Hiscox (OTC) ((GB:HSX)) has held its Q4 earnings call. Read on for the main highlights of the call.
Hiscox’s recent earnings call painted a picture of robust financial health and strategic growth, despite some challenges. The company reported record profits and significant capital returns to shareholders, underscoring confidence in its market positioning and future trajectory.
Record Profits and Revenue Growth
Hiscox reported record profits of $685 million for the second consecutive year, achieving a return on equity of 19.8%. The company’s revenue saw an increase of approximately $170 million, largely driven by its retail business, showcasing the effectiveness of its growth strategies.
Strong Performance in Retail Business
The retail segment was a standout performer, contributing approximately $300 million in profits. This growth was fueled by strategic management actions in the U.K., Europe, and particularly the U.S. direct-to-consumer business, which experienced double-digit growth.
Improved Combined Ratios
The group achieved an undiscounted combined ratio of 89.2%, a testament to effective cycle management in a challenging loss year. The London Market business maintained a strong combined ratio in the 80% range for the fifth consecutive year.
Significant Capital Returns
Hiscox announced a 20% increase in the final dividend and a full-year EPS increase of 15%. Additionally, the company initiated a $175 million share buyback, marking a special return of capital to shareholders.
Investment Gains
The group reported an investment return of $384 million, with the net asset value per share growing by 14% year-on-year, reflecting strong investment performance.
Positive Outlook and Growth Plans
Looking forward, Hiscox plans to continue its retail growth and anticipates a return to growth in the London Market by 2025. The company is also deploying incremental capital into attractive market conditions in the Re & ILS segment.
Impact of California Wildfires
The California wildfires posed a challenge, with the group estimating a net loss of around $170 million, affecting the Re & ILS and London Market segments.
Challenges in U.S. Broker Business
The U.S. broker business contracted by 4% in 2024, but there is optimism for a return to growth in 2025, reflecting the company’s resilience and strategic adjustments.
Increased Operating Expenses
Operating expenses rose by 19%, attributed to brand investment and one-off costs related to the sale of DirectAsia, Thailand, indicating strategic investments for future growth.
Tax Rate Increase
The effective tax rate is expected to rise to between 15% and 20% due to Bermuda’s corporate income tax, impacting the company’s financial planning.
Casualty Market Challenges
The casualty division faced less attractive market conditions, necessitating proactive cycle management, which impacted growth but demonstrated strategic foresight.
Forward-Looking Guidance
Hiscox provided robust guidance for 2024, highlighting a strong financial position and strategic growth initiatives. The company expects retail growth to exceed 6% in 2025, with favorable conditions in the London market property segment and continued capital deployment in Re & ILS.
In summary, Hiscox’s earnings call reflected a strong performance with record profits and strategic growth plans. Despite challenges like the California wildfires and increased operating expenses, the company remains confident in its growth trajectory and market positioning, offering an optimistic outlook for investors.