Hiscox profit tumbles 91% as natural catastrophes take their toll

FTSE 250 insurer Hiscox was under the cosh on Monday as it posted a 91% drop in full-year profit following "an historic year for catastrophes".

In the year to the end of December 2017, pre-tax profit slumped to £30.8m from £354.4m the year before as the company took a hit from hurricanes, wildfires and earthquakes, even after reserving $225m for claims. Meanwhile, gross written premiums increased to £2.5bn from £2.4bn and net premiums earned rose to £1.9bn from £1.7bn.

Earnings per share tumbled to 9.3p from 119.8p in 2016 and the group combined ratio deteriorated to 99.9% from 84.2%. A ratio below 100% indicates that the company is making an underwriting profit, while a ratio above signals it is paying out more in claims than it is receiving in premiums.

The final dividend came in at 19.5p, pushing the full-year dividend up 5.5% to 29p per share.

RBC Capital Markets said pre-tax profit was below its estimate of £48.1m and consensus of £35m, although the combined ratio was ahead of expectations of 102.6%. The dividend per share, meanwhile, was a touch below consensus expectations and lower than RBC's forecast of 30.5p.

Chief executive Bronek Masojada said: "Our long-held strategy of balance has served us well this year. The strong growth and profits in retail countered the volatility felt in our big-ticket businesses which were impacted by an historic year for natural catatrophes. We have made significant investments in infrastructure and brand both of which will continue. Market pricing has improved and as a consequence we have growth ambitions for every part of our business."

Whitman Howard said: "Hiscox remains relatively well positioned but not enough to escape the disappointment at the response of market pricing to last year’s Nat Cat losses. We expect further disappointment through the year as the industry grapples with what we view as a profound change to the reinsurance capacity landscape. in an over-capitalised market, Hiscox remains a reasonable target for speculation, although at 2.23x book, the valuation is starting to look full, in our view."

At 0920 GMT, the shares were down 4.8% to 1,330p.