As of 31 December 2018
Return on Equity: 2.4% RoE, including dividends declared 2018.
Aim: The Group’s aim is to provide shareholders with a risk-adjusted return on equity of 13 per cent in excess of risk-free rate over the insurance cycle.
Measurement: The return on equity is measured by management as the internal rate of return of the increase in fully converted book value per share in the period, adjusted for dividends.
Combined Ratio: 92.2% combined ratio achieved in 2018.
Aim: The Group aims to price its business to ensure that the combined ratio in any year is less than 100 per cent.
Measurement: The combined ratio is the ratio of total costs to total net earned premium and is a measure of an insurance company’s operating performance. It is calculated as the sum of the loss ratio, the acquisition cost ratio and the expense ratio.
Total Investment Return: 0.8% total return on investments in 2018.
Aim: The Group’s primary investment objectives are to preserve capital and provide adequate liquidity to support the Group’s payment of claims and other obligations.
Measurement: Total investment return measures investment income and net realised and unrealised gains and losses produced by the Group's managed investment portfolio.
Total Shareholder Return: -12.7% total shareholder return in 2018.
Aim: The Group’s aim is to provide an attractive risk-adjusted return to shareholders over the long term. The Group’s aim is a long-term goal, recognising that the cyclicality and volatility of both the insurance market and the financial markets in general will impact management’s ability to maximise the share multiple in the immediate term.
Measurement: The total shareholder return is measured in terms of the internal rate of return of the increase in share price in the period, measured in U.S. dollars and adjusted for dividends.
Percentage of Profit Returned to Shareholders: 284% of comprehensive income returned to shareholders in 2018.
Aim: The Group aims to carry the right level of capital to match attractive underwriting opportunities, utilising an optimal mix of capital tools. Over time, through pro-active and flexible capital management across the cycle, we aim to generate optimum returns for shareholders
Measurement: The percentage of profit returned to shareholders equals the total capital returned to shareholders through dividends and share repurchases in a given year, divided by the Group’s profit after tax.
Dividend Yield: 4.5% dividend yield in 2018.
Aim: The Group aims to maintain a strong balance sheet whilst generating an attractive risk-adjusted return for shareholders. Lancashire’s dividend yield demonstrates our ability to operate nimbly through the cycle through the active capital management that underpins our business model. We pay annual ordinary dividends, and when we cannot utilise our profits by retaining them as additional capital we return them to shareholders by way of special dividends.
Measurement: Dividend yield is measured by dividing the annual dividends per share by the share price on the last day of the given year.