Berenberg keeps 'buy' rating on 'underpriced' Hiscox

(Sharecast News) - Analysts at Berenberg said Hiscox's "underpriced momentum" offered clear upside for investors, arguing the shares failed to reflect the insurer's accelerating topline growth and improving operating leverage.

Berenberg noted the stock trades on around 10x twoyear blended forward earnings - roughly a 10% discount to the sector - and said its target price pointed to about 20% upside from current levels.

The German bank highlighted the continued strength of Hiscox's retail division, describing it as the group's "crown jewel", with retail growth steadily accelerating in recent years - from roughly 4% in 2023 to 5% in 2024 and 6% in 2025 - and management now targeting 9% growth for 2026 - implying a stepup from 8.2% in the first half to around 10% in the second.

Berenberg also said past investments were now paying off, with new products, distribution deals and partnerships supporting further gains, particularly in the US microSME market, where new business formations were running about 20% higher yearonyear. It believes Hiscox could reach its doubledigit retail growth target for 2028 a year early.

Operating leverage was also said to be improving, with premiums up 10% in H1 while underlying expenses rose just 0.4%, pushing the admin expense ratio down to 16.1%.

Berenberg, which reiterated its 2,150p target price and 'buy' rating on the stock, added that Hiscox has room to increase financial leverage, with its ratio at 17.3% versus 29% in 2020, and said refinancing its 2027 bond could create scope for buybacks. Earnings per share forecasts were nudged up around 2% on lower costs.

Reporting by Iain Gilbert at Sharecast.com