希斯科克斯（HSX）：零售重置-升级为买入

2025E162.9010.4x50.202.97% 2026E2027E198.50230.708.5x7.3x54.4058.103.22%3.44% Philip Kett * | Equity Analyst44 (0) 20 7548 4126 | pkett@jefferies.com The Long View: HiscoxInvestment Thesis / Where We Differ•Following a 15-year, period of elevated growth, at high but stable margins(2004-2019), Hiscox Retail experienced a marked fall in reserve releases.This was followed by a period of re-underwriting and re-platforming in theUS, while the UK business tackled pandemic related litigation. However,as these headwinds subside, underlying growth is returning faster thanthe market expects.•In the Hiscox London Market and Hiscox Re & ILS segments, prices haverecently passed their risk-adjusted all-time high. Although prices are nowfalling, excess capital generation is funding buybacks ($200m p.a.) andinvestments in improving operating efficiency.Base Case,1500p, +20%•We expect the undiscounted combined ratioin Hiscox Retail to return to the through-cycle,long-term average of 89%-94%.•Terminal growth in Hiscox Retail of 4.0%,reflecting long-term growth ahead of inflation•USD:GBP Rate of 1.35.•Average Cost of Equity 10.6%.•Average Cost of Capital 10.2%.•Price target 1,500p.Sustainability MattersTop Material Issue(s): 1) Environmental Risk Exposure -Climate change presents significantopportunities and risks for Hiscox. Insurers play an important role in the recovery process forgovernments, society and companies following a natural disaster.2) Transparent Information & FairAdvice for Customers -Transparent information and fair advice for customers are closely watchedby the market following the FCA's business interruption test case, whereby a number of Hiscoxpolicyholders' businesses suffered significant loss as a result of the COVID-19 pandemic.Company Target(s): 1)Net Zero emissions by 2050.Qs to Mgmt: 1)How do you monitor catastrophe risk exposure?2)What are the main opportunitiespresented by climate change?3)What are the downside scenarios that you model in your capitalstress testing?4)What targets are considered in setting employee remuneration?ESG Sector Integration: EMEA InsurancePlease see important disclosure information on pages 16 - 22 of this report.This report is intended for Jefferies clients only. Unauthorized distribution is prohibited. Upside Scenario,1850p, +48%•Through-the-cycle combined ratio in HiscoxRetail is reduced by -1.0%.•Accelerating growth in Retail is reflected vialifting the Terminal growth to 5.0%.•Terminal growth rate in Hiscox Re&ILSincreased by +50bps.•Average Cost of Equity 10.5%.•Price target 1,850p.•Implied target price is only marginally abovethe all-time high share price from 4Q 2019. Downside Scenario,1000p, -20%•Through-the-cycle combined ratio in HiscoxRetail is lifted by +1.0%.•Decelerating growth in Retail is reflected viacutting the Terminal growth to 2.0%.•Terminal growth rate in Hiscox Re&ILSreduced to 0.0%.•Average Cost of Equity of 12.5%.•Price target 1,000p.Catalysts•Reinsurance market renewals in January,April, June, and July.•The Atlantic Hurricane and Asian Typhoonseasons, lasting from June to November, arecritical event for reinsurance and catastrophe-exposed contracts.•Announcement of special capital returns withyear-end results. 2 The Retail ResetIn our view, the content of the Hiscox investor day was a material surprise, not only becauseit featured a commitment to step-change the dividend, but also because of management'sambition to re-accelerate Retail growth, and undertake a material efficiency programme.These developments are particularly impactful, not only because the implied uplift to EPSand DPS expectations, but because they address the bear arguments weighing on the shares.We believe that this investor day will be remembered as a landmark moment for the group,prompting us to lift our expectations for near-term dividend forecasts, medium-term growth,and long-term profitability. As a result, we upgrade Hiscox to Buy.Near-Term Improvement - Dividend Growth AccelerationHaving been advertised as focussing on Retail, nobody appeared to be expecting the investor dayto include changes to Hiscox's capital return intentions (especially ahead of windstorm season).Consequently, management's new dividend commitments were a material surprise, consistingof a formal policy whereby the interim dividend is set at 1/3 of the prior year's total, and, moreimpressively, a step change +20% for the final 2025 dividend (with progressive growth thereafter).Exhibit 1 - Interim and Final Dividend per Share Growth (%).11.1%2.0%17.6%9.5%3.5%-25.0%-20.0%-15.0%-10.0%-5.0%0.0%5.0%10.0%15.0%20.0%25.0%20102011Source: Jefferies, Company Data, Note that 2020 saw both the interim and final dividends cut for pandemic related reasons and for 2021 we thus calculated the growth rate compared to 2019.Also note that Hiscox changed its reporting currency in 2018 from GBP to USD. Here, we used the 2018 figures (disclosed in USc), and compared them to the restated figures from 2017 (USc).Exhibit