Shares in specialist insurer Hiscox (HSX) are flat this morning at £15.86 even though the company reported full year results above market estimates.

Gross written premiums were up 15% to $3.78bn, slightly ahead of expectations of $3.75bn, while pre-tax profits tripled to $137m. That compared with estimates of $129m despite ‘another busy year for claims’.

The muted response suggests that the results were largely priced in following the stock’s strong recent performance, helped by news last week that regulator the Financial Conduct Authority (FCA) had ended its probe into the wholesale insurance market.

Since the beginning of February the stock has rallied more than 12% from £14.18 levels.

SOLID PROGRESS DESPITE RISING CLAIMS

The firm flags the fact that its London Market business returned to growth last year and says it has seen ‘positive momentum in big-ticket lines where rates, terms and conditions are improving’.

The second half of the year saw a number of natural catastrophes, such as hurricanes and wildfires in the US, which caused ‘significant market losses’.

Hiscox also took hits for typhoon damage in Japan, hailstorms in Australia and large claims in marine and cyber security cover.

However, the volatility of these big-ticket insurance lines was offset by steady earnings from the Retail business which hit two major milestones last year. First it wrote more than $2bn of premiums, and secondly, customer numbers topped one million for the first time.

RATES SHOULD RISE THIS YEAR

After incurring large losses for the sequence of hurricanes which hit the US in 2017 the specialist insurers that cover this sort of event, including Hiscox, had anticipated that rates would rise last year. They were disappointed.

The hope is that those price increases can be passed onto to customers through higher premiums this year, although so far there is little evidence of that. That means the industry is having to be opportunistic, pushing through rate increases on a case-by-case basis.

Hiscox is remains hopeful that ‘more sensible’ pricing in the retrocession market - effectively the reinsurance of reinsurers - is a useful lead indicator on firmer pricing, as it has done in the past.

Find out how to deal online from £1.50 in a SIPP, ISA or Dealing account. AJBell logo

Issue Date: 25 Feb 2019