Hiscox upbeat despite fall in renewal rates
BRITISH insurer Hiscox reported a drop of up to seven per cent in average reinsurance prices as policies came up for renewal this month, but said the lower rates still offered attractive profit margins.
Reinsurance rates fell between five and seven per cent, Bermuda-based Hiscox said yesterday, blaming stiff competition between well-capitalised reinsurers..
The firm said that there was a small uptick in claims in the UK thanks to the cold snap in December, but that claim rates were lower globally.
Reinsurance rates are falling because a combination of moderate claims and high investment returns in 2009 have left reinsurers flush with cash, encouraging them to compete aggressively for new business.
Hiscox also said it had an investment return of 7.2 per cent in 2009, compared with a loss of 1.3 per cent the previous year, thanks to a strong performance from its riskier equities and corporate bond portfolios.
Reinsurance accounts for about a third of Hiscox’s sales.
The firm said it would pay a second interim dividend in March rather than a final dividend, allowing shareholders to avoid the forthcoming 10 per cent increase in the top rate of personal tax that will be introduced in April.
Joanna Parsons, analyst at RBS, said: “The trading update was as we expected, with a particularly strong investment yield for 2009 and a low level of claims activity. Despite the rate reductions with the January renewals, reinsurance margins remain attractive.”
Shares in the third largest Lloyd’s of London insurer closed virtually flat at 326.2p.