24th Feb 2014 14:42
LONDON (Alliance News) - Hiscox Ltd on Monday joined fellow insurer Beazley PLC in paying a special dividend to shareholders for 2013 as it reported a 12% rise in pretax profits for its last financial year on the back of a largely favourable year in terms of catastrophe claims.
In a statement, Hiscox said it made a GBP244.5 million pretax profit for 2013, compared with a GBP217.5 million pretax profit in 2012, boosted by a drop in its combined ratio, a measure of underwriting profitability, to 83.0% from 85.5%, on the back of a benign hurricane season. Gross written premium increased by 8.5% to GBP1.70 billion.
Hiscox increased its dividend to 21.0 pence per share from 18.0 pence, while proposing a 36.0 pence special dividend on top of that after reviewing its capital requirements for the coming year. This marks the second year running the insurer has been able to make a special capital return to shareholders but said it did not promise a third.
"Our long term strategy of building local retail businesses in Europe, the UK, Guernsey and the US to balance internationally traded business in London and Bermuda continues to deliver. We are excited about the opportunities we see in many retail markets where we have room to grow profitably. In our big ticket areas, discipline and opportunism will guide us," Chief Executive Bronek Masojada said in a statement.
"The good news from a shareholder perspective is that the strategic work suggests that the insurance markets and customer segments we already serve are sufficiently large enough, and our current market shares small enough, to allow us to double the size of business we have today through organic growth. We also believe that we can create further growth opportunities through judicious hiring of talented people or teams, or through small acquisitions which serve as a base for further development," Masojada added.
However, investment returns, as has been the trend for insurers, declined to 1.9% in 2013 from 3.1% in 2012 on the back of a challenging year in bond markets.
"The persistence of low interest rates has shifted the balance between underwriting and investment income," Chairman Robert Childs said in the statement. Childs succeeded industry titan Robert Hiscox as chairman after Hiscox's retirement in February 2013.
"Our investment strategy remains cautious: we will not take undue risk, preferring modest investment returns alongside better underwriting results to fuel profits," Childs added.
Childs described the returns as "good" in light of the bond market, adding that a return to higher interest rates will be welcome.
Reporting annual results earlier this month, specialty insurer Beazley had said it made a USD313.3 million pretax profit for 2013, compared with USD251.2 million in 2012. It declared a full-year dividend of 8.8 pence, up from the previous year's 8.3 pence, while nearly doubling its special dividend to 16.1 pence from 8.4 pence.
Hiscox CEO blasted the government for elements of the scheme it has put in place to help UK residents affected by the recent flooding.
In December, Hiscox set aside GBP11.0 million for claims relating to the heavy flooding in parts of southern and south-west England, and it expects to reserve a further GBP5.0 million to cover the losses.
While it supports Flood Re, the mutualised insurance cover initiative to help people affected by the floods back to their feet, Chief Executive Bronek Masojada said current plans are "unfair and unworkable".
Masojada warned that a number of properties are being excluded from the mutual cover scheme despite having to pay a levy to fund it. He said they would be unable to purchase subsidised insurance from Flood Re, even though their neighbours and other bands would be able to.
"Floods are one of the most traumatic claims we see, a flood doesn't discriminate and neither should the Government," Masojada said.
Hiscox shares were Monday quoted at 655.55 pence, down 0.45 pence, or 0.1%.
By Samuel Agini; [email protected]; @samuelagini
Copyright © 2014 Alliance News Limited. All Rights Reserved.
Related Shares:
BeazleyHiscox