How to play its shares: Hiscox is a secure insurance investment

Hiscox's strategy has enabled it to consistently produce profits, and the stock is valued at a very reasonable level

The share price can be played as follows.

Hiscox, an insurance company, benefits from a volatile global environment where businesses want to ensure that their assets, including their factories and the products and services they sell, are adequately insured. In the meantime, new kinds of insurance, like defense against cyberattacks, have emerged as a result of the growth of the digital economy.

Even though they might not seem glamorous, some of the best investment opportunities are found in sectors of the economy that are reliable, lucrative, and essential to the world economy.

Hiscox (LSE: HSX) has three areas of focus. Through its membership in Lloyd's of London, the world's largest insurance market, it offers extensive insurance. Additionally, it provides reinsurance, which involves assuming some or all of the risks associated with policies that were initially written by other insurance providers.

Hiscox has a solid track record of balancing risk and return in its investments, which has enabled it to consistently turn a profit. Both of those businesses have been successful. Hiscox's expanding retail division, which provides insurance policies to small businesses in the US, UK, and Europe, is, nevertheless, its most intriguing aspect.

Hiscox is succeeding with its expansion plan.

Hiscox has been able to enhance its brand and expand the retail division of the business more quickly than the other two segments thanks to advertising and a solid reputation for customer satisfaction; currently, the retail division makes up about half of sales. Although the market is competitive, Hiscox appears to have a sound strategy for sustaining this growth, which includes developing new products, forming partnerships and agreements, and making acquisitions to increase its footprint outside of the UK.

Hiscox's earnings per share more than tripled between 2021 and 2025, while its revenue increased by about 50% between 2020 and 2025.

Sales and profits will continue to rise. Hiscox's operating margins more than doubled to 15%, demonstrating its ability to boost pricing power. Since 2022, it has been able to continuously increase its dividend thanks to this. Despite this, the stock is still very reasonably priced, trading at just 12.8 times projected 2027 earnings and providing a respectable dividend yield.

Potential buyers are beginning to show interest due to the combination of high profits and low valuations. It was revealed in May that Intact Financial, a Canadian company, was considering making a bid for Hiscox. Global firms are keeping an eye on the UK insurance market, as evidenced by Zurich Insurance Group's agreement to buy rival Beazley in March, even though no formal announcement has been made.

In any event, there appears to be a lot of momentum behind Hiscox's share price. Hiscox gained a third over the last six months, making it the eighth best-performing share in the FTSE 100. Additionally, it is trading above its moving averages for 50 and 200 days. Thus, at the current price of 1.861p at 1.50 per 1p, I would go long. In that scenario, I would set the stop loss at 1,261p, giving you a 900p downside.