency mortgage backed securities
\u2014
117.4
\u2014
117.4
\u2022 Non-agency mortgage backed securities
\u2014
11.5
\u2014
11.5
\u2022 Non-agency commercial mortgage backed securities
\u2014
21.3
\u2014
21.3
\u2022 Bank loans
15.0
127.6
\u2014
142.6
\u2022 Corporate bonds
519.2
417.2
\u2014
936.4
\u2022 Other fixed maturities
\u2014
6.3
3.2
9.5
Total fixed maturity securities
1,207.5
1,069.4
3.2
2,280.1
Private investment funds
\u2014
\u2014
165.6
165.6
Hedge funds
\u2014
\u2014
9.9
9.9
Other investments
\u2014
(0.1)
\u2014
(0.1)
Total investments
1,207.5
1,069.3
178.7
2,455.5
The table below analyses the movements in investments classified as Level (iii) investments:
Private
investment funds
$m
Hedge\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
funds
$m
Other fixed
maturities1\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
$m
Total
$m
As at 31 December 2022
108.1
103.9
3.1
215.1
Purchases
63.5
0.9
\u2014
64.4
Sales
(5.1)
(99.6)
\u2014
(104.7)
Net realised gains recognised in profit or loss
\u2014
12.2
\u2014
12.2
Net unrealised (losses) gains recognised\u00a0 in profit or loss
(0.9)
(7.5)
0.1
(8.3)
As at 31 December 2023
165.6
9.9
3.2
178.7
Purchases
84.6
\u2014
\u2014
84.6
Sales
\u2014
(3.2)
(1.0)
(4.2)
Net realised gains recognised in profit or loss
\u2014
0.5
\u2014
0.5
Net unrealised gains (losses) recognised in profit or loss
4.1
0.7
(0.1)
4.7
Net unrealised foreign exchange (losses) recognised in profit or loss
(1.2)
\u2014
\u2014
(1.2)
As at 31 December 2024
253.1
7.9
2.1
263.1
1. Included within other fixed maturity securities are the Lloyd's central fund loans which are classified at Level (iii) within the fair value hierarchy.
Apart from the purchases and sales shown in the table above, there have been no other transfers into or out of the Level (iii) investments
during either the current period or the prior period.
Included within net unrealised gains (losses) recognised in profit or loss as shown in the table above, are net unrealised gains related to
Level (iii) investments still held as at 31 December 2024 of $5.0 million (31 December 2023 \u2013 $1.3 million).", "dimensions": { "concept": "ifrs-full:DisclosureOfInvestmentsAccountedForUsingEquityMethodExplanatory", "language": "en", "entity": "scheme:5493002UNUYXLHOWF752", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-268": { "value": "
11. Investments
2024
2023
As at 31 December
Cost\u00a0
$m
Unrealised\u00a0
gains\u00a0
$m
Unrealised\u00a0
losses\u00a0
$m
Fair value\u00a0
$m
Cost\u00a0
$m
Unrealised\u00a0
gains\u00a0
$m
Unrealised\u00a0
losses\u00a0
$m
Fair value\u00a0
$m
Fixed maturity securities1
2,626.6
20.0
(42.8)
2,603.8
2,314.1
22.6
(56.6)
2,280.1
Private investment funds
259.0
10.4
(16.3)
253.1
174.4
4.2
(13.0)
165.6
Hedge funds
5.8
2.1
\u2014
7.9
8.5
1.4
\u2014
9.9
Other investments
\u2014
0.1
\u2014
0.1
\u2014
\u2014
(0.1)
(0.1)
Total investments
2,891.4
32.6
(59.1)
2,864.9
2,497.0
28.2
(69.7)
2,455.5
1. The nature of our fixed maturity securities are presented in the investment risk disclosures.
The Group determines the fair value of each individual security utilising the highest-level inputs of the fair value hierarchy, as defined
below. The fair value of fixed maturity investments is determined from quotations received from third-party recognised pricing services.
The Group receives independence assurance reports to assess the design and operating effectiveness of controls over these processes.
The fair value of private investment funds is estimated based on the most recently available NAV as advised by the external fund
manager or third-party administrator.
The pricing sources use bid prices where available, otherwise indicative prices are quoted based on observable market trade data. The
prices provided are compared to the investment managers' own pricing.
During the year, the Group has changed its independent pricing services provider of the fixed maturity investments. The valuation of
fixed maturity investments is still estimated in accordance with the fair value hierarchy. The Group has not made any adjustments to the
pricing provided by its third-party investment managers for either the year ending 31 December 2024 or the year ending 31 December
2023.
The fair values of securities within the Group\u2019s investment portfolio are estimated using the following valuation techniques in
accordance with the fair value hierarchy:
Level (i)
Level (i) investments are securities with quoted prices in active markets. A financial instrument is regarded as quoted in an active market
if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service, or regulatory
agency, and those prices represent actual and regularly occurring market transactions, on an arm's length basis.
Level (ii)
Level (ii) investments are securities with quoted prices in active markets for similar assets or liabilities, or securities valued using other
valuation techniques for which all significant inputs are based on observable market data. Instruments included in Level (ii) are valued
through independent external sources using directly observable inputs to models or other valuation methods. The valuation methods
used are typically of an industry-accepted standard and include broker-dealer quotes and pricing models, including present values and
future cash flows, together with inputs such as yield curves, interest rates, prepayment profiles, and default rates.
Level (iii)
Level (iii) investments are securities for which valuation techniques are not based on observable market data, and therefore require
significant management judgement to determine an appropriate fair value. The Group determines securities classified as Level (iii) to
include private investment funds, hedge funds and loans made by the Group's Lloyd's syndicate platforms to the Lloyd's central fund.
The fair value of the Group's private investment funds are determined using statements received from each fund's investment managers
on either a monthly or quarterly in arrears basis. In addition, these valuations will be compared with benchmarks or other indices to
assess the reasonableness of the estimated fair value of each fund. Given the Group\u2019s knowledge of the underlying investments and the
size of the Group\u2019s investment therein, the Group would not anticipate any material variance between the statements and the final
actual NAVs reported by the investment managers.
The fair values of the Group's hedge funds are determined using a combination of the most recent NAVs, provided by each fund's
independent administrator, and the estimated performance provided by each hedge fund manager. Independent administrators provide
monthly reported NAVs with up to a one-month delay in valuation. The most recent NAV available for each hedge fund is adjusted for
the estimated performance, as provided by the fund manager, between the NAV date and the reporting date. Historically, estimated fair
values incorporating these performance estimates have not been significantly different from subsequent NAVs. Given the Group's
knowledge of the underlying investments, and the size of the Group's investment therein, we would not anticipate any material variance
between estimated valuations and the final NAVs reported by the administrators.
The Group determines whether transfers have occurred between levels of the fair value hierarchy by re-assessing the categorisation at
the end of each reporting period. Transfers between Level (i) to Level (ii) securities amounted to $40.6 million, and transfers from
Level (ii) to Level (i) securities amounted to $246.2 million during the year ended 31 December 2024.
The fair value hierarchy of the Group\u2019s investment holdings is as follows:
As at 31 December 2024
Level (i)\u00a0
$m
Level (ii)\u00a0
$m
Level (iii)\u00a0
$m
Total\u00a0
$m
\u2022 Short-term investments
27.9
4.6
\u2014
32.5
\u2022 Fixed maturity funds
3.8
19.3
\u2014
23.1
\u2022 US treasuries
509.9
\u2014
\u2014
509.9
\u2022 Other government bonds
19.6
45.7
\u2014
65.3
\u2022 US municipal bonds
3.7
12.1
\u2014
15.8
\u2022 US government agency debt
7.2
10.0
\u2014
17.2
\u2022 Asset backed securities
8.5
263.2
\u2014
271.7
\u2022 US government agency mortgage backed securities
122.1
204.4
\u2014
326.5
\u2022 Non-agency mortgage backed securities
\u2014
55.5
\u2014
55.5
\u2022 Non-agency commercial mortgage backed securities
\u2014
20.5
\u2014
20.5
\u2022 Bank loans
\u2014
153.4
\u2014
153.4
\u2022 Corporate bonds
1,012.6
95.4
\u2014
1,108.0
\u2022 Other fixed maturities
\u2014
2.3
2.1
4.4
Total fixed maturity securities
1,715.3
886.4
2.1
2,603.8
Private investment funds
\u2014
\u2014
253.1
253.1
Hedge funds
\u2014
\u2014
7.9
7.9
Other investments
\u2014
0.1
\u2014
0.1
Total investments
1,715.3
886.5
263.1
2,864.9
As at 31 December 2023
Level (i)\u00a0
$m
Level (ii)\u00a0
$m
Level (iii)\u00a0
$m
Total\u00a0
$m
\u2022 Short-term investments
21.4
52.5
\u2014
73.9
\u2022 Fixed maturity funds
\u2014
27.1
\u2014
27.1
\u2022 US treasuries
585.9
\u2014
\u2014
585.9
\u2022 Other government bonds
24.2
23.0
\u2014
47.2
\u2022 US municipal bonds
\u2014
13.5
\u2014
13.5
\u2022 US government agency debt
41.8
15.3
\u2014
57.1
\u2022 Asset backed securities
\u2014
236.7
\u2014
236.7
\u2022 US government agency mortgage backed securities
\u2014
117.4
\u2014
117.4
\u2022 Non-agency mortgage backed securities
\u2014
11.5
\u2014
11.5
\u2022 Non-agency commercial mortgage backed securities
\u2014
21.3
\u2014
21.3
\u2022 Bank loans
15.0
127.6
\u2014
142.6
\u2022 Corporate bonds
519.2
417.2
\u2014
936.4
\u2022 Other fixed maturities
\u2014
6.3
3.2
9.5
Total fixed maturity securities
1,207.5
1,069.4
3.2
2,280.1
Private investment funds
\u2014
\u2014
165.6
165.6
Hedge funds
\u2014
\u2014
9.9
9.9
Other investments
\u2014
(0.1)
\u2014
(0.1)
Total investments
1,207.5
1,069.3
178.7
2,455.5
The table below analyses the movements in investments classified as Level (iii) investments:
Private
investment funds
$m
Hedge\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
funds
$m
Other fixed
maturities1\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
$m
Total
$m
As at 31 December 2022
108.1
103.9
3.1
215.1
Purchases
63.5
0.9
\u2014
64.4
Sales
(5.1)
(99.6)
\u2014
(104.7)
Net realised gains recognised in profit or loss
\u2014
12.2
\u2014
12.2
Net unrealised (losses) gains recognised\u00a0 in profit or loss
(0.9)
(7.5)
0.1
(8.3)
As at 31 December 2023
165.6
9.9
3.2
178.7
Purchases
84.6
\u2014
\u2014
84.6
Sales
\u2014
(3.2)
(1.0)
(4.2)
Net realised gains recognised in profit or loss
\u2014
0.5
\u2014
0.5
Net unrealised gains (losses) recognised in profit or loss
4.1
0.7
(0.1)
4.7
Net unrealised foreign exchange (losses) recognised in profit or loss
(1.2)
\u2014
\u2014
(1.2)
As at 31 December 2024
253.1
7.9
2.1
263.1
1. Included within other fixed maturity securities are the Lloyd's central fund loans which are classified at Level (iii) within the fair value hierarchy.
Apart from the purchases and sales shown in the table above, there have been no other transfers into or out of the Level (iii) investments
during either the current period or the prior period.
Included within net unrealised gains (losses) recognised in profit or loss as shown in the table above, are net unrealised gains related to
Level (iii) investments still held as at 31 December 2024 of $5.0 million (31 December 2023 \u2013 $1.3 million).", "dimensions": { "concept": "ifrs-full:DisclosureOfInvestmentsOtherThanInvestmentsAccountedForUsingEquityMethodExplanatory", "language": "en", "entity": "scheme:5493002UNUYXLHOWF752", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-267": { "value": "
11. Investments
2024
2023
As at 31 December
Cost\u00a0
$m
Unrealised\u00a0
gains\u00a0
$m
Unrealised\u00a0
losses\u00a0
$m
Fair value\u00a0
$m
Cost\u00a0
$m
Unrealised\u00a0
gains\u00a0
$m
Unrealised\u00a0
losses\u00a0
$m
Fair value\u00a0
$m
Fixed maturity securities1
2,626.6
20.0
(42.8)
2,603.8
2,314.1
22.6
(56.6)
2,280.1
Private investment funds
259.0
10.4
(16.3)
253.1
174.4
4.2
(13.0)
165.6
Hedge funds
5.8
2.1
\u2014
7.9
8.5
1.4
\u2014
9.9
Other investments
\u2014
0.1
\u2014
0.1
\u2014
\u2014
(0.1)
(0.1)
Total investments
2,891.4
32.6
(59.1)
2,864.9
2,497.0
28.2
(69.7)
2,455.5
1. The nature of our fixed maturity securities are presented in the investment risk disclosures.
The Group determines the fair value of each individual security utilising the highest-level inputs of the fair value hierarchy, as defined
below. The fair value of fixed maturity investments is determined from quotations received from third-party recognised pricing services.
The Group receives independence assurance reports to assess the design and operating effectiveness of controls over these processes.
The fair value of private investment funds is estimated based on the most recently available NAV as advised by the external fund
manager or third-party administrator.
The pricing sources use bid prices where available, otherwise indicative prices are quoted based on observable market trade data. The
prices provided are compared to the investment managers' own pricing.
