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Hiscox drops on caution over recent weather catastrophes impact after solid Q3 premiums growth

The insurer said its gross written premiums increased by 14.3% to US$3.04bn for the period to the end of September, up from US$2,663.2mln a year earlier
Hurricane
However, after a benign first half for claims, the group said it experienced a more active environment for both natural catastrophes and large claims

Hiscox PLC (LON:HSX) shares fell on Monday after the insurer reported a 14% rise in gross written premiums for the first nine months of the year but cautioned that it expects growth to moderate over the balance of the year as recent weather catastrophes impact.

In a third-quarter trading update, the FTSE 250-listed insurer said its gross written premiums increased by 14.3% to US$3.04bn for the period to the end of September, up from US$2,663.2mln a year earlier with good growth reported in all its segments.

READ: Hiscox posts jump in first-half profit, but cautions “hurricanes can blow us off course in the second half”

However, after a benign first half for claims, the group said it experienced a more active environment for both natural catastrophes and large claims in the third quarter, with that activity extending into October with the firm impacted by weather catastrophes in the US and the Far East. 

The insurer added that it had set aside US$125m to cover claims in the third quarter from US Hurricanes Florence and Michael and Typhoons Jebi and Trammi, which hit Japan.

Hiscox said it also saw a number of larger individual claims in big-ticket and retail businesses, including a large marine loss of US$13mln, while the UK & Ireland saw an uptick in subsidence claims following a particularly dry summer, as well as a continuation of the escape of water claims.

Bronek Masojada, Hiscox’s chief executive officer, commented: "We have had strong growth, but as the market remains challenging, we will remain disciplined, and I expect our growth to moderate over the balance of the year. It has been an active third quarter for claims across the Group, both from large losses and catastrophes, and I am pleased with how we have responded."

He added: "Hiscox Retail continues to benefit from investment in the brand, and we were pleased to welcome our one-millionth retail customer. Our new European subsidiary is fully operational and expected to start writing business from 1 January 2019."

‘Hard Brexit’ assumed

The group said its preparations for Britain leaving the European Union are well advanced with is plans having always assumed a worst-case scenario 'hard Brexit’. 

Hiscox added that the financial impact of re-organising the business in preparation for Brexit is US$15mln million across the group in 2018, and it will inject incremental capital of approximately €40mln into its new European subsidiary.

In a note to clients, analysts at Shore Capital kept their rating for Hiscox ‘under review’ said: “The challenging claims environment in the third quarter and muted guidance on growth for the rest of the year, however, are not positive, in our view.

“With the shares up 12% YTD, there is still scope to take profits here.”

In late morning trading, Hiscox shares topped the FTSE 250 fallers list, down 7% at 1,530p.

 -- Adds analyst comment, share price --

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