Goldman Sachs upgrades Hiscox stock rating to Buy on balanced business mix

Investing.com - Goldman Sachs upgraded Hiscox Ltd. (LSE:LON:HSX) (OTC:HCXLF) from Neutral to Buy on Wednesday, while raising its price target to GBP13.95 from GBP12.82. The insurance company, with a market capitalization of $5.8 billion and a P/E ratio of 9.3x, has demonstrated solid financial performance, earning a "GOOD" financial health rating according to InvestingPro analysis.

The upgrade reflects Goldman Sachs’ positive view of Hiscox’s balanced business portfolio, which offers "a fairly even balance between commercial P&C / P&C Re (c.45%) and retail P&C (c.55%)" on a revenue basis, with retail accounting for almost 50% of earnings.

Goldman Sachs highlighted that this business mix provides "upside risk to further retail margin expansion while limiting the downside risk should commercial P&C / P&C Re soften more than expected."

The firm forecasts Hiscox to achieve the highest 2024-2028 top-line and EPS growth compared to its London Market peers, primarily driven by growth in the Retail segment and the company’s cost savings plan.

Goldman Sachs noted there is execution risk in its forecast but remains optimistic about Hiscox’s growth trajectory relative to competitors in the London insurance market. Based on InvestingPro’s Fair Value analysis, the stock appears to be fairly valued at current levels.

In other recent news, Hiscox has made significant announcements regarding its financial outlook and strategic direction. The company forecasts $200 million in efficiency gains starting from 2028, stemming from an operational overhaul designed to reduce costs and leverage scale across its insurance business. Hiscox also aims to expand its margins in the retail sector, which it sees as a $317 billion annualized addressable market, focusing on small commercial and high-net-worth individual lines.

Jefferies has upgraded Hiscox’s stock rating from hold to buy, with a new price target of £15.00, following positive developments revealed at the company’s recent investor day. The event highlighted Hiscox’s commitment to increasing dividends and boosting retail growth, along with a long-term efficiency program. Berenberg also raised its rating to buy, setting a price target of GBP14.50, and expressed optimism about the potential growth of Hiscox’s retail business, noting its lower volatility compared to other lines.

The analysts from both Jefferies and Berenberg see significant opportunities for Hiscox to expand its retail market share and sustain profitability. Hiscox is currently trading at a valuation below its pre-pandemic average, suggesting potential for future growth. These developments reflect a strategic shift for Hiscox, with an emphasis on retail expansion and operational efficiency.

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