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Hiscox sees catastrophe exposed business drive growth in first quarter

The group reported that gross written premiums for the three months to the end of March had risen 20% in constant currency to US$1.16bn
Hiscox Re & ILS, the firm's reinsurance arm, posted growth of 42%

Specialist insurer and FTSE 250 constituent Hiscox Ltd (LON:HSX) reported a rise in gross written premiums (GWP) for the first three months of 2018, driven in part by improving rates from catastrophe-exposed business.

The group reported that GWP for the three months to the end of March had risen 20% in constant currency to US$1.16bn while the increase in catastrophe-exposed business helped its London Market division grow 14%.

USA and Asia strongest performers

Additionally, Hiscox Re & ILS, the firm's reinsurance arm, posted growth of 42%.

The insurer added that its retail business also grew in the quarter, with growth in all areas and Hiscox USA and DirectAsia coming out as the strongest performers on new business in all product lines and ongoing investment in partnerships and branding.

Hiscox also changed its estimate for the 2016 and 2017 accounts for Syndicate 33 at -5.0% to 5.0% from -7.5% to 2.5% of its £1bn capacity for 2016, and left estimates unchanged for the 2017 account.

For Syndicate 6104, estimates remained unchanged for 2016, however 2017 was changed to -15% to -35% from -55% to -45%.

Bronek Masojada, Hiscox chief executive, said: "After a costly year for catastrophes in 2017, our London Market and reinsurance businesses mobilised quickly to grasp the opportunity and grew strongly. Sadly, discipline and good sense is receding in the market, so for the rest of the year growth in big-ticket business will be more measured. Our long-term strategy of investing in less volatile retail lines continues to provide balance and opportunity for growth,"

In a note to clients, analysts at Peel Hunt retained a Reduce rating on the stock, saying: “Hiscox is not as geared to lines where rates are improving given the Co’s focus on Retail business, as such the Co’s mixed rate commentary does not come as a surprise.

They added: “We had assumed mid single digit rate increases in our numbers and based on the Q1 commentary there is no reason to change our assumptions. The shares continue to trade at a significant premium to TNAV, which we struggle to justify by low-teen underlying returns and a low dividend yield.”

In lunchtime trading Tuesday, Hiscox shares were up 0.1% at 1,510p.

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