During the year, the Group has changed its independent pricing services provider of the fixed maturity investments. The valuation of
fixed maturity investments is still estimated in accordance with the fair value hierarchy. The Group has not made any adjustments to the
pricing provided by its third-party investment managers for either the year ending 31 December 2024 or the year ending 31 December
2023.
The fair values of securities within the Group\u2019s investment portfolio are estimated using the following valuation techniques in
accordance with the fair value hierarchy:
Level (i)
Level (i) investments are securities with quoted prices in active markets. A financial instrument is regarded as quoted in an active market
if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service, or regulatory
agency, and those prices represent actual and regularly occurring market transactions, on an arm's length basis.
Level (ii)
Level (ii) investments are securities with quoted prices in active markets for similar assets or liabilities, or securities valued using other
valuation techniques for which all significant inputs are based on observable market data. Instruments included in Level (ii) are valued
through independent external sources using directly observable inputs to models or other valuation methods. The valuation methods
used are typically of an industry-accepted standard and include broker-dealer quotes and pricing models, including present values and
future cash flows, together with inputs such as yield curves, interest rates, prepayment profiles, and default rates.
Level (iii)
Level (iii) investments are securities for which valuation techniques are not based on observable market data, and therefore require
significant management judgement to determine an appropriate fair value. The Group determines securities classified as Level (iii) to
include private investment funds, hedge funds and loans made by the Group's Lloyd's syndicate platforms to the Lloyd's central fund.
The fair value of the Group's private investment funds are determined using statements received from each fund's investment managers
on either a monthly or quarterly in arrears basis. In addition, these valuations will be compared with benchmarks or other indices to
assess the reasonableness of the estimated fair value of each fund. Given the Group\u2019s knowledge of the underlying investments and the
size of the Group\u2019s investment therein, the Group would not anticipate any material variance between the statements and the final
actual NAVs reported by the investment managers.
The fair values of the Group's hedge funds are determined using a combination of the most recent NAVs, provided by each fund's
independent administrator, and the estimated performance provided by each hedge fund manager. Independent administrators provide
monthly reported NAVs with up to a one-month delay in valuation. The most recent NAV available for each hedge fund is adjusted for
the estimated performance, as provided by the fund manager, between the NAV date and the reporting date. Historically, estimated fair
values incorporating these performance estimates have not been significantly different from subsequent NAVs. Given the Group's
knowledge of the underlying investments, and the size of the Group's investment therein, we would not anticipate any material variance
between estimated valuations and the final NAVs reported by the administrators.
The Group determines whether transfers have occurred between levels of the fair value hierarchy by re-assessing the categorisation at
the end of each reporting period. Transfers between Level (i) to Level (ii) securities amounted to $40.6 million, and transfers from
Level (ii) to Level (i) securities amounted to $246.2 million during the year ended 31 December 2024.
The fair value hierarchy of the Group\u2019s investment holdings is as follows:
As at 31 December 2024
Level (i)\u00a0
$m
Level (ii)\u00a0
$m
Level (iii)\u00a0
$m
Total\u00a0
$m
\u2022 Short-term investments
27.9
4.6
\u2014
32.5
\u2022 Fixed maturity funds
3.8
19.3
\u2014
23.1
\u2022 US treasuries
509.9
\u2014
\u2014
509.9
\u2022 Other government bonds
19.6
45.7
\u2014
65.3
\u2022 US municipal bonds
3.7
12.1
\u2014
15.8
\u2022 US government agency debt
7.2
10.0
\u2014
17.2
\u2022 Asset backed securities
8.5
263.2
\u2014
271.7
\u2022 US government agency mortgage backed securities
122.1
204.4
\u2014
326.5
\u2022 Non-agency mortgage backed securities
\u2014
55.5
\u2014
55.5
\u2022 Non-agency commercial mortgage backed securities
\u2014
20.5
\u2014
20.5
\u2022 Bank loans
\u2014
153.4
\u2014
153.4
\u2022 Corporate bonds
1,012.6
95.4
\u2014
1,108.0
\u2022 Other fixed maturities
\u2014
2.3
2.1
4.4
Total fixed maturity securities
1,715.3
886.4
2.1
2,603.8
Private investment funds
\u2014
\u2014
253.1
253.1
Hedge funds
\u2014
\u2014
7.9
7.9
Other investments
\u2014
0.1
\u2014
0.1
Total investments
1,715.3
886.5
263.1
2,864.9
As at 31 December 2023
Level (i)\u00a0
$m
Level (ii)\u00a0
$m
Level (iii)\u00a0
$m
Total\u00a0
$m
\u2022 Short-term investments
21.4
52.5
\u2014
73.9
\u2022 Fixed maturity funds
\u2014
27.1
\u2014
27.1
\u2022 US treasuries
585.9
\u2014
\u2014
585.9
\u2022 Other government bonds
24.2
23.0
\u2014
47.2
\u2022 US municipal bonds
\u2014
13.5
\u2014
13.5
\u2022 US government agency debt
41.8
15.3
\u2014
57.1
\u2022 Asset backed securities
\u2014
236.7
\u2014
236.7
\u2022 US government agency mortgage backed securities
\u2014
117.4
\u2014
117.4
\u2022 Non-agency mortgage backed securities
\u2014
11.5
\u2014
11.5
\u2022 Non-agency commercial mortgage backed securities
\u2014
21.3
\u2014
21.3
\u2022 Bank loans
15.0
127.6
\u2014
142.6
\u2022 Corporate bonds
519.2
417.2
\u2014
936.4
\u2022 Other fixed maturities
\u2014
6.3
3.2
9.5
Total fixed maturity securities
1,207.5
1,069.4
3.2
2,280.1
Private investment funds
\u2014
\u2014
165.6
165.6
Hedge funds
\u2014
\u2014
9.9
9.9
Other investments
\u2014
(0.1)
\u2014
(0.1)
Total investments
1,207.5
1,069.3
178.7
2,455.5
The table below analyses the movements in investments classified as Level (iii) investments:
Private
investment funds
$m
Hedge\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
funds
$m
Other fixed
maturities1\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
$m
Total
$m
As at 31 December 2022
108.1
103.9
3.1
215.1
Purchases
63.5
0.9
\u2014
64.4
Sales
(5.1)
(99.6)
\u2014
(104.7)
Net realised gains recognised in profit or loss
\u2014
12.2
\u2014
12.2
Net unrealised (losses) gains recognised\u00a0 in profit or loss
(0.9)
(7.5)
0.1
(8.3)
As at 31 December 2023
165.6
9.9
3.2
178.7
Purchases
84.6
\u2014
\u2014
84.6
Sales
\u2014
(3.2)
(1.0)
(4.2)
Net realised gains recognised in profit or loss
\u2014
0.5
\u2014
0.5
Net unrealised gains (losses) recognised in profit or loss
4.1
0.7
(0.1)
4.7
Net unrealised foreign exchange (losses) recognised in profit or loss
(1.2)
\u2014
\u2014
(1.2)
As at 31 December 2024
253.1
7.9
2.1
263.1
1. Included within other fixed maturity securities are the Lloyd's central fund loans which are classified at Level (iii) within the fair value hierarchy.
Apart from the purchases and sales shown in the table above, there have been no other transfers into or out of the Level (iii) investments
during either the current period or the prior period.
Included within net unrealised gains (losses) recognised in profit or loss as shown in the table above, are net unrealised gains related to
Level (iii) investments still held as at 31 December 2024 of $5.0 million (31 December 2023 \u2013 $1.3 million).
12. Interest in structured entities
Consolidated structured entities
The Group provides capital contributions to the EBT to enable it to meet its obligations to employees under the various Group equity
based compensation plans (see note 7). The Group has a contractual agreement which may require it to provide financial support to the
EBT (see note 19 and note 22). As at 31 December 2024 the Company held $14.1 million (31 December 2023 \u2013 $8.0 million) of private
investment funds through LICL Investments Holdings Limited, a wholly owned subsidiary of LICL.
Unconsolidated structured entities in which the Group has an interest
As part of its investment activities, the Group invests in unconsolidated structured entities. The Group does not sponsor any of the
unconsolidated structured entities.
A summary of the Group\u2019s interest in unconsolidated structured entities is as follows:
2024
2023
As at 31 December
Investments\u00a0
$m
Interest in
associate
$m
Total\u00a0
$m
Investments\u00a0
$m
Interest in
associate
$m
Total\u00a0
$m
Fixed maturity securities
\u2022 Asset backed securities
271.7
\u2014
271.7
236.7
\u2014
236.7
\u2022 US government agency mortgage backed securities
326.5
\u2014
326.5
117.4
\u2014
117.4
\u2022 Non-agency mortgage backed securities
55.5
\u2014
55.5
11.5
\u2014
11.5
\u2022 Non-agency commercial mortgage backed
securities
20.5
\u2014
20.5
21.3
\u2014
21.3
Total fixed maturity securities
674.2
\u2014
674.2
386.9
\u2014
386.9
Investment funds
\u2022 Private investment funds
239.0
\u2014
239.0
157.6
\u2014
157.6
\u2022 Hedge funds
7.9
\u2014
7.9
9.9
\u2014
9.9
Total investment funds
246.9
\u2014
246.9
167.5
\u2014
167.5
Specialised investment vehicles
\u2022 KHL (note 15)
\u2014
9.1
9.1
\u2014
16.2
16.2
Total
921.1
9.1
930.2
554.4
16.2
570.6
The fixed maturity structured entities are created to meet specific investment needs of borrowers and investors which cannot be met
from standardised financial instruments available in the capital markets. As such, they provide liquidity to the borrowers in these markets
and provide investors with an opportunity to diversify risk away from standard fixed maturity securities. Whilst individual securities may
differ in structure, the principles of the instruments are broadly the same, and it is considered appropriate to aggregate the investments
into the categories detailed above.
The primary risks that the Group faces in respect of its investments in structured entities are similar to the risks it faces in respect of
other financial investments held on the consolidated statement of financial position, in that the fair value is determined by market supply
and demand. This is in turn driven by investor evaluation of the credit risk of the structure, and changes in the term structure of interest
rates, which change investors\u2019 expectation of the cash flows associated with the instrument, and therefore its value in the market. The
total assets of these structured entities are not considered meaningful for the purpose of understanding the related risks, and therefore
have not been presented.
The maximum potential exposure to loss in respect of these structured entities is the carrying value of the instruments that the Group
holds as at 31 December 2024. Generally, default rates would have to increase substantially from their current level before the Group
would suffer a loss on maturity, and this assessment is made prior to investing, and regularly through the holding period for the security.
The Group has not provided any financial or other support in addition to that described above as at either the current or prior reporting
date, and there is no intention to provide support in relation to any other unconsolidated structured entities in the foreseeable future.
As at 31 December 2024, the Group has a commitment of $50.0 million (31 December 2023 \u2013 $50.0 million) in respect of one credit
facility fund. The Group, through the fund, provides collateral for revolving credit facilities purchased at a discount from financial
institutions, and is at risk for its portion of any defaults on those revolving credit facilities. The Group\u2019s proportionate share of these
revolving credit facilities purchased by the funds as at 31 December 2024 is $6.1 million (31 December 2023 \u2013 $15.9 million), which
currently remains unfunded. The maximum exposure to the credit facility funds is $50.0 million. As at 31 December 2024, there have
been no defaults under these facilities.
", "dimensions": { "concept": "ifrs-full:DisclosureOfInterestsInOtherEntitiesExplanatory", "language": "en", "entity": "scheme:5493002UNUYXLHOWF752", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-270": { "value": "
12. Interest in structured entities
Consolidated structured entities
The Group provides capital contributions to the EBT to enable it to meet its obligations to employees under the various Group equity
based compensation plans (see note 7). The Group has a contractual agreement which may require it to provide financial support to the
EBT (see note 19 and note 22). As at 31 December 2024 the Company held $14.1 million (31 December 2023 \u2013 $8.0 million) of private
investment funds through LICL Investments Holdings Limited, a wholly owned subsidiary of LICL.
Unconsolidated structured entities in which the Group has an interest
As part of its investment activities, the Group invests in unconsolidated structured entities. The Group does not sponsor any of the
unconsolidated structured entities.
A summary of the Group\u2019s interest in unconsolidated structured entities is as follows:
2024
2023
As at 31 December
Investments\u00a0
$m
Interest in
associate
$m
Total\u00a0
$m
Investments\u00a0
$m
Interest in
associate
$m
Total\u00a0
$m
Fixed maturity securities
\u2022 Asset backed securities
271.7
\u2014
271.7
236.7
\u2014
236.7
\u2022 US government agency mortgage backed securities
326.5
\u2014
326.5
117.4
\u2014
117.4
\u2022 Non-agency mortgage backed securities
55.5
\u2014
55.5
11.5
\u2014
11.5
\u2022 Non-agency commercial mortgage backed
securities
20.5
\u2014
20.5
21.3
\u2014
21.3
Total fixed maturity securities
674.2
\u2014
674.2
386.9
\u2014
386.9
Investment funds
\u2022 Private investment funds
239.0
\u2014
239.0
157.6
\u2014
157.6
\u2022 Hedge funds
7.9
\u2014
7.9
9.9
\u2014
9.9
Total investment funds
246.9
\u2014
246.9
167.5
\u2014
167.5
Specialised investment vehicles
\u2022 KHL (note 15)
\u2014
9.1
9.1
\u2014
16.2
16.2
Total
921.1
9.1
930.2
554.4
16.2
570.6
The fixed maturity structured entities are created to meet specific investment needs of borrowers and investors which cannot be met
from standardised financial instruments available in the capital markets. As such, they provide liquidity to the borrowers in these markets
and provide investors with an opportunity to diversify risk away from standard fixed maturity securities. Whilst individual securities may
differ in structure, the principles of the instruments are broadly the same, and it is considered appropriate to aggregate the investments
into the categories detailed above.
