Lancashire Holdings Limited (LRE) Earnings Call Transcript & Summary

Hello, and welcome to the Lancashire Holdings Limited's Q1 2022 results. [Operator Instructions] Please note, this call is being recorded. Today, I am pleased to present Alex Maloney, Group CEO; Natalie Kershaw, Group CFO; Paul Gregory, Group CUO. I will now hand over to Alex. Please begin.

Okay. Thank you, operator. Good morning, everyone, and thanks for joining our call. As we've done before, I will give you a brief overview. We will then talk you through the market trends we are seeing. While Natalie talks about the financials. Finally, I'll give you some thoughts on what we're seeing for the rest of 2022. If we start with Slide 5 please. I want to start by saying that our thoughts are with those affected by the Russia-Ukraine conflict. We sincerely hope that this tragic humanitarian crisis can be resolved and the sense will prevail. If I turn to the impact on the insurance industry, there's been much written in the trade press. But today, I hope to provide you with some context as to what it means for us. You'll see from our press release this morning that we have provided a range for the losses we may incur in Ukraine. It's important to note 2 things on this. First, we have followed our usual reserve and approach where we go policy-by-policy; line-by-line to reach the $20 million to $30 million range. As you know, given our size, we can easily get to our numbers and take into account all relevant exposures. And second, the claims we have actually paid to date are immaterial. So the amount that we've announced is not just what we have paid to date, but the total amount we may be exposed to in Ukraine. When it comes to Russia, this is a complex and evolving situation with many outcomes driven by an individual insurer's exposure. Importantly as things stand, based on our exposures, we believe no loss event has taken place as yet. But this is an evolving situation. And as we get more information, we will provide updates through our regular reporting. It's important to say, standing here today, even on a worst-case scenario basis, we expect to deliver our growth plans for this year and beyond. We have reported a BSCR ratio of 255% and Bermuda is Solvency II equivalent. Therefore I feel we have plenty of financial flexibility to benefit from the further hardening of the specialty market driven by this conflict, which we expect to materialize during 2022 and beyond. Now I want to turn to the business for the quarter. The trading conditions continues to be favorable. And we continue to see premium rates increased across our portfolio. Our premium growth for the quarter has been strong at 35%. We entered 2022 with a pipeline of new opportunities born after our investment in new underwriting teams. Therefore, we expect to grow our business strongly, but not to the extent we did in 2021, which was a record for our business. We expect the overall rating environment to remain positive across the majority of our portfolio throughout 2022. Specifically for specialty classes impacted by the Ukraine conflict, we expect to see material rate changes as the industry digests its exposure to certain loss scenarios. Therefore, I feel particularly well positioned to benefit from the improving underwriting opportunity. We have the talent across our business, and this is all in line with our long-term strategy to expand our footprint as the underwriting opportunity improves. With that, I'll hand over to Paul.

Thank you, Alex. And if we could move to Slide 7, please. I want to start by saying that we've ended the quarter more confident in the market outlook than where we started. And we expect to see further rate momentum through the year and beyond in certain classes. As previously guided, we continue to grow our premiums ahead of rate momentum with just under 35% premium growth in the quarter. We're very pleased with our progress in Q1. And it's encouraging to see that every segment of our portfolio continuing to deliver positive rate momentum. If we move to Slide 8 and 9, I'd like to briefly focus on some of the quarter's highlights and market dynamics. Premium growth for the quarter is very strong, with growth coming from increased rates; the classes '21 continuing to mature and the new product lines of '22 starting well. In P&C reinsurance, growth is driven by the maturing casualty reinsurance portfolio with growth in catastrophe reinsurance lines, mirroring rate increases. In P&C insurance, energy and marine, growth is aided by the new teams in construction and engineering, marine and energy liability. For the new 22 teams, we remain comfortable with our previous guidance of $50 million to $60 million of additional gross premium. Overall, the rating environment in Q1 was in line with expectation. Catastrophe-exposed classes saw high single-digit to low double-digit rate increases dependent upon the specific product class. And as expected, in the specialty insurance classes such as aviation, energy and some of the marine subclasses, we did start to see a slowing of rate increase, albeit they remain positive. Within the political violence classes, they were broadly stable. As I look to the rest of the year, our confidence has grown that the positive rating momentum will persist. We anticipate our initial expectations on rate will now be too conservative and likely improve with the continuing uncertainty. For some classes, the positive pricing pressure could be significant. Given the situation is currently ongoing; it's difficult at this stage to be specific and determine exactly how certain classes will react. Still it would almost certainly bring a better market. And with that will comes further opportunities. In summary, we're very happy with the progress we made in Q1. Our new teams have hit the ground running. And the teams of '21 continue to mature nicely. The rating environment has remained positive. The volatility and uncertainty in the marketplace is expected to further improve the rating environment in lines of business where we're incredibly well positioned to grow in. With that, I'll now pass over to Natalie.

