Hiscox Ltd. (HSX), the second-biggest Lloyd’s of London insurer by market value, plans to return 200 million pounds ($303 million) to shareholders after pretax profit surged more than 12-fold. The shares jumped.
Hiscox will pay shareholders 38 pence a share in special dividends, worth about 150 million pounds, in addition to its 12 pence-a-share final dividend, the Hamilton, Bermuda-based insurer said today in a statement. Pretax profit rose to 217 million pounds in 2012 from 17.3 million pounds in the previous year, beating the 197.3 million-pound average estimate of 15 analysts, according to data compiled by Bloomberg.
“The 2012 results, the positive outlook statement and the return of capital should be received well by the market this morning,” Eamonn Flanagan, a Liverpool, England-based analyst at Shore Capital Group Ltd. (SGR) with a buy rating on the stock, wrote in a note to clients.
Commercial insurers, including Hiscox, Beazley Plc (BEZ) and Lancashire Holdings Plc (LRE), are paying special dividends to shareholders after premium rates rose following 2011, the most costly year for natural disasters on record. The increased premiums helped insurers make profits in spite of Hurricane Sandy, which struck New Jersey and New York last year and is forecast to cost insurers $20 billion to $25 billion by Risk Management Solutions.
The shares rose as much as 4.7 percent, the biggest gain since Nov. 28, 2011, and closed at 514.50 pence in London, up 3.2 percent.
“We’ve had the three most expensive years on record in the last eight years starting in 2005” with Hurricane Katrina, Chief Executive Officer Bronek Masojada said in an interview. “Insurance pricing has adjusted to the fact that we’re living in a more volatile world in terms of natural catastrophes.”
Hiscox’s board decided to return capital to shareholders after achieving 16.9 percent return on equity in 2012. “I can see growth but not at 17 percent” in 2013, Masojada said.
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