The primary risks that the Group faces in respect of its investments in structured entities are similar to the risks it faces in respect of
other financial investments held on the consolidated statement of financial position, in that the fair value is determined by market supply
and demand. This is in turn driven by investor evaluation of the credit risk of the structure, and changes in the term structure of interest
rates, which change investors\u2019 expectation of the cash flows associated with the instrument, and therefore its value in the market. The
total assets of these structured entities are not considered meaningful for the purpose of understanding the related risks, and therefore
have not been presented.
The maximum potential exposure to loss in respect of these structured entities is the carrying value of the instruments that the Group
holds as at 31 December 2024. Generally, default rates would have to increase substantially from their current level before the Group
would suffer a loss on maturity, and this assessment is made prior to investing, and regularly through the holding period for the security.
The Group has not provided any financial or other support in addition to that described above as at either the current or prior reporting
date, and there is no intention to provide support in relation to any other unconsolidated structured entities in the foreseeable future.
As at 31 December 2024, the Group has a commitment of $50.0 million (31 December 2023 \u2013 $50.0 million) in respect of one credit
facility fund. The Group, through the fund, provides collateral for revolving credit facilities purchased at a discount from financial
institutions, and is at risk for its portion of any defaults on those revolving credit facilities. The Group\u2019s proportionate share of these
revolving credit facilities purchased by the funds as at 31 December 2024 is $6.1 million (31 December 2023 \u2013 $15.9 million), which
currently remains unfunded. The maximum exposure to the credit facility funds is $50.0 million. As at 31 December 2024, there have
been no defaults under these facilities.
", "dimensions": { "concept": "ifrs-full:DisclosureOfInformationAboutConsolidatedStructuredEntitiesExplanatory", "language": "en", "entity": "scheme:5493002UNUYXLHOWF752", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-271": { "value": "
13. Insurance contracts issued and reinsurance contracts held
A. Movements in the carrying amount - Insurance contract liabilities
The table below shows how the net carrying amounts of insurance contracts issued changed during the year ended 31 December 2024:
Liability for
remaining
coverage
Liability for incurred claims
Total\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
$m
Including loss
component\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
$m
Estimates of the
present value of
future cash flows\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
$m
Risk\u00a0 \u00a0
adjustment\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
$m
Net insurance contract liabilities (assets) as at 31 December 2023
57.8
1,411.5
354.4
1,823.7
Insurance revenue
(1,765.1)
\u2014
\u2014
(1,765.1)
Insurance service expenses
\u2022 Incurred claims and other insurance service expenses
2.3
897.4
120.8
1,020.5
\u2022 Changes in liability for incurred claims
\u2014
122.8
(166.5)
(43.7)
\u2022 Amortisation of insurance acquisition cash flows
209.3
\u2014
\u2014
209.3
Insurance service result before reinsurance contracts held
(1,553.5)
1,020.2
(45.7)
(579.0)
Finance expense from insurance contracts issued
\u2014
63.2
14.7
77.9
Effects of movements in exchange rates
(7.7)
(7.6)
(0.9)
(16.2)
Total changes in comprehensive income
(1,561.2)
1,075.8
(31.9)
(517.3)
Investment components
(57.0)
57.0
\u2014
\u2014
Other1
\u2014
0.1
1.0
1.1
Other changes
(57.0)
57.1
1.0
1.1
Premiums received net of insurance acquisition cash flows
1,623.1
\u2014
\u2014
1,623.1
Claims and other expenses paid
\u2014
(630.2)
\u2014
(630.2)
Total cash flows
1,623.1
(630.2)
\u2014
992.9
Net insurance contract liabilities (assets) as at 31 December 2024
62.7
1,914.2
323.5
2,300.4
1. Other includes the effect of the 2021 and prior underwriting years of account losses and loss adjustment expenses, and reinsurance recoveries, being
reinsured to close into the 2022 underwriting year of account, to the extent where the Group's syndicate participation has changed between those years
of account.
The liability for remaining coverage as at 31 December 2024 includes an onerous loss component of $3.3 million (31 December 2023 \u2013
$1.0 million).
The table below shows how the net carrying amounts of insurance contracts issued changed during the year ended 31 December 2023:
Liability for
remaining
coverage
Liability for incurred claims
Total\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
$m
Including loss
component\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
$m
Estimates of the
present value of
future cash flows
$m
Risk\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
adjustment\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
$m
Net insurance contract liabilities (assets) as at 31 December 2022
29.0
1,307.2
337.3
1,673.5
Insurance revenue
(1,519.9)
\u2014
\u2014
(1,519.9)
Insurance service expenses
\u2022 Incurred claims and other insurance service expenses
\u2014
624.5
93.0
717.5
\u2022 Changes in liability for incurred claims
\u2014
(111.6)
(97.9)
(209.5)
\u2022 Amortisation of insurance acquisition cash flows
188.2
\u2014
\u2014
188.2
Insurance service result before reinsurance contracts held
(1,331.7)
512.9
(4.9)
(823.7)
Finance expense from insurance contracts issued
\u2014
77.9
20.4
98.3
Effects of movements in exchange rates
1.0
18.3
1.6
20.9
Total changes in comprehensive income
(1,330.7)
609.1
17.1
(704.5)
Investment components
(47.1)
47.1
\u2014
\u2014
Other1
\u2014
5.4
\u2014
5.4
Other changes
(47.1)
52.5
\u2014
5.4
Premiums received net of insurance acquisition cash flows
1,406.6
\u2014
\u2014
1,406.6
Claims and other expenses paid
\u2014
(557.3)
\u2014
(557.3)
Total cash flows
1,406.6
(557.3)
\u2014
849.3
Net insurance contract liabilities (assets) as at 31 December 2023
57.8
1,411.5
354.4
1,823.7
1. Other includes the effect of the 2020 and prior underwriting years of account losses and loss adjustment expenses, and reinsurance recoveries, being
reinsured to close into the 2021 underwriting year of account, to the extent where the Group's syndicate participation has changed between those years
of account.
The liability for remaining coverage as at 31 December 2023 includes an onerous loss component of $1.0 million (31 December 2022 \u2013
$1.0 million).
B. Movements in the carrying amount - Reinsurance contracts held
The table below shows how the net carrying amounts of reinsurance contracts held changed during the year ended 31 December 2024:
Asset\u00a0 for
remaining
coverage
Asset\u00a0 for incurred claims
Total\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
$m
Including loss
component\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
$m
Estimates of
the present
value of future
cash flows\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
$m
Risk\u00a0
adjustment\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
$m
Net reinsurance contract (assets) liabilities as at 31 December 2023
42.5
(315.0)
(115.3)
(387.8)
Allocation of reinsurance premium paid
439.4
\u2014
\u2014
439.4
Amounts recoverable from reinsurers
\u2022 Recoveries of incurred claims and other insurance service expenses
\u2014
(107.0)
(13.5)
(120.5)
\u2022 Change in assets for incurred claims in relation to past service
\u2014
(165.8)
67.2
(98.6)
\u2022 Reinsurance expenses
(16.6)
\u2014
\u2014
(16.6)
\u2022 Recoveries and reversals of recoveries of losses on onerous underlying contracts
(1.3)
\u2014
\u2014
(1.3)
\u2022 Effect of changes in non-performing risk of reinsurers
\u2014
(3.3)
\u2014
(3.3)
Net expenses from reinsurance contracts held
421.5
(276.1)
53.7
199.1
Finance income from reinsurance contracts held
\u2014
(19.1)
(4.9)
(24.0)
Effects of movements in exchange rates
3.9
2.0
0.1
6.0
Total changes in comprehensive income
425.4
(293.2)
48.9
181.1
Other1
\u2014
(0.2)
(0.3)
(0.5)
Other changes
\u2014
(0.2)
(0.3)
(0.5)
Reinsurance premiums paid net of ceding commissions and other directly
attributable expenses
(416.6)
\u2014
\u2014
(416.6)
Recoveries from reinsurance
\u2014
66.6
\u2014
66.6
Total cash flows
(416.6)
66.6
\u2014
(350.0)
Net reinsurance contract (assets) liabilities as at 31 December 2024
51.3
(541.8)
(66.7)
(557.2)
1. Other includes the effect of the 2021 and prior underwriting years of account losses and loss adjustment expenses, and reinsurance recoveries, being
reinsured to close into the 2022 underwriting year of account, to the extent where the Group's syndicate participation has changed between those years
of account.
The asset for remaining coverage as at 31 December 2024 includes an onerous loss recovery component of $1.4 million (31 December
2023 \u2013 $0.1 million).
The table below shows how the net carrying amounts of reinsurance contracts held changed during the year ended 31 December 2023:
Asset\u00a0 for
remaining
coverage
Asset for incurred claims
Total\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
$m
Including loss
component\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
$m
Estimates of
the present
value of future
cash flows\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
$m
Risk\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
adjustment\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
$m
Net reinsurance contract (assets) liabilities as at 31 December 2022
41.9
(373.5)
(142.7)
(474.3)
Allocation of reinsurance premium paid
424.8
\u2014
\u2014
424.8
Amounts recoverable from reinsurers
\u2022 Recoveries of incurred claims and other insurance service expenses
(0.2)
(62.3)
(4.9)
(67.4)
\u2022 Change in assets for incurred claims in relation to past service
\u2014
63.6
39.6
103.2
\u2022 Reinsurance expenses
(16.3)
\u2014
\u2014
(16.3)
\u2022 Recoveries and reversals of recoveries of losses on onerous underlying contracts
0.2
\u2014
\u2014
0.2
\u2022 Effect of changes in non-performing risk of reinsurers
\u2014
(2.9)
\u2014
(2.9)
Net expenses from reinsurance contracts held
408.5
(1.6)
34.7
441.6
Finance income from reinsurance contracts held
\u2014
(24.4)
(7.3)
(31.7)
Effects of movements in exchange rates
(4.9)
(2.5)
\u2014
(7.4)
Total changes in comprehensive income
403.6
(28.5)
27.4
402.5
Other1
\u2014
(2.6)
\u2014
(2.6)
Other changes
\u2014
(2.6)
\u2014
(2.6)
Reinsurance premiums paid net of ceding commissions and other directly attributable
expenses
(403.0)
\u2014
\u2014
(403.0)
Recoveries from reinsurance
\u2014
89.6
\u2014
89.6
Total cash flows
(403.0)
89.6
\u2014
(313.4)
Net reinsurance contract (assets) liabilities as at 31 December 2023
42.5
(315.0)
(115.3)
(387.8)
1. Other includes the effect of the 2020 and prior underwriting years of account losses and loss adjustment expenses, and reinsurance recoveries, being
reinsured to close into the 2021 underwriting year of account, to the extent where the Group's syndicate participation has changed between those years
of account.
The asset for remaining coverage as at 31 December 2023 includes an onerous loss recovery component of $0.1 million (31 December
2022 \u2013 $0.1 million).
C. Claims development
The development of claims in respect of insurance contracts issued is indicative of the Group's ability to accurately estimate the
ultimate value of its liability for incurred claims. Actual claim payments are compared with previous estimates within the claims
development disclosures below for both the undiscounted liability for incurred claims, and the undiscounted asset for incurred claims,
as at 31 December 2024.
Accident year
2018
$m
2019
$m
2020
$m
2021
$m
2022
$m
2023
$m
2024
$m
Total\u00a0
$m
Liability for incurred claims - undiscounted
Estimate of ultimate liability1
At end of accident year
456.2
357.9
475.5
828.4
1,137.4
815.0
1,145.6
One year later
479.0
353.5
435.6
759.5
1,046.0
773.8
Two years later
445.7
320.8
388.0
727.7
1,143.0
Three years later
429.3
308.1
387.6
677.9
Four years later
403.0
312.3
384.2
Five years later
394.5
317.2
Six years later
391.6
Cumulative claims and other directly attributable expense paid
(363.8)
(272.4)
(299.6)
(533.3)
(534.3)
(315.6)
(199.2)
Liability for incurred claims - undiscounted
27.8
44.8
84.6
144.6
608.7
458.2
946.4
2,315.1
Liability for incurred claims - undiscounted - prior years
72.6
Effect of discounting
(231.9)
Non-distinct investment components
81.9
Liability for incurred claims
2,237.7
1. Adjusted for the revaluation of foreign currencies as at the 31 December 2024 exchange rates.
Accident year
2018
$m
2019
$m
2020
$m
2021
$m
2022
$m
2023
$m
2024
$m
Total\u00a0
$m
Asset for incurred claims - undiscounted
Estimate of ultimate asset1
At end of accident year
123.7
102.9
83.4
185.8
349.8
69.2
128.6
One year later
164.3
104.2
79.4
165.4
285.3
64.1
Two years later
157.6
92.0
72.1
151.0
415.9
Three years later
149.0
94.4
72.6
140.7
Four years later
140.1
98.3
71.7
Five years later
136.4
99.1
Six years later
138.3
Cumulative claim recoveries and other directly attributable
expenses paid
(130.2)
(71.8)
(63.1)
(60.1)
(104.7)
(4.2)
(1.9)
Asset for incurred claims - undiscounted
8.1
27.3
8.6
80.6
311.2
59.9
126.7
622.4
Asset for incurred claims - undiscounted - prior years
25.0
Effect of discounting
(38.9)
Asset for incurred claims
608.5
1. Adjusted for the revaluation of foreign currencies as at the 31 December 2024 exchange rates
During 2024, the Group experienced net losses (undiscounted, including reinstatement premiums) from catastrophe, weather and large
loss events totalling $214.1 million. Catastrophe and weather losses were $122.7 million with hurricane Milton the most significant,
together with the combined impact of hurricane Helene, hurricane Debby, storm Boris and the Calgary hailstorms. During 2024, the
Group also experienced net losses (undiscounted, including reinstatement premiums) from large risk events totalling $91.4 million. The
MV Dali Baltimore bridge collision loss, which occurred in the first quarter, was the most significant. None of these large risk losses were
individually material for the Group.
