Peel Hunt downgrades Hiscox after strong run but remains positive long term

(Sharecast News) - Peel Hunt downgraded Hiscox on Thursday to 'add' from 'buy' after a strong share price performance and citing a full standalone valuation. The broker, which remains positive long term, said the shares have enjoyed a strong performance, driven by healthy cash flows from the wholesale business, together with accelerating premium growth and better margins in retail.

"In addition, $200m of cost savings should continue to support margins into FY28E," Peel Hunt said.

It said the investment leverage of 2.7x and the circa 4% current yield further underpin returns, on top of healthy and diversified underwriting margins.

"We lower 2026E headline EPS by 1% (adjusted EPS -4%) and by 6% in FY27E (adjusted EPS -4%)," it said, adding that there is no major change in its estimates for FY26 NAV or DPS.

"Sustainable underwriting margins, combined with attractive insurance gearing, underpin solid mid-teens tangible returns on equity," it said.

The broker lifted its price target to 1,960p from 1,790p, which offers 8% potential upside from current levels. "This values HSX at 2.3x FY26E TNAV, for an average RoE of 17% in the next three years," it said.

At 1240 BST, the shares were down 1.6% at 1,776p.