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(Alliance News) - UK insurers Hiscox and Beazley early Wednesday gave estimates of the total claims expected to arise from the Covid-19 pandemic, while also defending against accusations they aren't paying out on small business claims.
Insurer Hiscox said it expects to pay net claims of USD150 million due to Covid-19 for event cancellation and abandonment, media and entertainment and other segments including travel.
In the event that restrictions on travel and mass gatherings are extended beyond six months, Hiscox expects that these claims could increase by an additional USD25 million.
Hiscox also is receiving claims as a result of economic losses following government action to stop the spread of Covid-19. Hiscox noted that its core small business insurance cover does not cover claims for business interruption due to the general measures taken by the UK government.
Hiscox's update comes a week after the City watchdog warned insurers that are liable for claims to cover business interruption due to coronavirus must pay out "as soon as is possible" to help small businesses survive the lockdown.
Hiscox said a number of its UK policyholders have disputed the application of its business interruption policies, and it said it will work with regulators to provide greater certainty for customers and expedited resolution of the disputes. The company said its economic exposure to the disputed claims is low and limited to the Hiscox Europe, with little such exposure in the US.
"Hiscox's capital, liquidity and funding positions remain robust and the group remains operationally strong in the face of unprecedented global uncertainty presented by the Covid-19 pandemic. Hiscox expects this uncertainty and consequent capital contraction to influence rates across wholesale and reinsurance markets," the company stressed.
Fellow insurer Beazley said it estimates the total claims from Covid-19 to be USD170 million net of reinsurance.
In an "unprecedented" first quarter, gross premiums written were up 13% to USD840 million.
Beazley expects the cost of Covid-19 across the political, accident and contingency division, which includes event cancellation, personal accident and accident and health, is around USD70 million net of reinsurance. The marine, property and reinsurance divisions should see claims around USD100 million.
Hiscox shares were up 0.7% in early trade, while Beazley's were down 5.0%.
Here is what you need to know at the London market open:
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MARKETS
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FTSE 100: up 0.5% at 5,670.71
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Hang Seng: up 0.5% at 23,922.63
Nikkei 225: closed down 0.7% at 19,137.95
DJIA: closed down 631.56 points, 2.7%, at 23,018.88
S&P 500: closed down 3.1% at 2,736.56
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GBP: up at USD1.2311 (USD1.2291)
EUR: unchanged at USD1.0864
Gold: up at USD1,681.72 per ounce (USD1,678.49)
Oil (Brent): down at USD16.87 a barrel (USD19.75)
(changes since previous London equities close)
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ECONOMICS AND GENERAL
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Wednesday's Key Economic Events still to come
0930 BST UK house price index
1100 CEST EU general government deficit and debt
1600 CEST EU flash consumer confidence indicator
0700 EDT US MBA weekly mortgage applications survey
0900 EDT US monthly house price index
1030 EDT US EIA weekly petroleum status report
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The UK inflation rate softened in March on lower fuel prices, amid the global plunge in oil markets, data from the Office for National Statistics showed. The annual inflation rate eased to 1.5% in March from 1.7% in February. Month-on-month, prices were flat after a 0.4% rise the month before. "The inflation rate slowed again in March mainly due to falling prices for clothing and motor fuel," commented Mike Hardie, head of inflation at the ONS. Separately, the ONS reported output producer prices rose 0.3% year-on-year in March, decelerating from 0.5% in February. Input prices fell 2.9%, ticking up from a 0.2% fall the month before.
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The UK economy would be hit by a premature end to the lockdown which would also "damage people's confidence very severely", Bank of England Governor Andrew Bailey has warned. Businesses have argued measures should be eased to allow economic recovery, but health authorities have cautioned against any relaxing before Covid-19 testing resources have been increased. Bailey told the Daily Mail that Britons should be cautious about easing restrictions. He told the paper: "If we had a lifting and then [lockdown] came back again, I think that would damage people's confidence very severely.
