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Hiscox boosted by retail business

And profits underpinned by underwriting discipline
February 25, 2019

Hiscox (HSX) once again benefited from its diverse revenue stream in the year to December 2018. For while it was a busy year for catastrophe-related claims, the retail side delivered double-digit growth in premiums and passed the 1m customer mark.

IC TIP: Hold at 1593p

Hiscox Retail remained the largest segment of the group, generating 55 per cent of gross written premiums worth $2.09bn (£1.6bn), up 14 per cent from a year earlier. And while the combined ratio (of claims to premium income) improved from 94.6 per cent to 93.6 per cent, profits were slightly down at $136m because of lower investment returns. Premium rates were also broadly flat.

In the Hiscox London market, the culmination of three years of disciplined underwriting saw the previous year’s loss of $46.7m turned into a profit of $78.2m, while the combined ratio improved from 111.6 per cent to 89.3 per cent. Since 2016, the underwriting team has walked away from $400m of challenged business.

For the various hurricanes, typhoons and wildfires, Hiscox reserved $165m, but maintaining a prudent approach to reserving meant that $327m was released from prior years’ claims.

Investment returns fell from 2 per cent to just 0.7 per cent as rising rates depressed bond prices. However, those higher rates will see an improved return in 2019.

Analysts at Peel Hunt expect adjusted net assets of 805¢ a share at the December 2019 year-end. 

HISCOX (HSX)   
ORD PRICE:1,593pMARKET VALUE:£4.58bn
TOUCH:1,593-1,594p12-MONTH HIGH:1,727pLOW: 1,283p
DIVIDEND YIELD:2.0%PE RATIO:46
NET ASSET VALUE:805¢COMBINED RATIO:94.9%
Year to 31 DecGross premiums (£bn)Pre-tax profit (£m)Investment return (£m)Dividend per share (p)
20141.7623156.222.5
20151.9421635.424
20162.4035512027.5
 ($bn)($m)($m)(¢)
20173.2939.710539.8
20183.78137.438.141.9
% change+15+246-64+5
Ex-div:09 May   
Payment:12 Jun   
£1=$1.307