Thanks, Paul. Hello, everyone. Today, I'm going to talk through the loss environment, investment returns and capital. Firstly, taking the loss environment on Slide 11. The first quarter was dominated by the situation in Ukraine. And like others have reported, there is significant uncertainty here. The event is still ongoing, which makes any estimate of total ultimate losses related to the conflict exceptionally difficult. Our first quarter estimate of $20 million to $30 million of ultimate net losses relates to direct exposure within Ukraine itself. These losses include exposures in our political violence, aviation war and marine insurance classes as well as our aviation and specialty reinsurance classes. We may also have exposure to potential losses in Russia, which we are continuing to monitor, although they have not yet materialized. The Ukraine-related losses are within our risk tolerances for large risk events. And our underwriting performance was profitable for the quarter. Moving on to investments on Slide 13. Our negative investment return of 2.3% was largely driven by unrealized losses across the portfolio, with all asset classes suffering from negative returns. It was a difficult quarter with a significant increase in interest rates and a widening of credit spreads negatively impacting our fixed maturity investments. The majority of the losses were driven by the increase in treasury yields. Our average duration during the quarter was just under 2 years. It's worth noting that we are going to be able to reinvest at higher rates relatively quickly given our short duration. Our risk assets also incurred smaller unrealized losses given market volatility following the Ukraine invasion. On Slide 14, the waterfall chart shows how our regulatory capital position has developed since the end of 2020, including the 2021 debt raise and the impact of new business. As mentioned at the year-end earnings call, the full year BSCR ratio of 255% is higher than the ratio as of Q3 2021. This is largely as a result of lower catastrophe exposures and the year-end BSCR model due to some restructuring of our outwards reinsurance of [ 11 ] that gives us additional cover for tail risk. We are also starting to see benefits from our more diversified book coming through. Most importantly, this diagram shows that we still maintain a strong regulatory capital position of 214%, following a 1 in 100 years Gulf of Mexico wind event of $309 million. As mentioned on previous calls, we expect our BMA solvency ratio to be above 200% going forward depending on market conditions. We end the quarter with a strong balance sheet, which gives us the ability to support our planned business growth over the remainder of the year. With that, I'll now hand back to Alex to conclude.

Thanks, Natalie. To conclude, there's only one thing I really want to say. We're in a fortunate position. We're at a time of great geopolitical and macro uncertainty. We have a strong balance sheet, an abundance of talent and plenty of opportunities on the horizon to navigate through the volatility and continue to deliver on our ambitious plans for this year. And with that, we'll now go to questions, please. Operator?

[Operator Instructions] The first question comes from the line of Kamran Hossain from JPMorgan.