In comparison, during 2023 the Group experienced net losses (undiscounted, including reinstatement premiums) from catastrophe,
weather and large loss events totalling $106.1 million.
Favourable prior accident year loss development, including the undiscounted net movement in loss reserves, reinstatement premiums
and expense provisions, was $121.1 million during 2024. This was primarily due to attritional loss experience in respect of the 2023
accident year, together with catastrophe event reserve releases on the 2022 and 2021 accident years.
In comparison, favourable prior accident year development during 2023 of $78.8 million was primarily the result of favourable attritional
loss experience and reserve releases on the 2022 accident year.
The prior accident year loss development for both 2024 and 2023 also benefited from the net release of expense provisions and
reductions in outwards reinstatement premiums. This reduction was slightly more pronounced in 2024.
The estimation of the ultimate loss and loss adjustment expense liability is a complex process which incorporates a significant amount
of judgement. Loss information after these catastrophe and large risk loss type of events can take some time to emerge. As additional
information becomes available, the Group\u2019s actual ultimate net losses may vary, perhaps materially, from current estimates. It is
reasonably possible that uncertainties inherent in the reserving process, delays in insureds or ceding companies reporting losses to the
Group, together with the potential for unforeseen adverse developments, could lead to a material change in estimated losses and loss
adjustment expenses.
There were no other individually significant net loss events for the years ended 31 December 2024 and 31 December 2023.
", "dimensions": { "concept": "ifrs-full:DisclosureOfInsuranceContractsExplanatory", "language": "en", "entity": "scheme:5493002UNUYXLHOWF752", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-272": { "value": "
B. Movements in the carrying amount - Reinsurance contracts held
The table below shows how the net carrying amounts of reinsurance contracts held changed during the year ended 31 December 2024:
Asset\u00a0 for
remaining
coverage
Asset\u00a0 for incurred claims
Total\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
$m
Including loss
component\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
$m
Estimates of
the present
value of future
cash flows\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
$m
Risk\u00a0
adjustment\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
$m
Net reinsurance contract (assets) liabilities as at 31 December 2023
42.5
(315.0)
(115.3)
(387.8)
Allocation of reinsurance premium paid
439.4
\u2014
\u2014
439.4
Amounts recoverable from reinsurers
\u2022 Recoveries of incurred claims and other insurance service expenses
\u2014
(107.0)
(13.5)
(120.5)
\u2022 Change in assets for incurred claims in relation to past service
\u2014
(165.8)
67.2
(98.6)
\u2022 Reinsurance expenses
(16.6)
\u2014
\u2014
(16.6)
\u2022 Recoveries and reversals of recoveries of losses on onerous underlying contracts
(1.3)
\u2014
\u2014
(1.3)
\u2022 Effect of changes in non-performing risk of reinsurers
\u2014
(3.3)
\u2014
(3.3)
Net expenses from reinsurance contracts held
421.5
(276.1)
53.7
199.1
Finance income from reinsurance contracts held
\u2014
(19.1)
(4.9)
(24.0)
Effects of movements in exchange rates
3.9
2.0
0.1
6.0
Total changes in comprehensive income
425.4
(293.2)
48.9
181.1
Other1
\u2014
(0.2)
(0.3)
(0.5)
Other changes
\u2014
(0.2)
(0.3)
(0.5)
Reinsurance premiums paid net of ceding commissions and other directly
attributable expenses
(416.6)
\u2014
\u2014
(416.6)
Recoveries from reinsurance
\u2014
66.6
\u2014
66.6
Total cash flows
(416.6)
66.6
\u2014
(350.0)
Net reinsurance contract (assets) liabilities as at 31 December 2024
51.3
(541.8)
(66.7)
(557.2)
1. Other includes the effect of the 2021 and prior underwriting years of account losses and loss adjustment expenses, and reinsurance recoveries, being
reinsured to close into the 2022 underwriting year of account, to the extent where the Group's syndicate participation has changed between those years
of account.
The asset for remaining coverage as at 31 December 2024 includes an onerous loss recovery component of $1.4 million (31 December
2023 \u2013 $0.1 million).
The table below shows how the net carrying amounts of reinsurance contracts held changed during the year ended 31 December 2023:
Asset\u00a0 for
remaining
coverage
Asset for incurred claims
Total\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
$m
Including loss
component\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
$m
Estimates of
the present
value of future
cash flows\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
$m
Risk\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
adjustment\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
$m
Net reinsurance contract (assets) liabilities as at 31 December 2022
41.9
(373.5)
(142.7)
(474.3)
Allocation of reinsurance premium paid
424.8
\u2014
\u2014
424.8
Amounts recoverable from reinsurers
\u2022 Recoveries of incurred claims and other insurance service expenses
(0.2)
(62.3)
(4.9)
(67.4)
\u2022 Change in assets for incurred claims in relation to past service
\u2014
63.6
39.6
103.2
\u2022 Reinsurance expenses
(16.3)
\u2014
\u2014
(16.3)
\u2022 Recoveries and reversals of recoveries of losses on onerous underlying contracts
0.2
\u2014
\u2014
0.2
\u2022 Effect of changes in non-performing risk of reinsurers
\u2014
(2.9)
\u2014
(2.9)
Net expenses from reinsurance contracts held
408.5
(1.6)
34.7
441.6
Finance income from reinsurance contracts held
\u2014
(24.4)
(7.3)
(31.7)
Effects of movements in exchange rates
(4.9)
(2.5)
\u2014
(7.4)
Total changes in comprehensive income
403.6
(28.5)
27.4
402.5
Other1
\u2014
(2.6)
\u2014
(2.6)
Other changes
\u2014
(2.6)
\u2014
(2.6)
Reinsurance premiums paid net of ceding commissions and other directly attributable
expenses
(403.0)
\u2014
\u2014
(403.0)
Recoveries from reinsurance
\u2014
89.6
\u2014
89.6
Total cash flows
(403.0)
89.6
\u2014
(313.4)
Net reinsurance contract (assets) liabilities as at 31 December 2023
42.5
(315.0)
(115.3)
(387.8)
1. Other includes the effect of the 2020 and prior underwriting years of account losses and loss adjustment expenses, and reinsurance recoveries, being
reinsured to close into the 2021 underwriting year of account, to the extent where the Group's syndicate participation has changed between those years
of account.
The asset for remaining coverage as at 31 December 2023 includes an onerous loss recovery component of $0.1 million (31 December
2022 \u2013 $0.1 million).
", "dimensions": { "concept": "ifrs-full:DisclosureOfReinsuranceExplanatory", "language": "en", "entity": "scheme:5493002UNUYXLHOWF752", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-273": { "value": "
14. Provision for deferred tax
As at 31 December
2024
$m
2023
$m
Equity based compensation
(11.1)
(8.1)
Syndicate underwriting profits
11.8
3.5
Syndicate participation rights
18.8
18.8
Other temporary differences
2.8
2.0
Net deferred tax liability
22.3
16.2
Deferred tax assets are recognised to the extent that realising the related tax benefit through future taxable profits is probable. It is
anticipated that sufficient taxable profits will be available within the Group in 2025 and subsequent years to utilise the deferred tax assets
recognised when the underlying temporary differences reverse, and the tax losses carried forward.
For the years ended 31 December 2024 and 31 December 2023, the Group had no uncertain tax positions (see note 9). The table below
reconciles the movements within the net deferred tax liability. All deferred tax assets and liabilities are classified as non-current.
As at 31 December
2024
$m
2023
$m
Opening net deferred tax liability
16.2
10.3
Deferred tax charge for the period
5.8
3.8
Adjustment in respect of prior period deferred tax
1.1
2.5
Deferred tax in equity
(0.8)
(0.4)
Closing net deferred tax liability
22.3
16.2
OECD global minimum tax and Bermuda corporate income tax
Subsidiary companies in a number of jurisdictions in which the Group operates were subject to a global minimum tax of 15% from 1
January 2024. The legislation brings into effect the Income Inclusion Rule and Qualified Domestic Minimum Top-up Tax, although
these have not had any impact on the Group.
As a response to the Pillar Two reform, legislation was passed in Bermuda to implement a CIT regime from 1 January 2025. To the
extent the Bermuda CIT results in an effective tax rate of less than 15%, the shortfall in tax will be collected by applying the Pillar Two
undertaxed payments rule, which was implemented on 1 January 2025. Any shortfall in tax will be collected in a jurisdiction that has
implemented the undertaxed payments rule and in which the Group has operating subsidiaries. For Lancashire this is likely to be the UK;
however, based on its limited international presence and provided it continues to meet the relevant conditions, Lancashire expects to
benefit from exclusion from the undertaxed payment rule for a period of five years, from 2025 to 2029.
The Group is also not expected to become subject to Bermuda CIT until 1 January 2030, provided it continues to meet the relevant
conditions within the Bermuda CIT rules that means groups with a limited international presence are excluded from scope for a period
of up to five years.
At 31 December 2023, in light of emerging guidance and uncertainty as to the potential impact for the Group, no decision had yet been
taken as to whether to take advantage of available tax deductions arising from the Economic Transition Adjustment, a transitional
measure introduced by Bermuda CIT, or to use the opt out available. Management's current assessment is that these uncertainties have
not diminished and, as a result its position as at 31 December 2024 is unchanged and no deferred tax asset has been recognised.
Management will continue to monitor developments during 2025.
The recently published, post balance sheet, administrative guidance by the OECD in respect of Pillar Two has no impact on the Group's
balance sheet position at 31 December 2024.", "dimensions": { "concept": "ifrs-full:DisclosureOfDeferredTaxesExplanatory", "language": "en", "entity": "scheme:5493002UNUYXLHOWF752", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-274": { "value": "
15. Investment in associate
The Group holds an interest in the preference shares of each segregated account of KHL. KHL is a company incorporated in Bermuda
and its operating subsidiary, KRL, is authorised by the BMA as a Special Purpose Insurer. KRL commenced writing insurance business on
1 January 2014. As at 31 December 2024, the carrying value of the Group\u2019s investment in KHL was $9.1 million (31 December 2023 \u2013
$16.2 million). The Group\u2019s share of profit for KHL for 2024 was $8.6 million (2023 \u2013 $12.1 million).
Key financial information for KHL is as follows:
2024
$m
2023
$m
Assets
230.6
315.7
Liabilities
159.1
220.2
Shareholders' equity
71.5
95.5
Insurance revenue
(1.2)
(0.1)
Comprehensive income
37.0
62.4
The Group has the power to participate in the operational and financial policy decisions of KHL and KRL, and has therefore classified its
investment in KHL as an investment in associate.
Refer to note 22 for details of transactions between the Group and its associate.
", "dimensions": { "concept": "ifrs-full:DisclosureOfSignificantInvestmentsInAssociatesExplanatory", "language": "en", "entity": "scheme:5493002UNUYXLHOWF752", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-275": { "value": "
16. Leases
As at 31 December 2024, the Group leases seven (31 December 2023 \u2013 five) properties and various items of office equipment.
Right-of-use assets
The Group had the following right-of-use assets in relation to the leases it has entered into:
Property
Equipment
Total
$m
$m
$m
Net book value as at 31 December 2022
20.1
0.2
20.3
Additions
0.2
\u2014
0.2
Modifications
2.2
\u2014
2.2
Depreciation charge
(3.3)
(0.1)
(3.4)
Net book value as at 31 December 2023
19.2
0.1
19.3
Additions
0.2
0.3
0.5
Modifications
0.2
\u2014
0.2
Depreciation charge
(3.7)
(0.1)
(3.8)
Net book value as at 31 December 2024
15.9
0.3
16.2
Lease liabilities
As at 31 December
2024
$m
2023
$m
Due in less than one year
5.8
4.5
Due between one and five years
14.6
15.9
Due in more than five years
5.8
9.5
Total undiscounted lease liabilities
26.2
29.9
Total discounted lease liabilities as per the consolidated statement of financial position
22.3
24.7
Current
4.9
3.2
Non-current
17.4
21.5
During the year ended 31 December 2024, the Group recognised a net non-cash increase of $1.6 million (31 December 2023 \u2013 $5.2
million) in respect of its lease liabilities.\u00a0
The Group does not face a significant liquidity risk regarding its lease liabilities.
