Hiscox Ltd's (LSE:HSX) retail insurance business is emerging as the key driver of future earnings growth, with RBC Capital Markets arguing that the insurer's valuation does not fully reflect the benefits of rising retail exposure and a major efficiency programme.
Following a meeting with UK retail boss Jon Dye, RBC said growth in the division is constrained by profitability targets rather than capital availability, leaving scope for further expansion as market conditions permit.
Retail accounted for 37% of retail written premiums in 2025 and around a fifth of group premiums.
The broker highlighted the increasing role of artificial intelligence in improving efficiency. In Hiscox's high-net-worth business, for example, an AI-powered triage tool that automatically rejects unsuitable risks has already delivered a 40% productivity improvement without increasing headcount.
Management also pointed to growing customer acquisition through AI LLMs, with around 1% of new business now sourced via AI-driven searches, up from virtually nothing a year ago.
Hiscox is also seen as well positioned as insurance pricing softens in some of its larger commercial and reinsurance businesses.
The broker views retail as a long-term growth engine that can offset pressure elsewhere in the group, while a $200 million cost reduction programme is expected to support a significant increase in profits by 2028.
RBC retained its 'outperform' rating and 1,850p price target, arguing the shares look undemanding given the forecast improvement in earnings over the next two years.
