Broker snap: JPMorgan downgrades Lancashire ahead of hurricane season

19th Jun 2013 11:55

JPMorgan Cazenove has cut its recommendation for insurance firm Lancashire Holdings from 'overweight' to 'neutral' given its premium multiple ahead of hurricane season as well as a full valuation.After cutting its target price from 860p to 800p due to the impact of softening rates, the broker said that current prices offer limited upside of just 2.0%.Nevertheless, the broker said that it sees scope for a special dividend in the fourth quarter of this year. "A decline in risk appetite following the exit from D&F [Direct and Facultative] and an expected decline in retro exposures is releasing capital. We estimate the company will carry c.$200m of excess capital at year end."JPMorgan said: "LRE, however, remains an attractive income stock with a special dividend of 65p (9.0% yield) likely in H2, subject to catastrophe losses being in line with budget. "A softening rate outlook across LRE's portfolio will cap underwriting progress and we see a lack of immediate catalysts for the shares ahead of the hurricane season."The stock was down 2.75% at 761p by 11:55.