25th Feb 2019 07:51
LONDON (Alliance News) - Hiscox Ltd on Monday upped its dividend payout after reporting a sharp rise in annual profit, ahead of consensus, in set of "good results" in a "challenging year".
For the year ended December 31, pretax profit rose to USD137.4 million from USD39.7 million the year before. Excluding foreign currency effect, pretax profit increased to USD151.1 million from USD120.6 million.
Analysts forecast pretax profit for the FTSE 100-listed insurer at USD129 million.
Hiscox attributed the profit increase on a "strong underwriting result" - increasing to USD148.0 million from USD43.0 million - in "another busy year for claims".
In 2017, profit performance was harmed by Hiscox reserving USD225 million for claims in what it termed a "historic year" for natural catastrophes, as hurricanes hit the Carribean and US and earthquakes struck Mexico.
Total income grew to USD2.66 billion from USD2.00 billion the year prior.
"We have generated strong growth and good profits in a busy year for claims. The tough action we took in our London Market business is paying off, and we are seeing some positive momentum in big-ticket lines, where rates, terms and conditions are improving. We are growing well in our chosen retail segments, and our small market shares mean the size of the opportunity in retail remains immense. We will continue to invest in our people, infrastructure and brand and maintain our focus on disciplined growth," said Chief Executive Bronek Masojada.
The insurer added its combined ratio strengthened to 94.9% in 2018 from 99.9% in 2017. A combined ratio below 100% still shows Hiscox made a profit from its underwriting. Analysts forecast a combined operating ratio of 96.4%.
During 2018, Hiscox wrote USD3.78 billion in gross premiums up from USD3.29 billion the year prior, with double digit growth in all of Hiscox's segments. Net premiums earned expanded to USD2.57 billion from USD2.42 billion the year before.
Company-compiled consensus saw gross premiums written reaching USD3.75 billion.
Claims in 2018 decreased to USD2.33 billion from USD2.49 billion in 2017 with positive reinsurance recoveries of USD1.10 billion, down from USD1.18 billion.
Hiscox total dividend for 2018 increased 5.3% to 41.9 US cents from 39.8 cents distributed the year before.
Hiscox said its standout performer in 2018 was Hiscox London Market, which returned to growth in 2018. The segment saw a 17% rise in gross written premiums to USD877.7 million from USD749.8 million the year before.
Hiscox Retail - which includes the company's UK & Europe and International businesses - generated 55% of the company's revenue. The segment saw a 14% rise in gross written premiums to USD2.09 billion from USD1.84 billion in 2017.
Hiscox said its reinsurance & insurance linked strategies unit was hurt due to a second year of "significant" natural catastrophes. The segment's gross written still increased by 15%, however, to USD812.0 million.
Looking ahead, Hiscox expects to grow its premiums in 2019 but at a slower pace compared to 2018.
CEO Masojada said: "We expect that improving pricing as a result of Lloyd's Decile 10 and our ongoing portfolio optimisation will lead to more insurance profit, with higher interest rates driving better investment returns. We will continue to invest in our underlying infrastructure and our brand. All of this will help propel our business forward."
Hiscox does not expect Brexit to impact its business. The company has created a Luxembourg insurer, Hiscox SA, to carry its retail risks in the EU and will use Lloyd's Brussels to insure EU risks which were previously place with Lloy'ds of London.
Hiscox booked a USD15 million one-off charge in 2018 for Brexit and expects ongoing costs of about USD2.4 million per annum.
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