Lancashire (LRE) H1 2024 earnings summary

Executive summary

• Record half-year profit after tax of $200.8 million, up 26% year-over-year, with a 14% increase in diluted book value per share and strong contributions from underwriting and investments.

• Gross premiums written increased 8.3% to $1,282.2 million; insurance revenue rose 18.5% to $854.1 million, outpacing rate changes and expanding the business footprint.

• Combined ratio was 73% (discounted) and 82.2% (undiscounted), reflecting robust underwriting despite industry-wide catastrophe losses.

• Interim dividend of 7.5 cents per share declared, with total dividends paid YTD at $0.65 per share, including a special dividend.

• Maintains a strong balance sheet and capital flexibility to pursue growth opportunities.

Financial highlights

• Profit after tax reached $200.8 million, up from $159.2 million year-over-year.

• Insurance revenue increased by 18.5% year-over-year, benefiting from prior years' premium growth.

• Investment return for the half year was 2.3%, or $75.2 million, driven by high yields and strong risk asset performance.

• Operating expense ratio improved to 7.8% from 8.6% in 2023.

• Prior year reserve releases totaled $52 million, down from $72.1 million in 2023.

Outlook and guidance

• Full-year guidance reiterated: undiscounted combined ratio in the mid-80s and ROE near 20%.

• Expect higher combined ratio in H2 due to hurricane season and increased catastrophe exposure.

• Continued growth anticipated in US E&S platform and specialty reinsurance lines.

• Strong capitalisation supports continued growth in an attractive rating environment.

• Reinsurance spend as a percentage of insurance revenue expected to decrease further in 2025.