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On Friday, Berenberg resumed coverage on Lancashire Holdings Ltd (LON:LRE:LN) (OTC:LCSHF), issuing a Hold rating and setting a price target of £6.70. The firm’s analyst, Michael Christodoulou, noted the insurance company’s successful efforts in diversifying its portfolio, particularly by expanding its specialist lines that are not exposed to catastrophe risks.
Lancashire Holdings is expected to report a loss from the Los Angeles wildfires of 2025, which, according to Christodoulou, is larger in relation to the company’s size compared to its peers. However, this loss is anticipated to have a much smaller impact on the firm’s combined ratio than similar events in the past. The analyst believes that despite the projected loss, Lancashire is on track to meet its profitability target for 2025.
The company’s special dividend for the year, however, is expected to be lower than the previous year. This projection is based on the firm’s financial performance and the impact of the aforementioned wildfires. Despite the lower dividend, the analyst points out that Lancashire’s valuation remains undemanding, with a price-to-earnings (P/E) ratio of 6.6 times estimated earnings for 2026.
Christodoulou’s assessment suggests that while the company has made commendable progress, the current valuation reflects a balanced risk-reward profile. This balance is likely the reason behind the Hold rating and the set price target, indicating a cautious optimism for the company’s financial outlook.
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