By Noor Zainab Hussain
(Reuters) - Lloyd's of London underwriter Hiscox Ltd (L:HSX) reported a 6.5 percent fall in full-year pretax profit, hurt mainly by falling investment returns in a challenging year for both bond and equity investments.
Hiscox, which underwrites a range of risks from oil refineries to kidnappings, said it would return 32 pence per share to shareholders, including a special dividend of 16 pence.
Going forward, the company will retain a greater proportion of earnings to fund growth opportunities, Hiscox said.
The company looks to wean investors off the expectation of special dividends and has earmarked the retained capital for funding growth, particularly in Hiscox International within the U.S. operation, Keefe, Bruyette & Woods analysts said.
Chief Executive Bronek Masojada declined to comment on how much of its earnings Hiscox would retain.
Investments, before derivatives, made 33.7 million pounds ($46.8 million) in the year, equating to a return of 1 percent, compared with 1.8 percent in 2014.
Gross written premiums rose 10.7 percent to 1.94 billion pounds ($2.69 billion) in the year ended Dec. 31.
Hiscox said it estimated an impact of 10 million pounds from three storms - Desmond, Eva and Frank - that hit Britain in December and January.
Hiscox said its full-year pretax profit fell to 216.1 million pounds from 231.1 million pounds a year earlier. Analysts on average had expected pretax profit of 213.18 million pounds, according to Thomson Reuters I/B/E/S.
The company said its business in the marine and energy markets shrank 12.2 percent and Masojada said Hiscox expects the division to continue to shrink.
"If oil prices stay low, that means there is less exploration activity, there are fewer rigs out at sea and therefore there are fewer things to insure," Masojada told Reuters.
The underwriter will take money from its marine and energy business and put it in other areas like cyber insurance, where demand is growing, Masojada added.
Hiscox could tap reserve releases of 205.9 million pounds, compared with the 172.2 million pounds it released in 2014.
Hiscox's combined ratio in 2015 was 85 percent, compared with 83.9 percent in the previous year. A ratio below 100 percent means an insurer earns more in premiums than it pays out in claims.
Shares in Hiscox were down about 2 percent at 1040 pence at 0859 GMT on Monday on the London Stock Exchange.