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The market definitely ties these two share together as peers in the specialty insurance market.
I actually think that BEZ is in a much better place than HSX. BEZ is expecting to return to profit this year, HSX not till 2023.
The most interesting aspect will be what sort of rate increases Hiscox are pushing through. I expect they will have managed big increases (10-15% on average) on cyber, PI and Management Liability renewals. If BEZ can replicate that then we will be in a strong position.
I expect it will be good... Completions on or above target, average asking price up, plenty of land in the bank. Expect the usual warnings about the end of government support including the end of the stamp duty holiday. There may also be some concerns about inflation feeding in shortly with higher costs of building materials impacting on margins.
I'm surprised the SP has dipped going in to the trading update. I sold up at 795p a couple of weeks ago but tempted to go back in now.
Does anyone know a rough split in B&M's turnover and profit between food & drink, homeware and garden & DIY?
The garden and DIY part of the business will surely have grown significantly in recent months and will hopefully offset any decline for non-recurring stockpiling at the beginning of lockdown this time last year.
Swanny, thanks for the reply. I guess it must be hard to forecast loss ratios when a lot of liability claims are not reported for a while after they happen. Plus a lot of their policies (PI, management liability etc) are issued on a claims made basis rather than claims occurring.
Nice rise today on the back of the broker upgrade. I still think this is undervalued
Even if they didn't want to move to quarterly divis, just spreading the 2 payments out a bit more evenly throughout the year would help. At the moment you go 9 months without any divi money, and people definitely move their money elsewhere during the drought.
Forgive me I'm not 100% familiar with the insurance terminology so I would appreciate any assistance from those in the know... Bez's gross written premium (turnover) in 2020 was £3.6bn. They are (according to the latest financials) expecting double digit rate increases on average in 2021 across their product lines, which would take it to £4bn.
The financials also say they expect a combined loss ratio in the 'low 90s%' for 2021, let's say 93% for arguments sake, giving them 7% profit on £4bn = £280bn profit before tax. The current market cap is £2.077bn meaning that forward profit/ earnings are just over 7 which seems very cheap.
Appreciate there a few ifs and buts there, but am I missing something?
I would definitely top up if it dropped to the early £20s. I'm not sure it will get that low, there does seem to be support at £22.60 having bounced off that 3 times in the last couple of months. Although I do note that the European on-premises market is v. Profitable for CCH so an extended lock down in West and Central Europe would be damaging. That said, I think there will be a decent rise once Europe gets it's vaccine house in order.
Am I reading that correctly... At a price of 935p those 2 x £3m purchases must have been made first thing. Someone's lost the best part of a half a million quid today if they've spent £10m at an average of 910p.
I'm uncertain on next movements, but I'll be keeping an eye out to see if there is a decent entry price (I don't think we are there yet). I see Beazley as a better option out of the 2 businesses at the moment as it is likely to return to profit sooner.
As a business, Hiscox still a lot of work to do. It built a great reputation by providing first class service and adopting a positive approach to paying claims. Both of those have been shot over the last couple of years.
They could do with taking on some more underwriters and quickly settling the Covid claims which they are on for so they can move on. I also think some of the book still needs to be reunderwritten.
There's so much M&A activity in the insurance market at the moment, could Hiscox become a target?
Like the look of this company. Some real strong points such as:
Well known brand name in the insurance world.
All Insurers (including Beazley) are currently pushing through rate rises across most lines, but especially PI and Management Liability where Beazley are strong.
Strong relationships with large brokers such as Aon.
Not afraid to exit certain lines e.g. loss making regional UK marine book.
Exposure to growing classes of insurance e.g. cyber, M&A etc.
2020 loss not as much as feared.
19% increase in GWP in 2020
Return of events in 2021 which will need insuring.
Wide margin of safety as still 30% below 2019 high.
Return of divi likely in the future.
People are taking money out of shares that have been lockdown winners (think B&M, AO, Boohoo etc) and putting them in to travel and hospitality for a quick win. Hopefully they'll return quickly and reinvest their profits.
I would say a target price is quite difficult at the moment. Until we know if/when the 3 acquisitions will be landed and how much it will add to the bottom line it's hard to put a value on the company going forward.
Still, I think the recent sell-off has been over done, and I'm expecting a return to over 100p in the next few weeks once there's some news.