Just I guess I've 3 questions. And the first one is just on kind of pricing versus kind of what's going on in the market. Could you say to what extent new business prices are higher than the, I guess, the -- what's implied in RPI at this point? Just wanted to kind of gauge how dislocated the market still is at the moment? The second question, I guess, we probably can't get away from it, kind of aviation leasing. There's a lot of noise out there about one very large contract. It's been in the press for many, many weeks now. What can you say on this exposure in particular? Do you have exposures to, et cetera? And then third question is just on the BSCR. Obviously, 255% is a very strong level. Does that include 35% growth that you kind of put on year-to-date? And then whether there are actually kind of any kind of changes that we should assume given, I guess, the move up in yields year-to-date?

Thanks, Kamran. I'll start on the question about that very large client and obviously, the Russian exposure. So I think there's a [indiscernible] recently that the insurers that are on that client, which is [ Air-Cap ]. We're not actually on those contracts. But clearly it's no surprise that the largest leasing company in the world with a large exposure is the first to present a claim, which clearly they think is credible. And I think that will be interesting for us, although we're not involved in the rest of the market to see where that goes. But as we've said in the script, the Russian conflict, the conflict in Ukraine and what may or may not happen in Russia is highly complex. There's lots of different outcomes for everyone, each insurer is going to have their own portfolio of business and clearly their own reinsurance protections. So I think everyone is going to have a different outcome based on the many, many outcomes that could happen. So it's just going to be a very complex situation, which is an ongoing event.

And if I take the one on pricing, Kamran, I think what we saw in Q1 new business versus renewal business, it very much depends upon what part of the portfolio. I think as I mentioned in my script, within P&C reinsurance, for example, a lot of our growth has come from our casualty reinsurance portfolio, and a lot of that is new business. You'll recall, we didn't actually have our full team in place at 11 last year. Hence, there has been quite a lot of growth this year. And that we're pleased with the market conditions in casualty reinsurance. But I'd suggest the rating environment there from a pure RPI perspective, not a rate adequacy perspective is less than some of the catastrophe exposed classes. If you look at some of the other areas of business, I think, particularly in things like direct property insurance, there is some difference in new business to us in terms of the pure rate on year-on-year rate increase. And we're getting lots of new opportunities still in that product line. But broadly, I'd say there isn't a huge disconnect between new business and renewal business in terms of RPI.

I mean, obviously, Kamran, anything that's affected by this current conflict is there's material rate changes in the classes of business you would expect such as aviation war. So we're starting to see that. And clearly, that's the direction of travel. And we believe anything that's affected by this conflict or specifically anything that's affected by the changes that we expect in the specialty reinsurance market, particularly for 2023 is going to drive material harden for those classes of business, which is a good opportunity for us.

Kamran, I'll take the BSCR question. So yes, the current growth this year is largely included in the year-end BSCR because it's based off a Solvency II equivalent economic balance sheet. So that does include all the 11 renewals. And then yes, you're right. It would -- the available capital would be impacted by the current unrealized yields, but that's a completely manageable number. And just to know is mainly all then unrealized.

The next question comes from the line of James Pearse from Jefferies.

So the first question is just on your war lines of business. I understand that war policies tend to include cancellation or exclusion clauses which have a 7-day notice. So firstly, you able to confirm if that is the case? And if so, can you just give us an idea of the percentage of your book where that has been issued and when the majority of those exclusions, I guess, became effective. And second question is on capital. So you've included a really helpful stress scenario in your slides, which would result in your ECR ratio moving down to 214%. What headroom does that give you above your A.M. Best BCAR capital requirement? I guess any other color in terms of how we should think about that threshold with reference to your ECR ratio would be extremely useful.

I'll take the first question. So on war, there's obviously a number of different classes of business that provide coverage for war like perils ranging from the political violence class, which generally doesn't have cancellation provisions. You then have the marine classes that also provide warlike payroll coverage. Some of those have cancellation provisions, which allow you to come of risk, some allow you to rerate the risk. And then, of course, you have aviation war policies, which, in general, the majority have cancellation provisions. But as you'll be aware from press articles, there are some that don't have cancellation provisions. Our strong underwriting preference is to write aviation war where cancellation provisions are provided. And for example, in Ukraine, when the escalation of the conflict started or ahead of actually, the escalation of the conflict started, we were issuing notice on the Ukrainian territory to clients. And you're correct, it's generally 7 days and a similar situation applied in respect of contingent war policies with exposure in Russia.