Amounts recognised in profit or loss
For the year ended 31 December
2024
$m
2023
$m
Depreciation of right-of-use assets
3.8
3.4
Interest expense on lease liabilities
1.3
1.5
Expenses relating to short-term leases and variable leases
1.5
1.2
Total
6.6
6.1
Total lease payments amounted to $4.0 million for the year ended 31 December 2024 (31 December 2023 \u2013 $3.8 million).
", "dimensions": { "concept": "ifrs-full:DisclosureOfLeasesExplanatory", "language": "en", "entity": "scheme:5493002UNUYXLHOWF752", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-276": { "value": "
Right-of-use assets
The Group had the following right-of-use assets in relation to the leases it has entered into:
Property
Equipment
Total
$m
$m
$m
Net book value as at 31 December 2022
20.1
0.2
20.3
Additions
0.2
\u2014
0.2
Modifications
2.2
\u2014
2.2
Depreciation charge
(3.3)
(0.1)
(3.4)
Net book value as at 31 December 2023
19.2
0.1
19.3
Additions
0.2
0.3
0.5
Modifications
0.2
\u2014
0.2
Depreciation charge
(3.7)
(0.1)
(3.8)
Net book value as at 31 December 2024
15.9
0.3
16.2
Amounts recognised in profit or loss
For the year ended 31 December
2024
$m
2023
$m
Depreciation of right-of-use assets
3.8
3.4
Interest expense on lease liabilities
1.3
1.5
Expenses relating to short-term leases and variable leases
1.5
1.2
Total
6.6
6.1
", "dimensions": { "concept": "ifrs-full:DisclosureOfQuantitativeInformationAboutRightofuseAssetsExplanatory", "language": "en", "entity": "scheme:5493002UNUYXLHOWF752", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-279": { "value": "
17. Intangible assets
Syndicate
participation\u00a0
rights\u00a0
$m
Goodwill\u00a0
$m
Internally
generated
intangible assets
$m
Total\u00a0
$m
Net book value as at 31 December 2022
87.7
71.2
13.5
172.4
Additions
3.3
\u2014
7.0
10.3
Amortisation
\u2014
\u2014
(0.2)
(0.2)
Impairment
\u2014
\u2014
(1.4)
(1.4)
Net book value as at 31 December 2023
91.0
71.2
18.9
181.1
Additions
11.2
\u2014
5.9
17.1
Amortisation
\u2014
\u2014
(1.2)
(1.2)
Net book value as at 31 December 2024
102.2
71.2
23.6
197.0
Syndicate participation rights and goodwill
During the year ended 31 December 2024, the Group's corporate member acquired additional participation rights in Syndicate 2010,
which took the Group's share on the 2025 underwriting year of account to 79.7% (2024 year of account \u2013 72.1%). Indefinite life
intangible assets are tested annually for impairment. For the purpose of impairment testing, the syndicate participation rights and
goodwill have been allocated to the LSL CGU.
The recoverable amount of the LSL CGU is determined based on its value in use. Value in use is calculated using the projected cash
flows of the LSL CGU. These are approved by management and cover a three-year period. The most significant assumptions used to
derive the projected cash flows include an assessment of business prospects, business plans approved by Lloyd's, expected future
market conditions, premium growth rates, outwards reinsurance expenditure, projected loss ratios, investment returns, and where
applicable, consideration of the potential impact of climate change. The Group accepts insurance risk for periods primarily of one year.
This provides the Group with the ability to re-evaluate the impact of climate risk on its insurance portfolio on an annual basis. The
Group can reprice the relevant elements of risk, and also reset exposure levels to consider new data regarding the frequency and
severity of elemental catastrophe events, where appropriate.
A pre-tax discount rate of 8.9% (2023 \u2013 8.9%) has been used to discount the projected cash flows. This discount rate reflects the current
market assessment of the time value of money and the risks specific to the asset for which the projected cash flow estimates have not
been adjusted. The discount rate is determined with reference to a combination of factors, including the Group's expected weighted
average cost of equity and cost of borrowing. This has been calculated using independent measurements of the risk-free rate of return
and is indicative of the Group\u2019s risk profile relative to the market. This current pre-tax discount rate has remained consistent with the
prior period discount rate, and reflects a consistent overall cost of equity and cost of borrowing within the Group's weighted average
cost of capital calculation for both periods. Within the cost of equity calculation there have been offsetting movements within the risk-
free rate, beta value, and equity risk premium rate assumptions. The growth rate used to extrapolate the cash flows is 2.5% (2023 \u2013 2.5%)
and is based on historical growth rates, as well as management\u2019s best estimate of future growth rates, taking into account current
economic market conditions.
Sensitivity testing has been performed to model the impact of reasonably possible changes in input assumptions to the base case
impairment analysis and headroom. The discount rate has been flexed to 100 basis points above the central assumption (resulting in a
15% reduction in headroom), the growth rate has been flexed to 100 basis points below the central assumption (resulting in a 14%
reduction in headroom), and the pre-tax projected cash flows have been flexed to 500 basis points below the central assumption
(resulting in a 6% reduction in headroom). Within these ranges, the recoverable amount remains above the current carrying amount.
No impairment loss has been recognised for the years ended 31 December 2024 and 31 December 2023.
Internally generated intangible assets
Internally generated intangible assets represent directly attributable costs incurred in the development phase of implementing cloud-
based software to support the Group's target operating model. As at 31 December 2024, certain of the internally generated intangible
assets are available for use and have commenced amortisation. During the year ended 31 December 2024, management considered the
relevant indicators of impairment at an individual intangible asset level and performed an impairment review where it was determined
appropriate. No impairment loss has been recognised for the year ended 31 December 2024 (2023 \u2013 $1.4 million).
", "dimensions": { "concept": "ifrs-full:DisclosureOfIntangibleAssetsAndGoodwillExplanatory", "language": "en", "entity": "scheme:5493002UNUYXLHOWF752", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-278": { "value": "
17. Intangible assets
Syndicate
participation\u00a0
rights\u00a0
$m
Goodwill\u00a0
$m
Internally
generated
intangible assets
$m
Total\u00a0
$m
Net book value as at 31 December 2022
87.7
71.2
13.5
172.4
Additions
3.3
\u2014
7.0
10.3
Amortisation
\u2014
\u2014
(0.2)
(0.2)
Impairment
\u2014
\u2014
(1.4)
(1.4)
Net book value as at 31 December 2023
91.0
71.2
18.9
181.1
Additions
11.2
\u2014
5.9
17.1
Amortisation
\u2014
\u2014
(1.2)
(1.2)
Net book value as at 31 December 2024
102.2
71.2
23.6
197.0
Syndicate participation rights and goodwill
During the year ended 31 December 2024, the Group's corporate member acquired additional participation rights in Syndicate 2010,
which took the Group's share on the 2025 underwriting year of account to 79.7% (2024 year of account \u2013 72.1%). Indefinite life
intangible assets are tested annually for impairment. For the purpose of impairment testing, the syndicate participation rights and
goodwill have been allocated to the LSL CGU.
The recoverable amount of the LSL CGU is determined based on its value in use. Value in use is calculated using the projected cash
flows of the LSL CGU. These are approved by management and cover a three-year period. The most significant assumptions used to
derive the projected cash flows include an assessment of business prospects, business plans approved by Lloyd's, expected future
market conditions, premium growth rates, outwards reinsurance expenditure, projected loss ratios, investment returns, and where
applicable, consideration of the potential impact of climate change. The Group accepts insurance risk for periods primarily of one year.
This provides the Group with the ability to re-evaluate the impact of climate risk on its insurance portfolio on an annual basis. The
Group can reprice the relevant elements of risk, and also reset exposure levels to consider new data regarding the frequency and
severity of elemental catastrophe events, where appropriate.
A pre-tax discount rate of 8.9% (2023 \u2013 8.9%) has been used to discount the projected cash flows. This discount rate reflects the current
market assessment of the time value of money and the risks specific to the asset for which the projected cash flow estimates have not
been adjusted. The discount rate is determined with reference to a combination of factors, including the Group's expected weighted
average cost of equity and cost of borrowing. This has been calculated using independent measurements of the risk-free rate of return
and is indicative of the Group\u2019s risk profile relative to the market. This current pre-tax discount rate has remained consistent with the
prior period discount rate, and reflects a consistent overall cost of equity and cost of borrowing within the Group's weighted average
cost of capital calculation for both periods. Within the cost of equity calculation there have been offsetting movements within the risk-
free rate, beta value, and equity risk premium rate assumptions. The growth rate used to extrapolate the cash flows is 2.5% (2023 \u2013 2.5%)
and is based on historical growth rates, as well as management\u2019s best estimate of future growth rates, taking into account current
economic market conditions.
Sensitivity testing has been performed to model the impact of reasonably possible changes in input assumptions to the base case
impairment analysis and headroom. The discount rate has been flexed to 100 basis points above the central assumption (resulting in a
15% reduction in headroom), the growth rate has been flexed to 100 basis points below the central assumption (resulting in a 14%
reduction in headroom), and the pre-tax projected cash flows have been flexed to 500 basis points below the central assumption
(resulting in a 6% reduction in headroom). Within these ranges, the recoverable amount remains above the current carrying amount.
No impairment loss has been recognised for the years ended 31 December 2024 and 31 December 2023.
Internally generated intangible assets
Internally generated intangible assets represent directly attributable costs incurred in the development phase of implementing cloud-
based software to support the Group's target operating model. As at 31 December 2024, certain of the internally generated intangible
assets are available for use and have commenced amortisation. During the year ended 31 December 2024, management considered the
relevant indicators of impairment at an individual intangible asset level and performed an impairment review where it was determined
appropriate. No impairment loss has been recognised for the year ended 31 December 2024 (2023 \u2013 $1.4 million).
", "dimensions": { "concept": "ifrs-full:DisclosureOfGoodwillExplanatory", "language": "en", "entity": "scheme:5493002UNUYXLHOWF752", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-277": { "value": "
17. Intangible assets
Syndicate
participation\u00a0
rights\u00a0
$m
Goodwill\u00a0
$m
Internally
generated
intangible assets
$m
Total\u00a0
$m
Net book value as at 31 December 2022
87.7
71.2
13.5
172.4
Additions
3.3
\u2014
7.0
10.3
Amortisation
\u2014
\u2014
(0.2)
(0.2)
Impairment
\u2014
\u2014
(1.4)
(1.4)
Net book value as at 31 December 2023
91.0
71.2
18.9
181.1
Additions
11.2
\u2014
5.9
17.1
Amortisation
\u2014
\u2014
(1.2)
(1.2)
Net book value as at 31 December 2024
102.2
71.2
23.6
197.0
Syndicate participation rights and goodwill
During the year ended 31 December 2024, the Group's corporate member acquired additional participation rights in Syndicate 2010,
which took the Group's share on the 2025 underwriting year of account to 79.7% (2024 year of account \u2013 72.1%). Indefinite life
intangible assets are tested annually for impairment. For the purpose of impairment testing, the syndicate participation rights and
goodwill have been allocated to the LSL CGU.
The recoverable amount of the LSL CGU is determined based on its value in use. Value in use is calculated using the projected cash
flows of the LSL CGU. These are approved by management and cover a three-year period. The most significant assumptions used to
derive the projected cash flows include an assessment of business prospects, business plans approved by Lloyd's, expected future
market conditions, premium growth rates, outwards reinsurance expenditure, projected loss ratios, investment returns, and where
applicable, consideration of the potential impact of climate change. The Group accepts insurance risk for periods primarily of one year.
This provides the Group with the ability to re-evaluate the impact of climate risk on its insurance portfolio on an annual basis. The
Group can reprice the relevant elements of risk, and also reset exposure levels to consider new data regarding the frequency and
severity of elemental catastrophe events, where appropriate.
A pre-tax discount rate of 8.9% (2023 \u2013 8.9%) has been used to discount the projected cash flows. This discount rate reflects the current
market assessment of the time value of money and the risks specific to the asset for which the projected cash flow estimates have not
been adjusted. The discount rate is determined with reference to a combination of factors, including the Group's expected weighted
average cost of equity and cost of borrowing. This has been calculated using independent measurements of the risk-free rate of return
and is indicative of the Group\u2019s risk profile relative to the market. This current pre-tax discount rate has remained consistent with the
prior period discount rate, and reflects a consistent overall cost of equity and cost of borrowing within the Group's weighted average
cost of capital calculation for both periods. Within the cost of equity calculation there have been offsetting movements within the risk-
free rate, beta value, and equity risk premium rate assumptions. The growth rate used to extrapolate the cash flows is 2.5% (2023 \u2013 2.5%)
and is based on historical growth rates, as well as management\u2019s best estimate of future growth rates, taking into account current
economic market conditions.
Sensitivity testing has been performed to model the impact of reasonably possible changes in input assumptions to the base case
impairment analysis and headroom. The discount rate has been flexed to 100 basis points above the central assumption (resulting in a
15% reduction in headroom), the growth rate has been flexed to 100 basis points below the central assumption (resulting in a 14%
reduction in headroom), and the pre-tax projected cash flows have been flexed to 500 basis points below the central assumption
(resulting in a 6% reduction in headroom). Within these ranges, the recoverable amount remains above the current carrying amount.
No impairment loss has been recognised for the years ended 31 December 2024 and 31 December 2023.
