Listed Lloyd’s blue-chips present a 'compelling' opportunity heading into hurricane season

By Ryan Hewlett

June 9 - (The Insurer) - Shares in Beazley, Hiscox and Lancashire seesawed throughout trading last week but ended broadly higher, with analysts arguing that the three Lloyd’s blue-chips continue to present a “compelling” investment opportunity.

Beazley’s shares ended the week 3.6% higher at 973.5 pence while Hiscox closed 7.3% higher at 1,353 pence. In contrast, Lancashire finished the five-day trading period 2.2% lower at 589.0 pence.

Shares in Beazley and Hiscox have climbed 18.9% and 22.0% in the year to date, respectively. Only Lancashire is trading at a discount in the year to date, having fallen 10.4%. By way of comparison, the Stoxx 600 Insurance index of top European life and non-life stocks is currently up around 18% so far in 2025.

Panmure Liberum’s Abid Hussain and Barrie Cornes said in a note on Friday that pricing levels remain “highly adequate” while reported returns on equity remain in the mid- to high teens on average across the London-listed names, in part supported by reserve releases from previous years, current year margins and investment returns.

The investment bank said Beazley remains its “top pick” owing to the carrier's diversified reinsurance and primary insurance books, as well as its exposure to structural growth in areas like cyber insurance.

“Our top pick is Beazley. Hiscox now also offers a timely diversified play with its new growth, cost and margin targets across its retail division,” Panmure Liberum said.

The sentiment echoed an earlier report from Hamburg-based Berenberg, which said Beazley, Hiscox and Lancashire present a compelling investment opportunity driven by disciplined underwriting, attractive valuations and growing business models.

Berenberg also named Beazley its top pick, citing a potential inflection point in cyber pricing. Though cyber pricing has declined 16% since peaking in mid-2022, it still more than 70% higher than four years ago.

As a long-established leader in cyber insurance, Beazley will benefit as the global cyber market is likely to double in size over five years, Berenberg said, adding that its shares trade at 7.5x 2026E earnings per share, offering a low double-digit yield annually.

Hiscox’s growing retail business was highlighted during its first capital markets day in May this year. Both Berenberg and Panmure Liberum noted that retail is becoming a bigger part of the group, with strong potential to outpace market growth and provide greater earnings stability. With $200 million in planned cost savings and shares trading at 9x 2026E price to earnings, Berenberg forecasts 15% upside.

Both Berenberg and Panmure Liberum said Lancashire has made progress diversifying away from catastrophe risks and by growing its specialist lines of insurance. While it faces losses from the 2025 Los Angeles wildfires, the impact is expected to be muted. Still, a lower special dividend is likely. Trading at 6.6x 2026E price to earnings, the stock offers a balanced risk-reward profile, Berenberg said.

Berenberg – which has a buy rating on Beazley and Hiscox and hold on Lancashire – said shares in the trio would likely be buoyed by continued profitability, market discipline and structural advantages, despite a mature pricing environment at Lloyd’s.

The three insurers generate around 45% to 60% of their group premium through the Lloyd’s market, which has seen pricing peak in recent years. Risk-adjusted pricing was down 3% across the market in the first quarter of 2025 following several years of increases, Berenberg noted, adding that maintaining underwriting discipline will be key for the trio.

With valuations still below historical lows and an improved profitability forecast, these insurers screen as attractive takeover targets.

The sub-sector has a history of consolidation, notably during the soft years of 2016-18. Berenberg added that leading franchises across London could now become targets of bigger groups that want to grow inorganically.