In spite of difficult insurance and investment markets, and a worsening claims environment after disasters such as the Chilean earthquake, hurricane Xynthia and Deepwater Horizon, Hiscox made a stronger showing in the first half than expected, helped by £22m of currency gains and above-average reserve releases.
The trading performance benefited from recovery in Europe and a selective approach to business in the UK, where Hiscox is targeting the offshore energy market after the jump in rates seen recently there. Reinsurance, which produces producing nearly a third of group income, and specialist lines also offer some defence against the softening of rates across most lines, apart from offshore energy, UK motor and household, which haven been hardening.
The group's hefty weighting towards corporate and non-government debt, and no exposure to sovereign debt, reflects a cautious investment approach, but one which also led to a modest 3.5 per cent annualised return on its £2.7bn investment portfolio.
Meanwhile, Hiscox is maintaining its expectation of total exposure to Chile/Xynthia/ Deepwater at £110m. And broker estimates are being held, too, at full-year pre-tax profits of £182m and EPS of 37.4p (£321m and 72.3p in 2009) and an increase in net tangible assets (NTA) from 275p to 322p a share.
More analysis of company results
HISCOX (HSX) | ||||
|---|---|---|---|---|
| ORD PRICE: | 355p | MARKET VALUE: | £1.3bn | |
| TOUCH: | 354-355p | 12-MONTH HIGH: | 369p | LOW: 300p |
| DIVIDEND YIELD: | 4.4% | PE RATIO: | 6 | |
| NET ASSET VALUE: | 319p | COMBINED RATIO: | 94% | |
| Half-year to 30 Jun | Net premiums written (£m) | Pre-tax profit (£m) | Investment return (£m) | Dividend per share (p) |
|---|---|---|---|---|
| 2009 | 545 | 141 | 85.4 | 4.5 |
| 2010 | 593 | 97 | 46.6 | 5.0 |
| % change | +9 | -31 | -45 | +11 |
Ex-div: 1 Sep Payment: 28 Sep | ||||
