Hiscox Ltd. – Value Analysis (LONDON:HSX) : December 19, 2017

Capitalcube gives Hiscox Ltd. a score of 68.

Our analysis is based on comparing Hiscox Ltd. with the following peers – Lancashire Holdings Limited, esure Group Plc, Admiral Group plc, Beazley Plc and Direct Line Insurance Group Plc (LRE-GB, ESUR-GB, ADM-GB, BEZ-GB and DLG-GB).

Fundamental Overview

Hiscox Ltd. has a fundamental score of 68 and has a relative valuation of OVERVALUED.

Fundamental Score

Company Overview

  • It’s current Price/Book of 2.19 is about median in its peer group.
  • The market expects HSX-GB to grow at about the same rate as the peers and to maintain the median returns it currently generates.
  • HSX-GB‘s relative capital efficiency and net profit margins are both around the median level.
  • The company’s year-on-year change in revenues and earnings are better than the median among its peer group.
  • HSX-GB‘s return on equity currently and over the past five years is around the peer median and suggest that it does not have any particular operational advantages versus peers.
  • While HSX-GB‘s revenues in recent years have grown faster than the peer median, the market gives the stock a P/E ratio that is around peer median suggesting that the market has some questions about the company’s long-term strategy.
  • The company is likely overinvesting in a business with only median returns.
  • HSX-GB has the financial and operating capacity to borrow quickly.

Drivers of Margin

  • Relatively high underwriting margin suggests a disciplined strategy in writing policies.
  • The company’s comparatively high underwriting margin (i.e. premiums earned minus insurance losses, expressed as a percentage of premiums earned) of 53.66% versus a peer median of 36.74% suggests that HSX-GB follows either a differentiated strategy with pricing advantages and/or a disciplined strategy in writing policies versus peers. However, HSX-GB‘s pre-tax margin of 12.91% is around the peer median which, combined with underwriting margin, suggests higher operating costs relative to peers.
Drivers of Margins

Quadrant label definitions. Hover to know more

Differentiated; Low Cost, Differentiated; High Cost, Commodity; High Cost, Commodity; Low Cost

Company Profile

Hiscox Ltd. engages in the insurance and reinsurance businesses. It operates through the following business segments: Hiscox Retail, Hiscox London Market, Hiscox Re, and Corporate Centre. The Hiscox Retail segment brings together the results of the UK and Europe, and Hiscox International being the U.S.A, Guernsey and Asia retail business divisions. The Hiscox London Market segment comprises the internationally traded insurance business written by the group’s London-based underwriters. The Hiscox Re segment combines underwriting platforms in Bermuda, London, and Paris. The Corporate Centre segment composes of the investment return, finance costs and administrative costs associated with Group management activities. The company was founded on September 6, 2006 and is headquartered in Hamilton, Bermuda.