Sunday, June 3, 2018

Weaker Than Expected Pricing Spoiled Lancashire's 2018 Story

Significantly leveraged to higher insurance prices and much more heavily leveraged to reinsurance than fellow Lloyd's insurers like Beazley (OTC:BZLYF) and Hiscox (OTC:HCXLF), Lancashire Holdings (OTCPK:LCSHF) (LRE.L) has been an underperformer this year. A weak January renewal period (and management's subsequent guidance) largely dashed hopes that last year's catastrophes would support meaningfully higher rates, and Lancashire is keeping its underwriting ambitions more modest given the less attractive returns that have appeared in the market.

Although Lancashire does still look undervalued and a time-tested underwriter with strong capital discipline and an above-average track record, the mid-year renewals are not likely to lead to a new rush of enthusiasm for the stock. The long-term annualized return potential looks worthwhile, but this is a name that is going to require some patience, and there's no shortage of well-run insurance companies trading at what look like attractive multiples.

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Weaker Than Expected Pricing Spoiled Lancashire's 2018 Story

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