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July 29 (Bloomberg) -- Hiscox Ltd. surged the most in more than four years after the second-biggest Lloyd’s of London insurer by market value reported better-than-expected first-half profit and increased its dividend.

The stock rose as much as 5.3 percent, the most since May 2009, to 643 pence in London. Pretax profit rose 44 percent to 180.7 million pounds ($278 million) in the six months to June 30 from the year-earlier period, the Bermuda-based firm said in a statement today. That beat the 115 million-pound median estimate of five analysts surveyed by Bloomberg.

“These are undoubtedly strong results that are likely to prompt material upgrades to full year consensus forecasts,” Nick Johnson, an analyst at Numis Corp. with a hold rating on the stock, wrote in a report to clients today. “The first-half result is characterized by a very strong underwriting result.”

Hiscox’s combined ratio, or claims and expenses as a percentage of premiums, fell to 74.7 percent from 81.7 percent a year earlier, indicating improved underwriting, according to the statement. Reserves for “various 2010 to 2012 catastrophes are stable to improving,” the company said. Hiscox increased its interim dividend by 17 percent to 7 pence a share.

‘Good Luck’

“Our combined ratio was outstanding and that is really because we haven’t seen any large losses in catastrophes in the first six months,” Chief Executive Officer Bronek Masojada said in a telephone interview. “We’ve had low exposure to large losses and lower than normal incidental attritional losses. Good luck has been met with good underwriting.”

Gross written premiums rose 12 percent to 1.02 billion pounds after a 7 percent gain a year ago.

Even so, the insurer’s net investment income almost halved in first half to 23.3 million pounds from 44.5 million pounds, eroded by its U.S. bond investments.

Investments are “obviously a drag, but it’s not a surprise given what’s happening in the world,” Masojada said. “A higher equity component than many of our peers has given us more volatility and helped drive returns.”

Beazley Plc slumped by the most in two years last week in London trading after the Lloyd’s insurer reported a 27 percent drop in first-half pretax profit as its net investment income fell to $300,000 from $36.1 million pounds.

To contact the reporter on this story: Sarah Jones in London at

To contact the editor responsible for this story: Edward Evans at

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