Internally generated intangible assets
Internally generated intangible assets represent directly attributable costs incurred in the development phase of implementing cloud-
based software to support the Group's target operating model. As at 31 December 2024, certain of the internally generated intangible
assets are available for use and have commenced amortisation. During the year ended 31 December 2024, management considered the
relevant indicators of impairment at an individual intangible asset level and performed an impairment review where it was determined
appropriate. No impairment loss has been recognised for the year ended 31 December 2024 (2023 \u2013 $1.4 million).
", "dimensions": { "concept": "ifrs-full:DisclosureOfIntangibleAssetsExplanatory", "language": "en", "entity": "scheme:5493002UNUYXLHOWF752", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-280": { "value": "Indefinite life
intangible assets are tested annually for impairment. For the purpose of impairment testing, the syndicate participation rights and
goodwill have been allocated to the LSL CGU.
The recoverable amount of the LSL CGU is determined based on its value in use. Value in use is calculated using the projected cash
flows of the LSL CGU. These are approved by management and cover a three-year period. The most significant assumptions used to
derive the projected cash flows include an assessment of business prospects, business plans approved by Lloyd's, expected future
market conditions, premium growth rates, outwards reinsurance expenditure, projected loss ratios, investment returns, and where
applicable, consideration of the potential impact of climate change. The Group accepts insurance risk for periods primarily of one year.
This provides the Group with the ability to re-evaluate the impact of climate risk on its insurance portfolio on an annual basis. The
Group can reprice the relevant elements of risk, and also reset exposure levels to consider new data regarding the frequency and
severity of elemental catastrophe events, where appropriate.
A pre-tax discount rate of 8.9% (2023 \u2013 8.9%) has been used to discount the projected cash flows. This discount rate reflects the current
market assessment of the time value of money and the risks specific to the asset for which the projected cash flow estimates have not
been adjusted. The discount rate is determined with reference to a combination of factors, including the Group's expected weighted
average cost of equity and cost of borrowing. This has been calculated using independent measurements of the risk-free rate of return
and is indicative of the Group\u2019s risk profile relative to the market. This current pre-tax discount rate has remained consistent with the
prior period discount rate, and reflects a consistent overall cost of equity and cost of borrowing within the Group's weighted average
cost of capital calculation for both periods. Within the cost of equity calculation there have been offsetting movements within the risk-
free rate, beta value, and equity risk premium rate assumptions. The growth rate used to extrapolate the cash flows is 2.5% (2023 \u2013 2.5%)
and is based on historical growth rates, as well as management\u2019s best estimate of future growth rates, taking into account current
economic market conditions.
Sensitivity testing has been performed to model the impact of reasonably possible changes in input assumptions to the base case
impairment analysis and headroom. The discount rate has been flexed to 100 basis points above the central assumption (resulting in a
15% reduction in headroom), the growth rate has been flexed to 100 basis points below the central assumption (resulting in a 14%
reduction in headroom), and the pre-tax projected cash flows have been flexed to 500 basis points below the central assumption
(resulting in a 6% reduction in headroom). Within these ranges, the recoverable amount remains above the current carrying amount.
No impairment loss has been recognised for the years ended 31 December 2024 and 31 December 2023.
During the year ended 31 December 2024, management considered the
relevant indicators of impairment at an individual intangible asset level and performed an impairment review where it was determined
appropriate. No impairment loss has been recognised for the year ended 31 December 2024 (2023 \u2013 $1.4 million).
", "dimensions": { "concept": "ifrs-full:DisclosureOfImpairmentOfAssetsExplanatory", "language": "en", "entity": "scheme:5493002UNUYXLHOWF752", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-281": { "value": "
18. Long-term debt and financing arrangements
Long-term debt
During the year ended 31 December 2021, LHL issued $450.0 million (being the aggregate principal amount) of 5.625% fixed-rate reset
junior subordinated notes, repayable on 18 September 2041. The long-term debt was issued in two tranches forming part of the same
series of notes, with $400.0 million issued on 18 March 2021, and $50.0 million issued on 31 March 2021. Interest is payable semi-
annually in arrears on 18 March and 18 September of each year. The fixed interest rate will reset on 18 September 2031 and each reset
date thereafter, at a rate per annum equal to the prevailing five-year treasury rate, plus a credit spread of 4.08% and a 100 basis point
step-up.
The carrying value of the Company's issued $450.0 million junior subordinated notes are shown below:
As at 31 December
2024
$m
2023
$m
Carrying value in consolidated statement of financial position
447.0
446.6
Fair value (classified within Level (ii) of fair value hierarchy)
417.9
388.3
Accrued interest (included within other payables)
7.2
7.2
LHL has the option to redeem some or all of the junior subordinated notes, prior to the maturity date. There are no negative or financial
covenants attached to the issued junior subordinated notes. Refer to note 8 for details of the interest expense for the year included
within financing costs.
Letters of credit
As both LICL and LUK are non-admitted (re)insurers throughout the US, the terms of certain contracts require them to provide LOCs to
policyholders as collateral. These LOCs are required to be fully collateralised.
LICL has a $150.0 million (31 December 2023 - $250.0 million) syndicated collateralised credit facility, which is guaranteed by LHL. The
credit facility was renewed in 2024 and the expiry date extended to 28 March 2028. The facility is available for the issue of LOCs to
ceding companies. The facility is also available for LICL to issue LOCs to LUK to collateralise certain insurance obligations.
The terms of the $150.0 million syndicated collateralised credit facility include standard default and cross-default provisions, which
require certain covenants to be adhered to. These include the following:
\u2022 an A.M. Best financial strength rating of at least B++;
\u2022 a maximum debt to capital ratio of 30.0%, where the junior subordinated notes are excluded as debt from this calculation;
\u2022 unsecured indebtedness incurred by LHL or LICL must be subordinated in right of payment to the obligations and liabilities of LHL and
LICL under the facility; and
\u2022 a maximum aggregated indebtedness incurred by CCL 1998, LHL or LICL in the ordinary course of business in connection with
coming into line requirements of $400.0 million.
The following LOCs have been issued by the Group:
As at 31 December
2024
$m
2023
$m
Issued to third parties
3.5
5.6
A syndicated uncollateralised LOC facility for an original amount of $215.5 million and a $70.0 million collateral pledge facility have been
in place since 25 October 2023 and 5 December 2023, respectively. The syndicated uncollateralised LOC facility was increased to
$265.5 million on 31 October 2024. They are available for utilisation by LICL and guaranteed by LHL for FAL purposes. As at 31
December 2024, a $265.5 million LOC was issued under the syndicated uncollateralised LOC facility, due to expire on 31 December
2028, and $70.0 million of agreed collateral had been deposited with Lloyd's, due to expire on 31 December 2025.
The terms of these facilities include standard default and cross-default provisions, which require certain covenants to be adhered to.
These include the following:
\u2022 an A.M. Best financial strength rating of at least B++;
\u2022 a maximum debt to capital ratio of 30.0%, where the junior subordinated notes are excluded as debt from this calculation; and
\u2022 maintenance of a minimum net worth requirement.
As at all reporting dates, the Group was in compliance with all covenants under these facilities.
Syndicate bank facilities
As at 31 December 2024 and 31 December 2023, Syndicate 2010 had in place a $60.0 million LOC catastrophe facility. The facility is
available to assist in paying claims and providing the gross funding of catastrophes for Syndicate 2010. A separate uncommitted
overdraft facility of $20.0 million is also available to Syndicate 2010.
There are no balances outstanding under the syndicate bank facilities as at 31 December 2024 and 31 December 2023.
Trust and restricted balances
The Group has several trust arrangements in place in favour of policyholders and ceding insurers, to comply with the security
requirements of certain reinsurance contracts and/or the regulatory requirements of certain jurisdictions.
In 2012, LICL established an MBRT to collateralise certain reinsurance liabilities associated with US domiciled clients. LICL continues to
maintain its accredited or trusteed reinsurer status in those US states where there are outstanding liabilities collateralised through the
MBRT. However, following LICL's approval as a reciprocal reinsurer in all relevant US states and territories, the MBRT is no longer
required for new business written with policyholders domiciled in the US and its relevant territories where LICL has received reciprocal
reinsurer approval.
The MBRT is subject to the relevant US state rules and regulations, and the respective deeds of trust. These rules and regulations include
minimum capital funding requirements, investment guidelines, capital distribution restrictions, and regulatory reporting requirements.
The Group holds a portion of its assets as FAL to support the underwriting capacity of both Syndicate 2010 and Syndicate 3010. FAL is
restricted in its use and can only be drawn down by Lloyd's to pay cash calls to the syndicates supported by the Group. FAL
requirements are formally assessed and revised twice a year.
In addition to the FAL, certain cash and investments held by Syndicate 2010 and Syndicate 3010 are only available for paying the
syndicates\u2019 claims and expenses. See capital management risk disclosures for more information regarding the capital requirements for
Syndicate 2010 and Syndicate 3010.
As at and for the years ended 31 December 2024 and 31 December 2023, the Group was in compliance with all covenants under its
trust facilities.
The following cash and cash equivalents, and investment balances are held in trust collateral accounts in favour of third parties, or are
otherwise restricted:
2024
2023
As at 31 December
Cash and cash
equivalents\u00a0
$m
Fixed\u00a0 maturity
securities\u00a0
$m
Total
$m
Cash and\u00a0 cash
equivalents\u00a0
$m
Fixed maturity
securities\u00a0
$m
Total
$m
FAL
0.3
137.5
137.8
7.0
245.3
252.3
MBRT accounts
1.5
217.4
218.9
0.2
266.0
266.2
Syndicate accounts
57.8
111.9
169.7
61.9
127.9
189.8
In trust accounts for policyholders
48.9
151.3
200.2
112.2
47.0
159.2
In favour of LOCs
2.6
6.4
9.0
2.4
17.3
19.7
Loan to Lloyd's Central Fund
\u2014
2.1
2.1
\u2014
3.2
3.2
Total
111.1
626.6
737.7
183.7
706.7
890.4
", "dimensions": { "concept": "ifrs-full:DisclosureOfDebtSecuritiesExplanatory", "language": "en", "entity": "scheme:5493002UNUYXLHOWF752", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-282": { "value": "
19. Share capital and other reserves
Authorised common shares of $0.50 each
Number
$m
As at 31 December 2024 and 2023
3,000,000,000
1,500.0
Allocated, called up and fully paid common shares of $0.50 each
Number
$m
As at 31 December 2024 and 2023
244,010,007
122.0
Own shares held in Trust
Total number
of own shares
$m
As at 31 December 2022
5,676,437
34.0
Shares distributed
(704,407)
(4.3)
As at 31 December 2023
4,972,030
29.7
Shares distributed
(1,546,818)
(9.2)
As at 31 December 2024
3,425,212
20.5
The number of common shares in issue with voting rights (allocated share capital, less shares held in treasury or pursuant to a custody
arrangement) as at 31 December 2024 was 244,010,007 (31 December 2023 \u2013 244,010,007). As at 31 December 2024 there were no
shares held in treasury (31 December 2023 \u2013 none). Common shares in issue (other than shares held in treasury) carry voting rights
which rank pari passu, and the same rights to receive any dividends and other distributions declared, made or paid by the Company.
Share repurchases
At the AGM held on 1 May 2024, LHL\u2019s shareholders approved a renewal of the Company's Repurchase Programme authorising the
repurchase of a maximum of 24,401,000 common shares, with such authority to expire on the conclusion of the 2025 AGM or, if earlier,
15 months from the date the resolution approving the Repurchase Programme was passed.
During the year ended 31 December 2024, no shares were repurchased by the Company under the Repurchase Programme (2023 - nil).
Dividends
The Board of Directors has authorised the following dividends:
Type
Per share amount
Record date
Payment date
$m
Final
$0.10
5 May 2023
2 Jun 2023
23.9
Interim
$0.05
18 Aug 2023
15 Sep 2023
11.9
Special
$0.50
17 Nov 2023
15 Dec 2023
119.5
Special
$0.50
15 Mar 2024
12 Apr 2024
119.9
Final
$0.15
10 May 2024
7 Jun 2024
36.0
Interim
$0.075
16 Aug 2024
13 Sep 2024
18.0
Special
$0.75
15 Nov 2024
13 Dec 2024
180.3
Other reserves
The Group's other reserves of $1,242.3 million (31 December 2023 \u2013 $1,233.2 million) comprises contributed surplus and an equity
based compensation reserve. The equity based compensation reserve comprises $49.1 million (31 December 2023 \u2013 $42.6 million) of
this balance and relates to the Group's equity compensation plans (see note 7).", "dimensions": { "concept": "ifrs-full:DisclosureOfShareCapitalReservesAndOtherEquityInterestExplanatory", "language": "en", "entity": "scheme:5493002UNUYXLHOWF752", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-283": { "value": "
Authorised common shares of $0.50 each
Number
$m
As at 31 December 2024 and 2023
3,000,000,000
1,500.0
Allocated, called up and fully paid common shares of $0.50 each
Number
$m
As at 31 December 2024 and 2023
244,010,007
122.0
Own shares held in Trust
Total number
of own shares
$m
As at 31 December 2022
5,676,437
34.0
Shares distributed
(704,407)
(4.3)
As at 31 December 2023
4,972,030
29.7
Shares distributed
(1,546,818)
(9.2)
As at 31 December 2024
3,425,212
20.5
The number of common shares in issue with voting rights (allocated share capital, less shares held in treasury or pursuant to a custody
arrangement) as at 31 December 2024 was 244,010,007 (31 December 2023 \u2013 244,010,007). As at 31 December 2024 there were no
shares held in treasury (31 December 2023 \u2013 none). Common shares in issue (other than shares held in treasury) carry voting rights
which rank pari passu, and the same rights to receive any dividends and other distributions declared, made or paid by the Company.
