Join our community of smart investors

Hiscox maintains tight discipline

Hiscox is underpinned by a growing retail insurance business and underwriting discipline.
March 2, 2015

Intense competition may have restrained progress at Hiscox (HSX) last year, but maintaining strict discipline on writing new business and a growing presence in retail insurance left profits only marginally lower. And the Lloyd's insurer's strong capital base prompted another bumper special dividend of 45p a share, along with the regular dividend that lifts the historic dividend yield on the current share price to 8.5 per cent.

IC TIP: Hold at 792p

Retail business, which covers specialist insurance for business customers and homeowners, now accounts for over half the group's gross written premiums, and profits from retail operations are now sufficient on their own to cover the cost of the standard dividend. Business in the US was particularly brisk last year, with written premiums up by 24 per cent to $360m (£233m), while Hiscox UK and Europe delivered record profits.

On the reinsurance side, a disciplined approach to writing new business brought revenue down by 14 per cent. Catastrophe reinsurance rates fell by around 12.5 per cent, the third successive annual decline. However, the group's overall combined ratio of claims to income - the key measure of underwriting profitability - was barely changed at 83.9 per cent.

Analysts at Peel Hunt are forecasting adjusted EPS of 48.2p this year, with year-end net tangible assets of 407p a share.

HISCOX (HSX)
ORD PRICE:792pMARKET VALUE:£2.53bn
TOUCH:791-792p12-MONTH HIGH:799pLOW:616p
DIVIDEND YIELD:2.8%PE RATIO:12
NET ASSET VALUE:455pCOMBINED RATIO:83.9%

Year to 31 DecGross premiums (£bn)Pre-tax profit (£m)Investment return (£m)Dividend per share (p)
20101.4321110016.5
20111.45172417
20121.572179218*
20131.702456021*
20141.762315622.5*
% change+3-6-6+7

Ex-div: tba

Payment: tba

*Excludes special dividends: 38p in 2012, 36p in 2013 and 45p in 2014.

Capacity owned 72.5 per cent