Strip out foreign-exchange distortions, and Hiscox's combined ratio (of claims to premiums) is rather better than it seems. Indeed, on that adjusted basis the ratio reached 82.2 per cent in 2009 - a rather more profitable underwriting result than the adjusted 91.6 per cent combined ratio for 2008.
That improved underlying underwriting performance largely reflects the lack of big catastrophes last year. Although such a benign claims environment has left insurers well placed to begin chase business by cutting prices - potentially bad news for the premium rate outlook. In fact, Hiscox said that reinsurance rates softened in the January 2010 renewal period and that rates have also been under pressure in the casualty and property books. Although rates in the energy book rose in 2010 and there's an expectation that pricing could improve in the specialty book, too.
Meanwhile, the investment portfolio remains heavily focused on cash and high-quality bonds - representing 95 per cent of the book - with the rest placed in riskier equities and shares in unit trusts. That mix delivered an impressive 7.2 per cent investment return last year, as opposed to an investment book loss in 2008.
KBC Peel Hunt expects adjusted pre-tax profits for 2010 of £227m, with adjusted EPS of 48.1p.
HISCOX (HSX) | ||||
|---|---|---|---|---|
| ORD PRICE: | 358p | MARKET VALUE: | £1.34bn | |
| TOUCH: | 358-359p | 12-MONTH HIGH: | 365p | LOW: 275p |
| DIVIDEND YIELD: | 4.2% | PE RATIO: | 5 | |
| NET ASSET VALUE: | 299p | COMBINED RATIO: | 86% | |
| Year to 31 Dec | Net premiums (£bn) | Pre-tax profit (£m) | Investment return (£m) | Dividend per share (p) |
|---|---|---|---|---|
| 2005 | 0.68 | 70 | 50.3 | 7.00 |
| 2006 | 0.88 | 201 | 78.5 | 10.00 |
| 2007 | 0.88 | 237 | 101..0 | 12.00 |
| 2008 | 0.93 | 105 | -27.6 | 12.75 |
| 2009 | 1.10 | 321 | 182.0 | 15.00 |
| % change | +18 | +206 | - | +18 |
Ex-div: 3 Mar Payment: 29 Mar Capacity owned: 73% | ||||
