Jefferies upgrades Hiscox to 'buy'

In the note, which was written before Hiscox confirmed that it had raised around £375m in the placing, Jefferies said it was not surprised to see the company undertake an accelerated book build for 19.99% of the issued capital.

Though pricing was not finalised at time of writing the note, it assumed that the 57.7m shares would be priced at 650p, raising £375m and said this was "reassuringly at the upper end of our expectations for $300m-$500m".

Jefferies also said this was a narrower discount than it had feared, perhaps reflecting the market's willingness to look to the long-term track record rather than focus on business interruption risk in UK small commercial lines.

The bank said that having declined more than 60% since their July 2019 high and with the equity issue undertaken, Hiscox shares now offer investors a secure balance sheet and very high growth at an attractive valuation.

"Given that most equity issues year-to-date come from a position of revenue weakness, Hiscox stands apart as offering a substantial growth opportunity," it said. "Like Beazley, Hiscox's capital pressures stem from four consecutive years of high natural catastrophe losses, coinciding with consistently high growth, causing capital requirements to outpace capital generation.

"Now, with deflationary pressures widespread, it is our view that growth will be valued at a higher premium."

As a result, and although it acknowledges that Hiscox faces "material" headwinds in the UK, Jefferies said the rapid de-rating of the shares reflects this and the opportunity to invest in US based growth creates "compelling upside potential".

Jefferies cut its price target on the stock to 850p from 1,325p.

At 1250 BST, the shares were up 4.4% at 722.60p.