Okay James. On the capital question, so obviously, all the capital models are different. And there's not really a linear relationship between them. So it is difficult to interpolate from one to the other. In particular, A.M. Best, which you're right is our most constraining capital requirement also incorporates the Catalan coming off capital. But we have previously said we are more than comfortable with our capital position at the BSCR ratio over 200%.

The next question comes from the line of Iain Pearce from Credit Suisse.

All Russia-Ukraine related. So first one is just in terms of the statement that you gave around potential exposures in Russia being within risk tolerance. If you could just give us some idea of sort of what the normal risk tolerances would be for an event like this that would be really useful. Secondly, in terms of the lines of business that you're most concerned about in Russia, where are the potential sort of biggest claims risk on a line of business basis. And then thirdly, I think you said in the sort of slides that you haven't incurred any claims in Russia as yet. Or you don't believe you've incurred any claims in Russia as yet. So what might need to change in the current situation in order for you to incur claims? Or is this a case of you think now are claims events that might have happened, but cancellations have already been issued, and therefore, you're off risk or the contract terms would mean that the current scenarios aren't covered. Just if you could give us a bit of clarity around that and that would be really useful as well.

Sure. Okay. Look, I think I'm going to try and sum up a whole view on Russia on a kind of broad basis. So I think you're in a highly complex situation with multiple different outcomes, which is what is very difficult for anyone to put any real number on. And equally, the way we think about it, it's very similar to when a hurricane maybe on its way to Miami. At that point, we're going to run certain scenarios as we are fortunate in this business where we can get to our numbers very quickly, our exposures very quickly. But you don't really know the outcome until the hurricane land. So I think that's the way we're thinking about Russia and some of those outcomes could be 0, and some of those outcomes could be different. I think what we're trying to assure everyone on any basis, as we sit here today, even on the worst case scenario that we can model, think of that within our own resonances for a specialty type event. And therefore, we are reasonably relaxed about that. And it doesn't change our view of what we want to do in our business this year and that's why we've given a very reassuring statement. So I think what we can't do is sit here and go through lots of different scenarios that may or may not happen. There's clearly got a legal challenge to a lot of these things. But as an industry, we are used to dealing with complex claims. This is clearly on a complex situation. That will take a period of time to come through. And then if we're in a better position where we have claims and data, we're very aware of our stock market obligations. And we will update the market accordingly at that point.

And with regard to your question on Russia, specifically, the focus for us is aviation exposure and that's both insurance and reinsurance.

And just if I can, on the sort of the risk tolerance question. I mean how should we look in to say relative to PMLs for a normal cat rate? Should we be thinking 1 in 100 or lower than that just based on classes of business?

I think what we've said already is we're very comfortable with the exposure and it's within our own risk tolerances for these types of events. And I don't think you can really compare this to the cat PMLs that we published. But as I said, everything that we're seeing, we're comfortable with and it doesn't change our plans for the year.

The next question comes from the line of Freya Kong, Bank of America.

3 questions, if I may, please. Just a follow-up on capital. If I compare your full year slides and your Q1 slides, the growth -- the impact of growth has more than halved between now and then. Is that purely the effect of the reinsurance program? Or has something else changed? And secondly, how are you guys thinking about June-July renewals and appetite for property cat, given what you've done so far this year and the extra reinsurance you put on the book. And thirdly, we are seeing significant claims inflation in short-tail property lines. Are you comfortable with the rate rises you're seeing? Can they more than offset the claims inflation?

