Hurricane season leaves profits at Hiscox devastated

Hiscox, the Lloyd's of London insurer, conceded yesterday that its second-half operating profits would be reduced by £25m this year after the worst hurricane season since records began.

Hiscox, the Lloyd's of London insurer, conceded yesterday that its second-half operating profits would be reduced by £25m this year after the worst hurricane season since records began, which has generated collective insurable losses of more than $22bn (£12.3bn).

Four hurricanes - Charley, Frances, Ivan and Jeanne - have hit the US coast and Caribbean islands over the past two months, taking the total damage toll beyond the $20.5bn caused by Hurricane Andrew in 1992. The £25m hit to Hiscox represents aboutone-third of its 2003 operating profits.

Hiscox said that although the ferocity of the hurricane season would have a noticeable effect on its 2004 balance sheet, it believed any losses would be countered by the positive effect that the storms would have on premiums over the coming year. Last week, the group announced it was increasing its capacity for 2005 to take advantage of the increase in rates.

Fiona Fong, a company spokeswoman, said: "This is the result of an unprecedented level of hurricane intensity in one year, which has surpassed the whole industry's catastrophe planning. For us, we think that our structure of having a retail business to offset the international business will help to cushion the blow."

Hiscox's announcement is the latest in a string of statements by UK insurers over the past week, which confirm the damage to their balance sheets caused by the hurricanes.

On Monday, Chaucer Holdings said that hurricane claims would reduce its pre-tax profits by as much as £15m this year, equivalent to almost half of its 2003 operating profit. Last week, Kiln predicted the storms would cost it between £10m and £15m.

The biggest loss to be announced by a quoted British insurer so far came from Brit Insurance, which on Friday said its profits would be reduced by as much as £35m.

Geoff Miller, an analyst for Bridgewell Securities, predicts that several insurers will be forced to pay much smaller dividends in the second half as a result of the hurricanes. He highlights Amlin and Brit as two of the most likely candidates.

With the market having priced in a potentially worse result for Hiscox, shares in the company rose by more than 2 per cent on yesterday's news to 163.5p, giving the company a market value of £473m.