Hiscox Ltd (LSE:HSX) shares slumped 9% in early trading after the specialist insurance provider posted a pre-tax loss in its half-year results but some analysts said the result was not as bad as many were seeing.
The loss of £88mln was a big swing from a profit of £111mln for the same period 12 months prior.
It comes as the insurance sector takes a beating during the current cost-of-living crisis.
Sabre Insurance was the first to issue a profit warning, while Direct Line this week said it would be forced to hike premiums to match accelerated claims inflation in its interim results.
Much of Hiscox’s top-line performance is likely to be attributed to rising costs associated with reinsurers, up by US$30mln, as well as the impact of the war in Ukraine, to which it attributes a net loss of US$48mln.
However, analysts at Peel Hunt remain optimistic over the stock, with the company’s actual results better than its own forecasts in most cases.
For example, the broker expected the group to report a loss of £109mln compared to £88mln.
Additionally, Hiscox’s solvency position and reserve buffers “remain healthy,” the analysts said. Reserve buffers are the layer of coverage that protects against losses that occur between primary and excess insurance policies.
Hiscox’s is “letting rate increases drop to the bottom line, which is delivering strong underwriting performance,” across its wholesale offering, the analysts added, with the London and reinsurance business putting in a “particularly strong underwriting performance.”
The outlook is also positive, said Peel Hunt, with the group raising its dividend by 50 cents as it finalises its re-underwriting program at Lloyd’s, continues to de-risk its exposure and passes on rate rises.
Peel Hunt set a target price of 1,000p, with an ‘add’ rating.