Okay. Hello, Freya. On the BSCR question, you get a slightly different impact when you look at the year as a whole. Our catastrophe risk does drive the largest capital requirement in the BSCR model. And as I mentioned in my script, we did restructure our reinsurance at 11 and that resulted in a reduction to the PMLs that are used to estimate cat risk in the BSCR model. So that did dampen the impact of some of the new business that came through last year. But there are also some other contributing factors to the increase in the coverage ratio. These include profits in Q4 and also other favorable movements in the economic balance sheet in Q4. But most importantly, we're also starting now to see the benefits of the new lines of business, increasing the diversification benefit in the BSCR model, and that also helps.

And I'll take the last 2 questions, Freya. So in terms of the cat renewals in June and July, as always, our appetite is going to be driven by the market opportunity. If we're good, we have the balance sheet to take advantage and grow. If it's not there, we're prepared to hold or even decrease our position. I think what we said at the start of the year from an inward perspective, we would expect our appetite to remain broadly flat and that we would take rate increases, but always remain flexible around that. I think, obviously, June, in particular, is dominated by Florida. And as we sit here today, it's too early to know what the outcome of Florida would be. And we'll just be as flexible as ever and trade around depending upon where the market lands. In terms of inflation, I think a few things. And again, we've addressed some of these issues in the past. I think the first thing to say is, obviously, when we publish our RPIs, they are risk-adjusted, so take into account value increases. We automatically include what's called a growth load within our model. There is a catchall for inflationary pressures. And we look at that and adjust that as necessary. Also, we are seeing on our inwards portfolio, values increasing on a year-on-year basis and in some instances, quite materially. And if we do get accounts in and we don't feel the values have been inflated enough by the -- or client, then what we do is make manual adjustments on top of that. So I mean, obviously, we're predominantly short tail that helps the majority of our policies renew on an annual basis. So we get the opportunity for values to adjust. They don't all renew at the same time of the year. We're very aware of inflationary pressures. It's obviously something the industry is quite rightly focused on. But we're comfortable with what we're seeing and how we're managing the potential impact of inflation.

Just a quick follow-up on the PMLs and the benefit of reinsurance. Would that apply under the A.M. Best model as well as the [indiscernible] model?

Yes, it would be applies on the capital models, yes.

The next question comes from the line of Teik Goh of RBC.

I have 4 questions, please. The first one is just on reinsurance recovery. So on the $20 million, $30 million Ukrainian loss, what were the ceded claims? What the overall growth claims if you can say? And can you give us any indication on the coverage limits that you have left? And how should we be thinking about cost of reinstatement premiums? Second question is just on the solvency ratio. So you're at 222% at 9 months, 255% at year-end, so the 30-point gap. Could you give us a sense of how much of it came from diversification? And how much of it came from, say, the reinsurance program changes? Third one is just on the solvency ratio at Q1 this year. Just accounting for market movements, the war losses and kind of your underlying cat-gen fourth one, any details you can say about the underlying performance in Q1, so things like the attritional loss ratio, cat losses and reserve leases, et cetera.

If I take the first one on reinsurance. As you know, we don't split out our gross to net when we announce our loss ranges. I think what's important to note, though, and so I can give you a little bit of color on maybe the comfort that you're offering in terms of reinsurance remaining available. Our exposure in Ukraine on that 20% to 30% that is split over a number of lines of business, political violence or aviation war, specialty, and aviation reinsurance. So in all of those, our underlying footprint in the region is not particularly big. There are some reinsurance recoveries that are included to get to that net number. But in terms of sidewise protection, we have in place. We're very comfortable with what we've got, given that underlying footprint to start with on a gross basis is relatively modest.

