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Hiscox underwriting under pressure

The insurer was boosted only by investment income
July 29, 2019

Like peers, Hiscox’s (HSX) profits were given a shot in the arm from falling debt yields during the first half, causing a surge in investment income. However, the combined ratio - calculated as claims costs as a proportion of premium income - rose to almost 99 per cent due to higher claims, while reserves were also strengthened for catastrophe events last year.

IC TIP: Hold at 1762p

The London market and reinsurance businesses both reported an underwriting loss, with improving rates – which meant overall premium growth was better than expected – “dampened by the continued abundance of reinsurance capacity” in the market. An easing of the benign conditions enjoyed by the dominant retail business at the start of the year also meant that business’s underwriting performance worsened, with management expecting the combined ratio to come in at the top end of the 90-95 per cent target range this year.

Analysts at Peel Hunt forecast adjusted net tangible assets of 779¢ at the December 2019 year-end, up from 764¢ at the same time in the prior year. 

HISCOX (HSX)    
ORD PRICE:1,762pMARKET VALUE:£ 5.08bn
TOUCH:1,760-1,762p12-MONTH HIGH:1,795pLOW: 1,411p
DIVIDEND YIELD:2.0%PE RATIO:54
NET ASSET VALUE:805¢COMBINED RATIO:98.8%
Half-year to 30 JunGross premiums ($bn)Pre-tax profit ($m)Investment returns ($m)Dividend per share (¢)
20182.2316319.813.25
20192.3416814813.75
% change+5+3+647+4
Ex-div:08 Aug   
Payment:11 Sep   
£1=$1.23