Hiscox Gains Morgan Stanley Overweight Nod on $200M Savings Plan and 26% Earnings Surge

Hiscox (LON: HSX) just got a fresh vote of confidence from Morgan Stanley, which bumped its rating to "overweight" and lifted the price target from 1,280p to 1,460p.

The upgrade follows the insurer's recent Capital Markets Day reveal, where the company laid out a clear-cut plan aimed at trimming costs, sharpening capital efficiency, and beefing up growth in its Retail segment.

Central to this strategy is a hefty $200 million cost-reduction program set to roll out through 2028. Hiscox plans to shell out this amount between 2025 and 2027, aiming to generate $160 million in extra net earnings by 2028 - that's a 26% bump from 2024's figures.

Two-thirds of these savings will tackle the combined ratio-split evenly between claims and expenses-pushing it down by about three points. The rest comes from operating expense cuts.

On the growth front, Retail, which makes up roughly half of Hiscox's premiums, is expected to pick up steam with a target of double-digit growth by 2028, a sharp step up from the 6%+ forecast for 2025. The improved performance of the U.S. broker and partnership business played a part in this optimism.

The combined ratio in Retail is projected to slide from 89.3% in 2025 to 86.8% by 2027, while the group's overall combined ratio should improve from 88.7% to 83.6% over the same period, indicating leaner underwriting and operational execution.

Capital management is also getting a clearer form: Hiscox now aims for a Bermuda Solvency Capital Requirement ratio between 190% and 200%. Anything above that range is slated to be returned to shareholders, leading Morgan Stanley to raise its 2025-2027 share buyback estimate by $50 million, now expecting a $225 million total. Even after these paybacks, the company should carry a 10-15 point buffer, translating to 3.5-5% of its market cap by 2027.

Earnings forecasts received a boost, with Morgan Stanley upping estimated reported EPS by 4% in 2025 and 7% in 2027. Adjusted operating profit projections are now 8%, 11%, and 20% higher for 2025 through 2027, respectively. Meanwhile, dividend forecasts climbed between 11% and 16%, building on a 20% hike already announced for the 2025 final dividend.

Sure, there's always execution risk-hitting those savings and growth numbers won't be a walk in the park. But the plan's detailed nature, aligned with tangible targets, has enough credibility to sway those with a closer eye.

Currently, Hiscox shares trade at 8.4 times 2026 adjusted operating P/E and 1.4 times 2025 price-to-book, which Morgan Stanley labels as undemanding compared to its history.

With earnings updates due soon and management promising steady progress reports, analysts will be looking for proof that this cost-cutting and growth pivot sticks.