Teik, on the first question, as I just mentioned, here, the 3 main impacts from the BSCR from Q3 to Q4 with the reduction in the catastrophe risk, the increase in the diversification, benefit and the movement in the economic balance sheet in the last quarter. And that's as much detail I think we're comfortable giving at the moment. The solvency ratio in Q1 -- as I mentioned in my script, we've had a profitable underwriting results for Q1. But that has been offset by the unrealized losses on the investment portfolio. And neither of those things will be material from a capital and solvency perspective. And then, the last question on the underlying performance. Yes, our underlying performance is in line with our expectations. And we're still happy with the full year guidance that we gave in the last earnings call.

The next question comes from the line of Andrew Ritchie from Autonomous.

Just a general question. Both Alex and Paul, you talked about expecting quite a big price reaction in specialty lines because of Russia-Ukraine. And you specifically called out aviation more. I'm just curious, though, because it sounds like we're a long way from actually coming to any view on losses that may accrue to aviation more both yourselves and the industry. So why would pricing already be going up if the industry feels it may not have a loss? To clarify, is it because a potential scenario has been revealed by this situation, the concentration scenario that wasn't contemplated before. So just why are there already signs of pricing reaction when we don't necessarily seem to have a loss on aviation in particular? Second question, just remind us. Apologies you've told us before. But I just was reminding of the areas within Casualty Re that you're growing that clearly had a big impact in growth in Q1. Just by way of structure of the part of business and classes and region will be helpful. I think my only other question was for Natalie. Do the PMLs that you disclosed in the accounts, have they changed then since the year-end accounts or were those already pro forma changes at 11? If they have changed, roughly, what's the quantum?

I think on your first question, Andrew, I think you kind of answered it yourself really. What's happening is clearly, as we have done, people are running certain loss scenarios coming out of the Ukraine crisis. And obviously, aviation is probably the one that every carrier is be focusing on. And based on certain scenarios that could be a large claim or it could be 0. And I think it will take probably years to materialize and before any of us have a picture on that. But that doesn't mean that the peoples' risk appetite or hasn't changed already. So already, and I think I said this in my script, be placed on depending on certain loss trends or exposures. I think clearly that this has the capacity to be a very large claim. And therefore, peoples' risk appetites are changing already. I think secondly, the bit that we definitely believe will change and the big brokers will confirm it is the way people have purchased specialty reinsurance in recent years has softened really as people's appetite for catastrophe business has changed. The -- arguably the specialty reinsurance market has softened, which has been a benefit for people like us who buy that cover. But what we believe will happen as these programs renew is we expect a decoupling of particularly any kind of war cover or aviation war cover. So I think whoever writes those classes of business going forward. And again, we don't expect everyone who's currently writes in those classes to continue. People are going to have to pay a lot more for their reinsurance. They probably going to have to buy separate powers of coverage, which will be a material change in reinsurance expenditure. Therefore, we expect the front-end classes of business that are most affected to be completely rerated. And I think what we know you're seeing that already as people are anticipating what's going to happen in '23. So the market is already reacting. You're already seeing material changes in premiums. And obviously, for us, that's a great opportunity.

The main renewal season, I guess, is in October and that was second half. So we're going to be getting through the aviation renewal season and with still no clarity, the industry is unlikely to have any clarity on the ultimate loss at that point.

That is -- yes, on the ultimate loss or whatever is going to happen on the loss scenarios, absolutely. That doesn't mean it's going to be a very, very difficult renewal period, and it's going to require some strong leadership. But I think everything that we believe there's just going to be a material rerating particularly the aviation class full stop.

Andrew, on your casualty question, yes, just as a reminder, our predominant play in casualty reinsurance is via quota shared product with a strong weighting towards the U.S. So we're not particularly overweight in any particular underlying class of casualty insurance. We've targeted large cedents with a very broad spread of risk. And by writing predominantly quota share, we get access to that broader market. And as you know, our player has been very much around the macro timing given the rate -- underlying rating environment for casualty business. So it's a very broad spread of the casualty world with a focus on the U.S.