Share repurchases
At the AGM held on 1 May 2024, LHL\u2019s shareholders approved a renewal of the Company's Repurchase Programme authorising the
repurchase of a maximum of 24,401,000 common shares, with such authority to expire on the conclusion of the 2025 AGM or, if earlier,
15 months from the date the resolution approving the Repurchase Programme was passed.
During the year ended 31 December 2024, no shares were repurchased by the Company under the Repurchase Programme (2023 - nil).
", "dimensions": { "concept": "ifrs-full:DisclosureOfIssuedCapitalExplanatory", "language": "en", "entity": "scheme:5493002UNUYXLHOWF752", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-284": { "value": "
Dividends
The Board of Directors has authorised the following dividends:
Type
Per share amount
Record date
Payment date
$m
Final
$0.10
5 May 2023
2 Jun 2023
23.9
Interim
$0.05
18 Aug 2023
15 Sep 2023
11.9
Special
$0.50
17 Nov 2023
15 Dec 2023
119.5
Special
$0.50
15 Mar 2024
12 Apr 2024
119.9
Final
$0.15
10 May 2024
7 Jun 2024
36.0
Interim
$0.075
16 Aug 2024
13 Sep 2024
18.0
Special
$0.75
15 Nov 2024
13 Dec 2024
180.3
", "dimensions": { "concept": "ifrs-full:DisclosureOfDividendsExplanatory", "language": "en", "entity": "scheme:5493002UNUYXLHOWF752", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-285": { "value": "0.10", "decimals": 2, "dimensions": { "concept": "ifrs-full:DividendsRecognisedAsDistributionsToOwnersPerShare", "entity": "scheme:5493002UNUYXLHOWF752", "period": "2023-05-05T00:00:00/2023-05-06T00:00:00", "unit": "iso4217:USD/xbrli:shares" } }, "f-286": { "value": "0.05", "decimals": 2, "dimensions": { "concept": "ifrs-full:DividendsRecognisedAsDistributionsToOwnersPerShare", "entity": "scheme:5493002UNUYXLHOWF752", "period": "2023-08-18T00:00:00/2023-08-19T00:00:00", "unit": "iso4217:USD/xbrli:shares" } }, "f-287": { "value": "0.50", "decimals": 2, "dimensions": { "concept": "ifrs-full:DividendsRecognisedAsDistributionsToOwnersPerShare", "entity": "scheme:5493002UNUYXLHOWF752", "period": "2023-11-17T00:00:00/2023-11-18T00:00:00", "unit": "iso4217:USD/xbrli:shares" } }, "f-288": { "value": "0.50", "decimals": 2, "dimensions": { "concept": "ifrs-full:DividendsRecognisedAsDistributionsToOwnersPerShare", "entity": "scheme:5493002UNUYXLHOWF752", "period": "2024-03-15T00:00:00/2024-03-16T00:00:00", "unit": "iso4217:USD/xbrli:shares" } }, "f-289": { "value": "0.15", "decimals": 2, "dimensions": { "concept": "ifrs-full:DividendsRecognisedAsDistributionsToOwnersPerShare", "entity": "scheme:5493002UNUYXLHOWF752", "period": "2024-05-10T00:00:00/2024-05-11T00:00:00", "unit": "iso4217:USD/xbrli:shares" } }, "f-290": { "value": "0.075", "decimals": 3, "dimensions": { "concept": "ifrs-full:DividendsRecognisedAsDistributionsToOwnersPerShare", "entity": "scheme:5493002UNUYXLHOWF752", "period": "2024-08-16T00:00:00/2024-08-17T00:00:00", "unit": "iso4217:USD/xbrli:shares" } }, "f-291": { "value": "0.75", "decimals": 2, "dimensions": { "concept": "ifrs-full:DividendsRecognisedAsDistributionsToOwnersPerShare", "entity": "scheme:5493002UNUYXLHOWF752", "period": "2024-11-15T00:00:00/2024-11-16T00:00:00", "unit": "iso4217:USD/xbrli:shares" } }, "f-292": { "value": "
Other reserves
The Group's other reserves of $1,242.3 million (31 December 2023 \u2013 $1,233.2 million) comprises contributed surplus and an equity
based compensation reserve. The equity based compensation reserve comprises $49.1 million (31 December 2023 \u2013 $42.6 million) of
this balance and relates to the Group's equity compensation plans (see note 7).", "dimensions": { "concept": "ifrs-full:DisclosureOfReservesAndOtherEquityInterestExplanatory", "language": "en", "entity": "scheme:5493002UNUYXLHOWF752", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-293": { "value": "
20. Earnings per share
The following reflects the profit and share data used in the basic and diluted earnings per share computations:
For the year ended 31 December
2024
$m
2023
$m
Profit after tax
321.3
321.5
2024
Number
of shares
2023
Number
of shares
Basic weighted average number of shares
239,948,359
238,811,761
Dilutive effect of RSS
6,826,530
5,192,761
Diluted weighted average number of shares
246,774,889
244,004,522
Earnings per share
2024
2023
Basic
$1.34
$1.35
Diluted
$1.30
$1.32
Equity based compensation awards are only treated as dilutive when their conversion to common shares would decrease the earnings
per share, or increase the loss per share, from continuing operations. Unvested restricted shares without performance criteria are
therefore included in the number of potentially dilutive shares. Incremental shares from ordinary restricted share options, where
relevant performance criteria have not been met, are not included in the calculation of dilutive shares.
", "dimensions": { "concept": "ifrs-full:DisclosureOfEarningsPerShareExplanatory", "language": "en", "entity": "scheme:5493002UNUYXLHOWF752", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-296": { "value": "
21. Commitments and contingencies
Credit facility fund
As at 31 December 2024 , the Group has a commitment of $50.0 million (31 December 2023 \u2013 $50.0 million) relating to one credit
facility fund (refer to note 12).
Private investment funds
The table below shows the dates on which the Group committed to invest in six different private investment funds and the amount of
the total commitment that remains undrawn as at 31 December 2024.
Amount and date of commitment to invest in private investment fund
Undrawn
commitment
$m
GBP 50 million on 20 November 2024
38.2
USD 50 million on 31 July 2024
45.0
Euro 40 million on 11 January 2024
18.1
USD 34 million on 28 July 2021
8.5
USD 25 million on 9 December 2020
0.5
USD 25 million on 5 November 2019
1.0
Total
111.3
Mandatory offer for third-party capacity of Syndicate 2010
As a result of paying consideration to acquire capacity in the 2024 capacity auctions, Cathedral Capital (1998) Limited will have a
syndicate premium limit on managed Syndicate 2010 of greater than 75% of the syndicate's allocated capacity for the 2025 year of
account. It is therefore required, under Paragraph 2 of the Mandatory Offer Byelaw, to make a mandatory offer during 2025 to the
remaining members of the syndicate to acquire all of the unaligned prospective participations of Syndicate 2010 for the 2026 and each
subsequent underwriting year.\u00a0
Legal proceedings and regulations
The Group operates in the insurance industry and is therefore, from time to time, subject to legal proceedings in the normal course of
business. While it is not practicable to estimate or determine the final results of all pending or threatened legal proceedings,
management does not believe that such proceedings (including litigation) will have a material effect on the Group's results and financial
position.
", "dimensions": { "concept": "ifrs-full:DisclosureOfContingentLiabilitiesExplanatory", "language": "en", "entity": "scheme:5493002UNUYXLHOWF752", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-295": { "value": "
21. Commitments and contingencies
Credit facility fund
As at 31 December 2024 , the Group has a commitment of $50.0 million (31 December 2023 \u2013 $50.0 million) relating to one credit
facility fund (refer to note 12).
Private investment funds
The table below shows the dates on which the Group committed to invest in six different private investment funds and the amount of
the total commitment that remains undrawn as at 31 December 2024.
Amount and date of commitment to invest in private investment fund
Undrawn
commitment
$m
GBP 50 million on 20 November 2024
38.2
USD 50 million on 31 July 2024
45.0
Euro 40 million on 11 January 2024
18.1
USD 34 million on 28 July 2021
8.5
USD 25 million on 9 December 2020
0.5
USD 25 million on 5 November 2019
1.0
Total
111.3
Mandatory offer for third-party capacity of Syndicate 2010
As a result of paying consideration to acquire capacity in the 2024 capacity auctions, Cathedral Capital (1998) Limited will have a
syndicate premium limit on managed Syndicate 2010 of greater than 75% of the syndicate's allocated capacity for the 2025 year of
account. It is therefore required, under Paragraph 2 of the Mandatory Offer Byelaw, to make a mandatory offer during 2025 to the
remaining members of the syndicate to acquire all of the unaligned prospective participations of Syndicate 2010 for the 2026 and each
subsequent underwriting year.\u00a0
Legal proceedings and regulations
The Group operates in the insurance industry and is therefore, from time to time, subject to legal proceedings in the normal course of
business. While it is not practicable to estimate or determine the final results of all pending or threatened legal proceedings,
management does not believe that such proceedings (including litigation) will have a material effect on the Group's results and financial
position.
", "dimensions": { "concept": "ifrs-full:DisclosureOfCommitmentsExplanatory", "language": "en", "entity": "scheme:5493002UNUYXLHOWF752", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-294": { "value": "
21. Commitments and contingencies
Credit facility fund
As at 31 December 2024 , the Group has a commitment of $50.0 million (31 December 2023 \u2013 $50.0 million) relating to one credit
facility fund (refer to note 12).
Private investment funds
The table below shows the dates on which the Group committed to invest in six different private investment funds and the amount of
the total commitment that remains undrawn as at 31 December 2024.
Amount and date of commitment to invest in private investment fund
Undrawn
commitment
$m
GBP 50 million on 20 November 2024
38.2
USD 50 million on 31 July 2024
45.0
Euro 40 million on 11 January 2024
18.1
USD 34 million on 28 July 2021
8.5
USD 25 million on 9 December 2020
0.5
USD 25 million on 5 November 2019
1.0
Total
111.3
Mandatory offer for third-party capacity of Syndicate 2010
As a result of paying consideration to acquire capacity in the 2024 capacity auctions, Cathedral Capital (1998) Limited will have a
syndicate premium limit on managed Syndicate 2010 of greater than 75% of the syndicate's allocated capacity for the 2025 year of
account. It is therefore required, under Paragraph 2 of the Mandatory Offer Byelaw, to make a mandatory offer during 2025 to the
remaining members of the syndicate to acquire all of the unaligned prospective participations of Syndicate 2010 for the 2026 and each
subsequent underwriting year.\u00a0
Legal proceedings and regulations
The Group operates in the insurance industry and is therefore, from time to time, subject to legal proceedings in the normal course of
business. While it is not practicable to estimate or determine the final results of all pending or threatened legal proceedings,
management does not believe that such proceedings (including litigation) will have a material effect on the Group's results and financial
position.
", "dimensions": { "concept": "ifrs-full:DisclosureOfCommitmentsAndContingentLiabilitiesExplanatory", "language": "en", "entity": "scheme:5493002UNUYXLHOWF752", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-297": { "value": "
22. Related party disclosures
The Group's consolidated financial statements include LHL and the entities listed below:
Name
Principal Business
Domicile
Subsidiaries1
CCHL
Holding company
United Kingdom
CCL2
Holding company
United Kingdom
CCL 19983
Lloyd\u2019s corporate member
United Kingdom
CCL 1999
Non-trading
United Kingdom
CUL
Non-trading
United Kingdom
LAPL
Non-trading
Australia
LICLIHL
Holding company
Bermuda
LCM
Insurance agent services
Bermuda
LCMMSL
Support services
United Kingdom
LICL
General insurance business
Bermuda
LUS
Surplus line broker
United States of America
LIHL
Holding company
United Kingdom
LHUS
Holding company
United States of America
LIMSL
Insurance mediation activities
United Kingdom
LISL
Support services
United Kingdom
LHAPL
Holding company
Australia
LMSCL
Support services
Canada
LSL
Lloyd\u2019s managing agent
United Kingdom
LUAPL
Lloyd's service company
Australia
LUK
General insurance business
United Kingdom
Associate
KHL4 (and its subsidiary KRL)
Holding company / General insurance business
Bermuda
Other controlled entities
EBT
Trust
Jersey
1. Unless otherwise stated, the Group owns 100% of the ordinary share capital and voting rights in its subsidiaries listed above.
2. CCL was dissolved on 24 September 2024.
3. 72.1% participation on the 2024 year of account, and 79.7% participation on the 2025 year of account, for Syndicate 2010.
4. The Group has a 14.1% holding through its interest in the preference shares of each segregated account of KHL.
The EBT was established to assist in the administration of the Group's employee equity based compensation schemes. While the Group
does not have legal ownership of the EBT, and the ability of the Group to influence the actions of the EBT is limited by the trust deed in
place, the EBT was set up by the Group with the sole purpose of assisting in the administration of these schemes, and it is\u00a0 therefore
considered to be controlled by the Group, and is consolidated within the Group's consolidated statement of comprehensive income
and consolidated statement of financial position.
