Lancashire Holdings Reports Mixed Half-Year Results Amid Challenging Conditions
Why we think this is bad
While Lancashire Holdings demonstrated resilience with increased gross premiums and revenue, the significant drop in profitability is concerning. The profit after tax decreased by 45.6% year-on-year, and the combined ratio deteriorated substantially from 82.2% to 97.8%. The impact of major catastrophic events, particularly the California wildfires, highlights the company's vulnerability to climate-related risks. Despite an upgraded RoE expectation, this is contingent on a stable loss environment in H2, which introduces uncertainty. The competitive market conditions and economic instability further add to the challenges ahead. While the company remains profitable and has shown some positive indicators, the overall picture suggests caution is warranted.
Key Points
- Gross premiums written up 5.8% to $1,356.2 million
- Insurance revenue increased 8.9% to $930.1 million
- Profit after tax down 45.6% to $109.2 million
- Combined ratio (undiscounted) worsened from 82.2% to 97.8%
- Net losses from catastrophe, weather, and large loss events rose to $211.2 million
- 2025 RoE expectation upgraded from mid-teens to high-teens
- Total capital available approximately $1.9 billion
- Interim dividend of $0.075 per share declared
- Market described as more competitive with economic instabilities
- Broker targets range from 626p to 800p with mixed recommendations
Summary
Lancashire Holdings' half-year results for 2025 present a mixed picture. Gross premiums written increased by 5.8% to $1,356.2 million, and insurance revenue grew by 8.9% to $930.1 million. However, profit after tax declined significantly by 45.6% to $109.2 million. The company faced challenges from catastrophic events, particularly the California wildfires, leading to net losses from such events increasing from $44.0 million to $211.2 million. The combined ratio (undiscounted) deteriorated from 82.2% to 97.8%, indicating reduced underwriting profitability. Despite these headwinds, Lancashire has upgraded its 2025 RoE expectation from mid-teens to high-teens, contingent on a stable H2 loss environment. The company maintains a strong balance sheet with total capital of approximately $1.9 billion. Market conditions are described as more competitive, and the company acknowledges operating in an 'unstable world, both geopolitically and economically'. Broker targets range from 'Hold' to 'Buy', with price targets between 626p and 800p.