Andrew, on your PML question, you can't necessarily extrapolate between the single event PML that gets published at the year-end and the half year. And the PMLs that are used in the capital models, which tend to be kind of aggregated or payrolls PMLs that are further out in the tail. So depending on the structuring of a few reinsurance that can impact the different types of PMLs differently. But I can say what we will do, obviously, next quarter; we'll give an up-to-date our published up-to-date single event PMLs in the financial statements. And then we can give more detail then, if required.

I guess I'm just trying to judge the directionally they should have gone down or were very stable. Or is there some change of the correlation assumption between them or something like it I don't --

There isn't necessarily a correlation between the single event PMLs and how regulators lacerates and agencies view it given the aggregate nature of those return periods. So unfortunately, there isn't a very simple answer we can give you. But what we will do, as Natalie said, half year, we have an updated set of numbers, which were actually would be our 11 numbers on a single event, and then we can talk around that then.

The next question comes from the line of William Hardcastle from UBS.

I'm sorry confused. It was sort of a similar question to Andrew, but just scratching my head on the reinsurance protection. Is it a tail risk? Or I guess the reinsurance benefit has come through? Is it tail-risk -- or is it frequency? Is the difference that the rating agency or regulators, as they like to look at a series of events? Is that how we should look at it? I guess the second one is much quicker. Is it fair to assume on cat losses outside of Russia, Ukraine, that there was nothing of any note that you felt disclosing, just confirmation of that.

Yes, hello, Will. So you're right. We did publish -- sorry we did purchase a 11 some more aggregate reinsurance protection compared to what we had purchased the year before. And that gives us a benefit in the regulatory and rating agency capital models, which right look more at a series of events rather than just one event. So that's why you get a different benefit. And then, yes, you're right on the cat losses. Obviously, if we had material cat losses, we would have had to disclose them.

And just to verify, we shouldn't -- I guess, the total cost of that you kind of alluded to at the full year, there's nothing different. Obviously, between now and then when you sort of -- we discussed gross to net full year on the full year call, is that there's nothing else has changed between now and then?

No, no.

The next question comes from the line of Joshua Hole from Citi.

Just 2 for me, if I may. Firstly, back to Russia and Aviation. I guess what really gives you the confidence that this is and will remain an earnings event? And perhaps you could highlight 2 or 3 key points of comfort that's specific to the book that you're writing? And if you could put maybe some numbers on a worst-case scenario to potential exposures. And more generally, please can you confirm what your limits are within the exposed aviation lines? And can you also give an indication of the reinsurance protection that you have within the clients? And then my second question, you've posted some pretty strong growth in Q1. And a lot of that has come from the build-out of casualty lines that you began underwriting in 2021. Could you put maybe a figure on top line expectations for this year within these lines, perhaps over and above the $95 million that you achieved last year?

Okay. Look, on the Russian playing question, I think probably the thing that gives me and the wider management team comfort is that one of the great things about a company like Lancashire is that you are very aware of your exposures. We're not a big business. We can get to our numbers quickly. Our aviation team is fantastic. So we've spent a lot of time and effort in Q1, running every single scenario that we can think of. That doesn't mean there's a scenario that may change. But I think in the realms of reality, as we were doing any other class of business in a similar situation, we have run every scenario that we can think of and that gives me comfort that we're in a good position. And as I said in my script, even on the worst case scenario that we can think of today, that's something very manageable for our business, very akin to any other kind of like specialty type claim that we can have like a very large energy claim. So that gives us the confidence to the balance sheet we have. The ambitious growth plans that we have for the rest of the year to just continue and exactly the same form as we expected. I mean your other question; we never give our growth and exposures on any class of business in any claims scenario. So we wouldn't change that. We can say on the aviation book, we do have a lot of quota-share reinsurance. So we do have a material amount of reinsurance. And again, that's very comforting in these situations. But as I said, all of candies reshow you that it's within what we would expect for a large specialty event if it happens. There are multiple scenarios and that will come through over time.