The Group has a Loan Facility Agreement (the \u2018Facility\u2019) with JTC PLC, the trustee of the EBT. The Facility is an interest free revolving
credit facility under which the trustee can request advances on demand, within the terms of the Facility, up to a maximum aggregate
amount of $80.0 million. The Facility may only be used by the trustee for the purpose of achieving the objectives of the EBT. During the
year ended 31 December 2024, the Group had made advances of $nil (31 December 2023 \u2013 $nil) to the EBT under the terms of the
Facility.
During the year ended 31 December 2024, no common shares were donated by the Company to the EBT (2023 - none). LHL did not
issue any common shares to the EBT during the years ended 31 December 2024 or 31 December 2023 .
LICL holds $266.4 million (31 December 2023 \u2013 $215.5 million) of cash and cash equivalents, fixed maturity securities, and accrued
interest in trust for the benefit of LUK relating to intra-group reinsurance agreements. In addition, LICL provides 100% of the required
FAL to support the underwriting activities of Syndicate 2010 and Syndicate 3010. LICL holds $137.8 million (31 December 2023 \u2013 $252.3
million) of cash and cash equivalents and fixed maturity securities in FAL, with the remaining FAL requirement covered by a LOC and a
collateral pledge facility (refer to note 18).
Mr Maloney and his spouse acquired 100.0% of the shares in Nameco on 7 November 2016. Nameco provides capacity to a number of Lloyd's
syndicates, including Syndicate 2010 which is managed by LSL. Nameco has provided $0.2 million of capacity to Syndicate 2010 for the 2025
year of account (2024 year of account \u2013 $0.2 million). Mr Maloney receives a proportionate share of the underwriting results of Syndicate 2010
to which he is contractually entitled through his participation. These transactions occurred on an arm's length basis.
Key management compensation
Remuneration for key management, the Group\u2019s Executive and Non-Executive Directors, was as follows:
For the year ended 31 December
2024
$m
2023
$m
Short-term compensation
7.9
4.9
Equity based compensation
6.0
2.5
Directors' fees
2.6
2.5
Total
16.5
9.9
Non-Executive Directors do not receive any benefits in addition to their agreed fees, and do not participate in any of the Group\u2019s
incentive, performance or pension plans.
Transactions with the Group's associate and the associate's subsidiary
In 2013, LCM entered into an underwriting services agreement with KRL and KHL to provide various insurance-related services. In the
year ended 31 December 2024 and 31 December 2023, no new underwriting cycles were entered into and LCM recognised profit
commission of $0.8 million (31 December 2023 \u2013 none). During 2024, KHL returned $15.7 million (2023 \u2013 $55.6 million) of capital to
the Group.
As at 31 December 2024, the consolidated financial statements includes reinsurance contract assets of $16.0 million (31 December
2023 \u2013 $19.1.million) due from KRL, together with a corresponding net expense of $3.1 million (2023 \u2013 $1.0.million).", "dimensions": { "concept": "ifrs-full:DisclosureOfRelatedPartyExplanatory", "language": "en", "entity": "scheme:5493002UNUYXLHOWF752", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-298": { "value": "
The Group's consolidated financial statements include LHL and the entities listed below:
Name
Principal Business
Domicile
Subsidiaries1
CCHL
Holding company
United Kingdom
CCL2
Holding company
United Kingdom
CCL 19983
Lloyd\u2019s corporate member
United Kingdom
CCL 1999
Non-trading
United Kingdom
CUL
Non-trading
United Kingdom
LAPL
Non-trading
Australia
LICLIHL
Holding company
Bermuda
LCM
Insurance agent services
Bermuda
LCMMSL
Support services
United Kingdom
LICL
General insurance business
Bermuda
LUS
Surplus line broker
United States of America
LIHL
Holding company
United Kingdom
LHUS
Holding company
United States of America
LIMSL
Insurance mediation activities
United Kingdom
LISL
Support services
United Kingdom
LHAPL
Holding company
Australia
LMSCL
Support services
Canada
LSL
Lloyd\u2019s managing agent
United Kingdom
LUAPL
Lloyd's service company
Australia
LUK
General insurance business
United Kingdom
Associate
KHL4 (and its subsidiary KRL)
Holding company / General insurance business
Bermuda
Other controlled entities
EBT
Trust
Jersey
1. Unless otherwise stated, the Group owns 100% of the ordinary share capital and voting rights in its subsidiaries listed above.
2. CCL was dissolved on 24 September 2024.
3. 72.1% participation on the 2024 year of account, and 79.7% participation on the 2025 year of account, for Syndicate 2010.
4. The Group has a 14.1% holding through its interest in the preference shares of each segregated account of KHL.
The EBT was established to assist in the administration of the Group's employee equity based compensation schemes. While the Group
does not have legal ownership of the EBT, and the ability of the Group to influence the actions of the EBT is limited by the trust deed in
place, the EBT was set up by the Group with the sole purpose of assisting in the administration of these schemes, and it is\u00a0 therefore
considered to be controlled by the Group, and is consolidated within the Group's consolidated statement of comprehensive income
and consolidated statement of financial position.
The Group has a Loan Facility Agreement (the \u2018Facility\u2019) with JTC PLC, the trustee of the EBT. The Facility is an interest free revolving
credit facility under which the trustee can request advances on demand, within the terms of the Facility, up to a maximum aggregate
amount of $80.0 million. The Facility may only be used by the trustee for the purpose of achieving the objectives of the EBT. During the
year ended 31 December 2024, the Group had made advances of $nil (31 December 2023 \u2013 $nil) to the EBT under the terms of the
Facility.
During the year ended 31 December 2024, no common shares were donated by the Company to the EBT (2023 - none). LHL did not
issue any common shares to the EBT during the years ended 31 December 2024 or 31 December 2023 .
LICL holds $266.4 million (31 December 2023 \u2013 $215.5 million) of cash and cash equivalents, fixed maturity securities, and accrued
interest in trust for the benefit of LUK relating to intra-group reinsurance agreements. In addition, LICL provides 100% of the required
FAL to support the underwriting activities of Syndicate 2010 and Syndicate 3010. LICL holds $137.8 million (31 December 2023 \u2013 $252.3
million) of cash and cash equivalents and fixed maturity securities in FAL, with the remaining FAL requirement covered by a LOC and a
collateral pledge facility (refer to note 18).
Mr Maloney and his spouse acquired 100.0% of the shares in Nameco on 7 November 2016. Nameco provides capacity to a number of Lloyd's
syndicates, including Syndicate 2010 which is managed by LSL. Nameco has provided $0.2 million of capacity to Syndicate 2010 for the 2025
year of account (2024 year of account \u2013 $0.2 million). Mr Maloney receives a proportionate share of the underwriting results of Syndicate 2010
to which he is contractually entitled through his participation. These transactions occurred on an arm's length basis.
Transactions with the Group's associate and the associate's subsidiary
In 2013, LCM entered into an underwriting services agreement with KRL and KHL to provide various insurance-related services. In the
year ended 31 December 2024 and 31 December 2023, no new underwriting cycles were entered into and LCM recognised profit
commission of $0.8 million (31 December 2023 \u2013 none). During 2024, KHL returned $15.7 million (2023 \u2013 $55.6 million) of capital to
the Group.
As at 31 December 2024, the consolidated financial statements includes reinsurance contract assets of $16.0 million (31 December
2023 \u2013 $19.1.million) due from KRL, together with a corresponding net expense of $3.1 million (2023 \u2013 $1.0.million).", "dimensions": { "concept": "ifrs-full:DisclosureOfSignificantInvestmentsInSubsidiariesExplanatory", "language": "en", "entity": "scheme:5493002UNUYXLHOWF752", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-299": { "value": "
Key management compensation
Remuneration for key management, the Group\u2019s Executive and Non-Executive Directors, was as follows:
For the year ended 31 December
2024
$m
2023
$m
Short-term compensation
7.9
4.9
Equity based compensation
6.0
2.5
Directors' fees
2.6
2.5
Total
16.5
9.9
Non-Executive Directors do not receive any benefits in addition to their agreed fees, and do not participate in any of the Group\u2019s
incentive, performance or pension plans.
", "dimensions": { "concept": "ifrs-full:DisclosureOfInformationAboutKeyManagementPersonnelExplanatory", "language": "en", "entity": "scheme:5493002UNUYXLHOWF752", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-300": { "value": "
Transactions with the Group's associate and the associate's subsidiary
In 2013, LCM entered into an underwriting services agreement with KRL and KHL to provide various insurance-related services. In the
year ended 31 December 2024 and 31 December 2023, no new underwriting cycles were entered into and LCM recognised profit
commission of $0.8 million (31 December 2023 \u2013 none). During 2024, KHL returned $15.7 million (2023 \u2013 $55.6 million) of capital to
the Group.
As at 31 December 2024, the consolidated financial statements includes reinsurance contract assets of $16.0 million (31 December
2023 \u2013 $19.1.million) due from KRL, together with a corresponding net expense of $3.1 million (2023 \u2013 $1.0.million).", "dimensions": { "concept": "ifrs-full:DisclosureOfTransactionsBetweenRelatedPartiesExplanatory", "language": "en", "entity": "scheme:5493002UNUYXLHOWF752", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-301": { "value": "
23. Subsequent events
Dividends
On 5 March 2025, Lancashire\u2019s Board of Directors declared a final ordinary dividend of $0.15 (approximately \u00a30.12) per common share,
subject to a shareholder vote of approval at the AGM to be held on 30 April 2025, which will result in an aggregate payment of
approximately $36.0 million. The dividend will be paid in Pounds Sterling on 13 June 2025 (the \u201cDividend Payment Date\u201d) to
shareholders of record on 16 May 2025 (the \u201cRecord Date\u201d) using the \u00a3 / $ spot market exchange rate at 12 noon London time on the
Record Date.
Lancashire's Board of Directors has declared a special dividend of $0.25 per common share (approximately \u00a30.20 per common share at
the current exchange rate), which will result in an aggregate payment of approximately $60.0 million. The dividend will be paid in
Pounds Sterling on 11 April 2025 (the \"Dividend Payment Date\") to shareholders of record on 14 March 2025 (the \"Record Date\") using
the \u00a3 / $ spot market exchange rate at 12 noon London time on the Record Date.", "dimensions": { "concept": "ifrs-full:DisclosureOfEventsAfterReportingPeriodExplanatory", "language": "en", "entity": "scheme:5493002UNUYXLHOWF752", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-302": { "value": "0.15", "decimals": 2, "dimensions": { "concept": "ifrs-full:DividendsProposedOrDeclaredBeforeFinancialStatementsAuthorisedForIssueButNotRecognisedAsDistributionToOwnersPerShare", "entity": "scheme:5493002UNUYXLHOWF752", "period": "2025-05-16T00:00:00/2025-05-17T00:00:00", "unit": "iso4217:USD/xbrli:shares" } }, "f-303": { "value": "0.12", "decimals": 2, "dimensions": { "concept": "ifrs-full:DividendsProposedOrDeclaredBeforeFinancialStatementsAuthorisedForIssueButNotRecognisedAsDistributionToOwnersPerShare", "entity": "scheme:5493002UNUYXLHOWF752", "period": "2025-05-16T00:00:00/2025-05-17T00:00:00", "unit": "iso4217:GBP/xbrli:shares" } }, "f-304": { "value": "36000000.0", "decimals": -5, "dimensions": { "concept": "ifrs-full:DividendsProposedOrDeclaredBeforeFinancialStatementsAuthorisedForIssueButNotRecognisedAsDistributionToOwners", "entity": "scheme:5493002UNUYXLHOWF752", "period": "2025-05-16T00:00:00/2025-05-17T00:00:00", "unit": "iso4217:USD" } }, "f-305": { "value": "0.25", "decimals": 2, "dimensions": { "concept": "ifrs-full:DividendsProposedOrDeclaredBeforeFinancialStatementsAuthorisedForIssueButNotRecognisedAsDistributionToOwnersPerShare", "entity": "scheme:5493002UNUYXLHOWF752", "period": "2025-03-14T00:00:00/2025-03-15T00:00:00", "unit": "iso4217:USD/xbrli:shares" } }, "f-306": { "value": "0.20", "decimals": 2, "dimensions": { "concept": "ifrs-full:DividendsProposedOrDeclaredBeforeFinancialStatementsAuthorisedForIssueButNotRecognisedAsDistributionToOwnersPerShare", "entity": "scheme:5493002UNUYXLHOWF752", "period": "2025-03-14T00:00:00/2025-03-15T00:00:00", "unit": "iso4217:GBP/xbrli:shares" } }, "f-307": { "value": "60000000.0", "decimals": -5, "dimensions": { "concept": "ifrs-full:DividendsProposedOrDeclaredBeforeFinancialStatementsAuthorisedForIssueButNotRecognisedAsDistributionToOwners", "entity": "scheme:5493002UNUYXLHOWF752", "period": "2025-03-14T00:00:00/2025-03-15T00:00:00", "unit": "iso4217:USD" } }, "f-308": { "value": "Lancashire Holdings Limited", "dimensions": { "concept": "ifrs-full:NameOfReportingEntityOrOtherMeansOfIdentification", "language": "en", "entity": "scheme:5493002UNUYXLHOWF752", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-309": { "value": "Limited", "dimensions": { "concept": "ifrs-full:LegalFormOfEntity", "language": "en", "entity": "scheme:5493002UNUYXLHOWF752", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } } } }