Canaccord ups Hiscox to 'buy', says reaction to update was 'overdone'
Analysts at Canaccord Genuity upped their rating on shares of insurance firm Hiscox from 'hold' to 'buy' on Friday, saying the share price reaction to the group's trading update earlier this week appeared to be overdone.
Canaccord conceded that the update was a disappointment but insisted that "it's not all over for Hiscox".
It pointed out that in US casualty, Hiscox is taking a more cautious view on its loss reserving, and hence 2019-21 will see a slowdown in its profit recognition as opposed to it having to strengthen prior year reserves, i.e. no material deterioration in its back book.
"Questions that investors need to ask: is the US retail business 'broken'? (We do not believe that is the case, seeing the opportunity as still substantial.) Will the rating momentum seen year-to-date in insurance stall and will reinsurance rates stagnate as opposed to rise despite the all the property/ casualty losses - or, will capacity become even more selective, retrenching if rates don't rise enough (itself driving rates higher)?
"We believe it is the latter...and Hiscox should benefit along with its peers."
It cut its price target on the stock to 1,400p from 1,600p.
At 1210 GMT, the shares were up 2.3% at 1,282.80p.