And just answering your question on new lines of business from '21 and how they may mature. We haven't given specific guidance on that. And just to remind you, obviously, in just casualty reinsurance, there was also active in the health and specialty reinsurance at the other additional lines within 2021. As a rough guide, if you recall, back in 2018, we went into an aviation niche power and downstream energy. And if you look to year 2 of them, so 2019 versus 2018, it was -- the book approximately doubled. I don't -- I mean just as a guide that that would be something that you could potentially look to the '21 classes of business.

The next question comes from the line of Ashik Musaddi from Morgan Stanley.

Just a couple of more questions, if I may. First of all, if I look at the P&C insurance, the primary one, the RPI is like 104 and similarly in energy as well as 104. And I guess you mentioned it's risk-adjusted. So would it be possible to get a bit more color on what's the nominal rate increases in these 2 lines of businesses? Because clearly 4%, probably its risk adjusted, that's why it's 4%. I mean, it would be great to get some color on nominal increase. And secondly, have you taken any view on what on litigation as well with respect to, say, aviation or any other Russia-Ukraine related conflict? Have you taken any view on where the litigation is going to end up, which might have given you some comfort around the risk tolerance level. I know it's a complicated one. And we've been asking since the beginning of this call, but maybe just one more question.

So I take on the first point, RPIs, and sorry, the blunt answer is we don't really look at RPIs in the way that you're asking, i.e., nominal rate increases. We just look at everything on a risk-adjusted basis, whether that'd be changes in underlying value, whether that'd be changes in contract conditions, whether that'd be changes in excess points. And that's how we determine our risk-adjusted year-on-year rate change. Within those classes of business, you particularly mentioned, there are subclasses that are very different ends of the spectrum in terms of RPI. So in Q1, for example, in property and casualty insurance, the higher end of the spectrum with the catastrophe-exposed products such as property D&F insurance. And then in Q1, at the lower end of things like political violence that's broadly stable. That could clearly change going forward, given all the things we've been talking about. But when we look at RPIs, it's always on a risk-adjusted basis.

Okay. And I think coming back to the Russia question. Clearly, yes, there's going to be litigation. And everyone is going to -- it can take a long period of time to be resolved. But when we've assessed certain scenarios, as I've said, clearly, we've assessed numerous different scenarios. And as I said, on the worst-case scenario that we can foresee today, including the factors around litigation and the complexity of these claims, we're still very comfortable with our position.

[Operator Instructions] The next question comes from Akshay Kaushal from HSBC.

This is Akshay Kaushal from HSBC. And I have a few questions on behalf of Faizan Lakhani. Firstly, do you have any additional insights as to what are the implications of OECD global minimum tax regime for your group? And one of your peers suggested that this could be an effective tax rate of 15% or so. Is that broad-based that we should be aligned for? Secondly, do you have a view on the S&P capital proposals? And does it potentially influence your strategy for June-July renewables?

So firstly, on the tax rate, I think they recently published about 200 pages of further guidance, which we're working our way through. So at the moment, we're not in a position to give an update on that. But obviously, it's something that we're keeping an eye on. On the new S&P model, as I think I mentioned last quarter, it's quite difficult to assess the full impact without the full model being released. But we don't anticipate a change to our rating. We're expecting that the increase in risk charges will be offset by diversification benefits. And we'll also get an additional capital benefit from the allowance of deferred acquisition costs as capital. Just as a reminder, all our debt refinancing in early '21 was Tier 2 debt. And that's all fully allowable in the new S&P model. So going forward, we expect that A.M. Best will be our key constraining factor for capital. So the new S&P model will not have any impact on the renewals at June or July this year.

[Operator Instructions] There are no further questions. I hand the conference back to you, speakers.

Okay. Thank you very much for dialing in today. And we'll talk to you next quarter.

Thank you. This now concludes our presentation. Thank you all for attending. You may now disconnect.