RBC Capital Markets hikes target price on Lancashire Holdings

RBC Capital said that heading into the capital markets day event it had viewed Lancashiire's balance sheet as being "very prudently managed", and stated incremental details on the day were supportive of its view.

The Canadian bank noted that earnings resiliency continued to improve from Lancashire's diversification strategy and said its current capitalisation gave it "plenty of flexibility" to grow further into an attractive marketplace while leaving upside on further capital returns.

RBC, which reiterated its 'outperform' rating on the stock, said Lancashire's valuation "remains cheap" in its view at 1.3x book against an average 2023-25 return on equity of 22% with double-digit yields.

"We make no changes to our net income forecasts while our EPS increases by 2% reflecting the announced $50.0m buyback. For 2023e, we continue to forecast a final dividend per share of $0.15 to be announced giving a full-year total DPS of $0.70. For 2024e and 2025e, we forecast total DPS of $0.90 (up from $0.75) and $1.20 (unchanged), respectively, or a yield of 10.5% and 13.9% in each year. We assume no further buybacks," concluded the analysts.

Reporting by Iain Gilbert at Sharecast.com