Hiscox Downgraded to ‘Sell’ Amid Prolonged Underperformance and Elevated Risks
Hiscox has been downgraded to a 'Sell' rating by Jefferies analyst Derald Goh, with a price target of 1,068.00p. The downgrade is attributed to prolonged underperformance, elevated underwriting risks, and insufficient margins. Hiscox's return on equity (ROE) is expected to remain weaker than peers until 2028, contributing to a projected 20% downside in share price. The company's earnings outlook is also below consensus for key segments, justifying the downgrade to Underperform.
Hiscox, the Financial sector company, was revisited by a Wall Street analyst today. Analyst Derald Goh from Jefferies downgraded the rating on the stock to a Sell and gave it a p1,068.00 price target.
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Derald Goh has given his Sell rating due to a combination of factors impacting Hiscox’s financial performance and market positioning. Despite efforts to improve returns through a new retail and cost plan announced in May, Hiscox’s return on equity (ROE) remains weaker compared to its peers. The company is expected to close this ROE gap only by 2028, indicating a prolonged period of underperformance relative to its competitors.
Additionally, Hiscox’s underwriting risks appear higher than suggested by its business profile, and the company is not achieving sufficient margins to offset these risks. The market-implied cost of equity for Hiscox is approximately 10%, which is lower than that of its peers like Beazley and Lancashire, suggesting that Hiscox’s valuation is not justified by its track record and future outlook. Furthermore, the earnings outlook for Hiscox is weaker, with projections falling below consensus for the Specialty earnings in the London Market and Re & ILS segments. These factors contribute to a 20% downside to the current share price, leading to a double downgrade to Underperform with a price target set at 1,068p.
Goh covers the Financial sector, focusing on stocks such as Sabre Insurance Group plc, Admiral, and Hiscox. According to TipRanks, Goh has an average return of 16.7% and a 79.13% success rate on recommended stocks.
