JP Morgan has estimated some changes for the Lloyd’s insurers ahead of the first half of 2024 (1H24) results, including the expectation that the companies are well on track to achieve their 2024 guidance.
“We expect the Lloyd’s insurers to be well on track to achieve their FY guidance with 1H24 claims experience likely to be within normal expectations. While we believe Q2 large loss trends were not as benign as Q1, we do not expect total H1 losses to be in excess of the assumed budgets,” JP Morgan stated.
On the top line, growth rates are estimated to be broadly similar to the trends seen at Q1 across the companies, with overall pricing likely to hold or see minor changes.
For Beazley, JP Morgan forecast 8% gross premium growth (vs high single-digit guidance), 7% ICWP growth at Hiscox and 8% GWP growth for Lancashire.
Additionally, interim dividends of 13c are forecasted for Hiscox and 10c for Lancashire, while Beazley uses an annual dividend policy.
It was also noted that investment income could benefit from an increase in bond yields in the first half of the year.
“Bond yields have increased over 1H24 (up ~50bps for US two-year as a proxy) and we account for the P&L impacts for the companies on the investments and liabilities side. This should also be slightly beneficial to investment income, although this has already been partly reflected in our numbers post the Q1 update.” analysts noted.
JP Morgan analysts remain positive on the Lloyd’s sub-sector for 2024, also highlighting that the companies are on track to produce high ROEs, and the strong potential for capital returns at attractive valuations.
They stated: “We continue to like the Lloyd’s sub- sector given its high ROE outlook and strong capital return potential at attractive valuations, even after the rally seen on the back of the M&A speculation earlier this week.
“We forecast average 2024 ROE of ~20% and on 1.4x average 2024E P/B, all three stocks still trade at a discount to their five-year averages (18%/6%/7% for BEZ/HSX/LRE). Within the space, Beazley (OW) remains our top pick.”