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BROKER RATING CHANGES
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GOLDMAN CUTS SAGE GROUP TO 'SELL' ('NEUTRAL') - TARGET 500 (590) PENCE
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JEFFERIES CUTS CENTRICA TO 'HOLD' ('BUY') - TARGET 29 (50) PENCE
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SOCGEN CUTS METRO BANK TO 'HOLD' ('BUY') - TARGET 100 (300) PENCE
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COMPANIES - FTSE 100
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CRH said it saw a good start to the year, but the impact of Covid-19 has become visible since mid-March. The building materials firm said it had a "good" first three months of the year, with like-for-like sales up 3%. To mitigate the financial impact of Covid-19, CRH has suspended all non-essential and discretionary spending. Following a "prudent and precautionary decision" to draw down its EUR3.5 billion revolving credit facility, the group now has cash and cash equivalents of over USD6 billion. "This is sufficient to meet all maturing debt obligations for the next 4.5 years and the weighted average maturity of the remaining debt is 10.4 years. There are no financial covenants associated with the group's debt obligations," CRH highlighted. CRH has decided to postpone its share buyback programme until further notice, but has proposed a final cash dividend of EUR0.63 per share for consideration at Thursday's AGM.
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COMPANIES - OTHER MAIN MARKET AND AIM
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Fast fashion retailer boohoo saw revenue surge 44% to GBP1.23 billion in its financial year to February 29, while pretax profit jumped 54% to GBP92.2 million. The online seller said strong momentum was maintained into the new financial year, though trading since the middle of March has been mixed due to Covid-19. However, performance has improved in more recent weeks and it is now seeing "improved" year-on-year sales growth in April. "We remain cautious regarding our outlook, as a result of the uncertainty caused by the Covid-19 pandemic," boohoo said.
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Huntsworth's takeover by a private equity firm will not be investigated by US monopoly regulators, the healthcare public relations firm said on Tuesday. And in Austria, the Federal Competition Authority and the Federal Cartel Attorney opted not to pursue an in-depth probe of the deal. Back in March, the company agreed to a GBP400 million takeover by CD&R Artemis UK Bidco, an entity fronted by New York-based Clayton Dubilier & Rice. A court hearing to sanction the takeover will take place on Thursday next week, albeit remotely due to the Covid-19 pandemic. Huntsworth shares are expected to be cancelled on May 1.
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COMPANIES - INTERNATIONAL
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Roche Holding confirmed its annual outlook as its performance improved in the first quarter of 2020. The Swiss healthcare company reported 2% sales growth in the three months to the end of March to CHF15.14 billion, about USD15.61 billion, from CHF14.83 billion. On a constant currency basis, sales grew by 7%. Roche explained that sales growth was driven by new products, more than compensating for the impact of competition from biosimilars. "The global coronavirus pandemic outbreak during the first quarter poses an unprecedented challenge in particular for healthcare systems worldwide. Roche made important contributions to the fight against Covid-19," said Chief Executive Severin Schwan.
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Boeing announced a series of leadership changes, aimed at improving the aerospace firm's internal integration as it looks to move beyond its 737 MAX production halt. The MAX has been grounded by regulators since March 2019 following two crashes that killed 346 people. Boeing hopes to receive regulatory approval to resume flights on the MAX in mid-2020. As part of the changes, Boeing has formed a new unit - Enterprise Operations, Finance & Strategy. Boeing said the new organisation will bring together teams responsible for manufacturing, supply chain and operations, finance, enterprise performance, strategy, enterprise services and administration. It will be led by Chief Financial Officer Greg Smith, who also currently serves as executive vice president for Enterprise Operations.
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Wednesday's Shareholder Meetings
Drax Group
Premier Global Infrastructure Trust
Glanbia
Arkle Resources (re share capital reorganisation)
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By Tom Waite; thomaslwaite@alliancenews.com
Copyright 2020 Alliance News Limited. All Rights Reserved.
