Lancashire Holdings Reports Strong 2024 Performance Despite Industry Challenges
Why we think this is good
Lancashire Holdings has delivered a robust performance in 2024, demonstrating resilience in a challenging year for the insurance industry. The company reported a significant increase in gross premiums written and insurance revenue, indicating strong growth. While profit after tax remained relatively stable at $321.3 million, the company maintained a healthy return on equity of 23.4%. The combined ratio increased to 89.1%, which is a slight concern, but still indicates profitability. The company's positive outlook for 2025, anticipating mid-teens RoE, and its strong capital position further support the positive sentiment. However, the high P/E ratio suggests the stock may be fully valued at current levels, tempering the overall enthusiasm.
Key Points
- Gross premiums written up 11.3% to $2,149.6 million
- Insurance revenue increased 16.1% to $1,765.1 million
- Profit after tax stable at $321.3 million
- Return on equity of 23.4%
- Combined ratio (undiscounted) increased to 89.1% from 82.6%
- Total investment return of 5.0%
- Total dividends for 2024 of $294.3 million, including special dividend
- Positive outlook for 2025, anticipating mid-teens RoE
Summary
Lancashire Holdings Limited has reported strong results for 2024, demonstrating resilience in a challenging insurance market. Gross premiums written increased by 11.3% to $2,149.6 million, while insurance revenue grew by 16.1% to $1,765.1 million. The company maintained a stable profit after tax of $321.3 million, resulting in a return on equity of 23.4%. However, the combined ratio increased to 89.1% from 82.6% in the previous year, indicating some pressure on underwriting profitability. Lancashire's investment portfolio performed well, delivering a total investment return of 5.0%. The company's outlook remains positive, with expectations of mid-teens RoE in 2025 assuming a similar loss environment. Broker targets remain generally positive, with most maintaining 'Buy' or 'Outperform' ratings and price targets above the current share price.