Hiscox pays the Covid price

There were signs of a recovery of sorts for Hiscox (HSX) in its latest interim results after the insurer saw few significant man-made or natural disasters during the half and confirmation that rates across many of its business lines were hardening significantly. The return of dividends also helped the mood music for investors after an income drought. However, the most interesting information was how much the group will have to pay to settle the rancorous dispute over its refusal to pay out on business interruption policies triggered by the pandemic.

 A decisive ruling In the Supreme Court earlier this year meant that the insurer was left the door open to hundreds of claims by small business in relation to disruption of business caused by the lockdowns. While Hiscox had initially argued that this lay beyond the scope of the policies, the Supreme Court unanimously disagreed. The group's resistance to pay-outs may have been linked to its high exposure to such policies. Investors got the first idea in these results of how much the actions will cost. Management has put aside $475m (£342m) for the first wave of pandemic-related claims and $17m to cover the impact of the second lockdown.

Aside from that controversy, Hiscox isn’t doing badly. Notably strengthening rates were in cyber security in its developed markets which were up 20 per cent on the same time last year as the result of many so-called ransomeware attacks – the deliberate jamming of a computer system in exchange for payment. The core London market saw rates rise by 12 per cent in the half.

Investors like certainty, and now that there a ceiling on Covid-19 payments, Hiscox can get back to restoring its pay-outs. Hold.

Last IC view: Hold, 987p, 15 January 2021