Hiscox plans cost cuts after announcing surprise profit

Hiscox pre-tax profit jumped 29.5% to £141.4m for the first half of the year, compared with the £109.2m for the same period in 2008. “Hiscox has followed its London peers by reporting record pre-tax profits ahead of our £94m forecast,” Citigroup analyst Trevor May said.

Gross written premium jumped 41.7% to £906m, earnings per share (EPS) went up 53% to 33.2p, while return on equity improved 27.5%.

“Good underwriting and investing has helped to keep our long-term strategy firmly in place, which is to continue to build a first-class, balanced, international insurance business,” chairman Robert Hiscox said.

But the company announced cost cuts in its UK regional businesses. It said that while GWP increased 20%, increasing the operating efficiency and scale could add significantly to profits. “It’s the cost of distributing our policies. We reckon we can have lower costs to the business and keener rates. It’s difficult when dealing with 200-250 brokers; they all want to do business a certain way. It’s difficult to get economies of process.”

Hiscox International’s GWP rose 75%, with profits before tax jumping to £71.5m from the £20.3m of 2008.