Lancashire Q1 2024 trading update

Lancashire Group has provided its 2024 first quarter update with CEO Alex Maloney noting a record quarter, highlighting growth in GWP and insurance revenue, opportunities for profitable growth, and the commencement of Lancashire Insurance U.S. operations.

The company affirmed its guidance for the full year, including an undiscounted combined ratio around the mid-80% range and a return on equity of around 20%.

Analyst scrutiny was largely focused on the potential fallout from the collapse of the Francis Scott Key Bridge in Baltimore in March, with fears over potential outsized losses largely dispelled by management commentary.

Lancashire said it had some exposure to the loss but don’t expect large insurance claims from this event, providing some reassurance to the market.

The key data points covered in the call were

• Gross premiums written (GWP) increased by 7.8% year-on-year to $631.7 million, while insurance revenue rose by 24.6% to $422.0 million. Property insurance was the main driver of growth in both the insurance and reinsurance segments, with the new E&S unit contributing to the boost in property insurance GWP.
• The Group Renewal Price Index (RPI – overall premium increases) stood at 104% for the quarter.
• The loss environment was relatively benign in the first quarter, with no notable natural catastrophe losses. As above, Lancashire expects its exposure to the Baltimore bridge disaster to be within expectations.
• The investment portfolio generated a positive return of 0.9%, with elevated market yield and strong investment income. Interest rate increases were offset by credit spread tightening.
• Lancashire maintained its guidance for an undiscounted combined ratio in the mid-80s for the full year, citing a relatively benign loss experience in the first quarter.

Argenta view : Overall, Lancashire reported strong performance, driven by growth in premiums and investments, while maintaining a positive outlook for the year ahead. There is no change to their long term strategy with disciplined growth to balance returns over the longer term. This approach to growth will allow Lancashire to mitigate the weaker years through portfolio optimisation and we expect this to enhance returns over the cycle.