Hiscox profit up 13% on solid retail business

Hiscox reported a 12.5% jump in pre-tax profit for the first half on Monday thanks to a solid performance in its retail business.

In the six months to the end of June, pre-tax profit rose to £133.5m from £118.7m in the same period a year ago, as gross premium written increased to £1.5bn from £1.3bn. However, including the impact of foreign exchange, profits fell to £102.6m from £206m the year before.

The FTSE 250 insurer said Hiscox Retail was the greatest contributor to profit in the half, with Hiscox USA a standout performer, generating 31.1% premium growth in local currency.

The dividend was lifted to 9.5p per share from 8.5p in 2016 and net premiums earned came in at £936.6m from £767.5m.

Chief executive Bronek Masojada said: "We are managing the cycle and driving retail growth, as our long-held strategy of balancing the portfolio between volatile big-ticket business and steady retail business continues to deliver. Despite tough market conditions we are finding opportunities."

Hiscox said conditions in the London market continue to test its mettle. It has trimmed back in some of the most affected areas, making "difficult but necessary decisions" to reduce its involvement or withdraw completely from some lines of business. In Hiscox Re and ILS, it is benefitting from strong underwriting heritage and product innovation.

"We are pleased with this result, but as usual we look forward with caution to the second half of the year as the hurricane season approaches," the company said.

Shore Capital said Hiscox's £133.5m in pre-tax profit represented a "highly commendable performance" while the interim dividend of 9.5p was well ahead of consensus expectations of 9.0p.

"We believe the stock still offers good upside potential as the market appreciates the scale and success of the group’s retail strategy which complements the strict underwriting discipline elsewhere with the business," the brokerage said, as it reiterated its 'buy' recommendation on the stock.

Meanwhile, Numis said the pre-tax profit figure including the FX impact was modestly ahead of consensus of £97m. However, with the shares having risen 30% so far this year and reaching its target price of 1,345p, the brokerage downgraded its recommendation to 'hold' from 'add'.

At 0940 BST, the shares were down 1.6% to 1,332p.