Lancashire: 1H26 First Take: PBT lower than expected due to Baltimore Bridge reserve top up

Research evidence excerpt

Lancashire: 1H26 First Take: PBT lower than expected due to Baltimore Bridge reserve top up

Kamran M Hossain AC Europe Equity Research

(44-20) 3493-3780 29 July 2026 C A Z E N O V E

kamran.hossain@jpmorgan.com

Investment Thesis, Valuation and Risks

Lancashire (Neutral; Price Target: 650p)

Investment Thesis

We believe Lancashire can continue to grow and return a high percentage of earnings to

shareholders in coming years. However, we think that the market will only give the company

credit for its transformation into a more diversified and resilient business as the market

softens, and therefore while we continue to be positively disposed to the Lloyd’s sub-sector

we see better near-term re-rating potential in other peers.

• Likely to continue growing. Lancashire has seen its business grow materially since

2018 and looking ahead, we expect the US operations are likely to be a source of growth

again in the coming year.

• Expect higher payout in coming years. Given a strong balance sheet, strong ROE

forecast and fewer opportunities for capital-consumptive growth, we continue to see a

high likelihood that Lancashire will pay out a high percentage of earnings in the coming

years.

• Market not yet giving credit for more diversified business. Lancashire is more

diversified than it was in the past given its build-out of the specialty book since 2018.

At this stage, we believe that the market will only be giving the company credit as the

market softens and the resilience of the company is witnessed.

Valuation

We value Lancashire by estimating its sustainable underlying IFRS earnings power based

on cross-cycle assumptions to derive a group sustainable RoTE of ~15%. We adjust for

dividends and apply a CoE of 13%. This results in our Dec-27 PT of 650p.