FTSE 100 insurer slides despite profit beat

The exposure of Hill & Smith (LSE:HILS) to structurally growing US markets today contrasted with a slower top-line performance by Beazley (LSE:BEZ) as their shares found opposite ends of the FTSE 350 index.

Hill & Smith is now more than 40% higher than its April low point for this year, boosted by a strong response to this morning’s interim results and share buyback announcement.

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The group, whose products and services enhance the resilience of infrastructure and the built environment, generated three-quarters of its operating profit in the US in the half year.

It expects strong trading in its larger US platform businesses to continue in the second half of the year amid favourable market conditions in electricity transmission and distribution, water and wastewater and infrastructure construction. 

The company added: “We continue to monitor the effects of tariff announcements on our businesses and supply chains, however we have not seen any significant impact to date.”

The outlook for its UK businesses in the second half is likely to remain challenging given broader economic conditions, budgetary pressures and a lack of road investment schemes. 

Analysts at Jefferies said the results should squash lingering concerns of a US slowdown, while counterparts at Investec said the plan for a £100 million share buyback over the next 18 months was a reflection of the group’s strong balance sheet and near-term confidence.

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Shareholders are set to receive an interim dividend of 18p a share on 7 January, representing a rise of 9% on a year earlier.

The award follows a 10% rise in earnings per share to 63.9p as revenues lifted 4% on a constant currency basis to £431.6 million and operating profit improved 11% to £73.5 million.

In contrast, Beazley shares fell to their lowest level since February even though the specialist insurer and manager of seven Lloyd’s syndicates posted a forecast-beating half-year profit.

The FTSE 100 share price reverse was driven by a downgrade in the company’s guidance for premium growth in 2025 to a low or mid-single digit.

Growth in the first half was 2% compared with 6.9% the year before, which Beazley said reflected its deliberate prioritisation of rate adequacy and disciplined underwriting.

It said this evolution was entirely consistent with the nature of the insurance cycle: “It is both familiar and something we know how to manage well.”

Chief executive Adrian Cox added: “Our depth of experience in operating within a cyclical environment means we know when to take risk, and when to pull back. This phase is no exception.”

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Rates fell in all areas apart from casualty, with cyber insurance down 6.8% and property 7% lower.

Beazley said: “Growth in recent years has been exceptionally strong, supported by a combination of increased exposure and significant rate momentum across many of our lines. These conditions were dislocated and temporary.”

The impact of improved underwriting and better-than-expected investment gains meant Beazley reported a half-year profit of $502 million (£370 million), which compared with the consensus estimate of $453 million and Peel Hunt’s $356 million.

Beazley said the fact that this performance came in a period that had the second highest market-wide losses on record reinforced confidence in the long-term trajectory of the business.

Peel Hunt reiterated an Add recommendation and price target of 995p following the results. 

It said: “We had already been assuming slowing top-line growth in the medium term, but this seems to have been brought forward.

“Beazley’s strategic focus turns to cycle management and enhancing the underwriting platform while continuing to build up excess capital.”