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Hamilton, Bermuda (5 November 2018) – Hiscox Ltd (LSE:HSX), the international specialist insurer, yesterday (6 November 2018) issued its trading statement for the first nine months of the year to 30 September 2018.

 

Gross written premiums increased by 14.3% to $3,043.1 million (2017: $2,663.2 million), with good growth reported in all segments.

Bronek Masojada, Chief Executive Officer, commented: “We have had strong growth, but as the market remains challenging, we will remain disciplined, and I expect our growth to moderate over the balance of the year. It has been an active third quarter for claims across the Group, both from large losses and catastrophes, and I am pleased with how we have responded.”

“Hiscox Retail continues to benefit from investment in the brand, and we were pleased to welcome our one millionth retail customer. Our new European subsidiary is fully operational and expected to start writing business from 1 January 2019.”

Gross Written Premiums for the period:

 

  Gross Written Premiums

to 30 September 2018

Gross Written

Premiums

to 30 September 2017

Growth in constant currency

 

Growth in USD

 

  US$m US$m % %
Hiscox Retail $1,596.6 $1,367.5 12.5% 16.8%
Hiscox London Market $664.1 $590.3 10.4% 12.5%
Hiscox Re & ILS $782.4 $705.4 9.9% 10.9%
Total* $3,043.1 $2,663.2 11.4% 14.3%

* excludes business allocated to Corporate Centre of $1.5m.

Claims

After a benign first half for claims, the Group experienced a more active environment for both natural catastrophes and large claims in the third quarter. This activity extended into October.

Hiscox was impacted by catastrophes in the US and the Far East. The Group has reserved net $125 million to cover claims and reduced profit commissions resulting from Hurricanes Florence and Michael, which made landfall on the US East Coast, and Typhoons Jebi and Trammi, which impacted Japan. The losses are within our modelled assumptions for these events.

Hiscox has also seen a number of larger individual claims in both our big-ticket and retail businesses, including a large marine loss of $13 million. Hiscox USA has experienced a higher frequency of D&O claims, and Hiscox UK & Ireland has seen an uptick in subsidence claims following a particularly dry summer, as well as a continuation of escape of water claims.

Rates

In Hiscox London Market, rates have increased across the portfolio by 5% year to date, with double-digit increases in major property and 5% in casualty lines. More recently we have seen increases in areas targeted by the Lloyd’s ‘Decile 10’ directive, which has forced the whole market to take action in unprofitable areas. Cargo business, for example, has seen much-needed rate improvement of more than 20% since August. Overcapacity in cyber and terrorism continues to drive pricing pressure in those classes.

In Hiscox Re & ILS, rates in US catastrophe-exposed business are up mid-single-digits, while rates in the international book are down slightly. Looking ahead to January and further into 2019 renewals, we expect the market to recognise material adverse development from the hurricanes of 2017 and the recent events in the US and Japan. To date we have seen the most significant rate improvement in our risk excess book, which is up almost 10%, and our wildfire book which is up 50% year to date.

Rates in our retail business are broadly flat, with some increases in UK home insurance as the market responds to claims trends.

Investments

The investment return for the first nine months of 2018 was $44 million (2017: $83million), or 0.9% on an annualised basis (2017: 1.6%). Assets under management at 30 September 2018 were $6,438 million (2017: $6,129 million).

Market sentiment in 2018 has remained challenging, with most asset classes in which Hiscox invests generating low or even negative returns. Rising yields, most apparent in our US fixed income portfolio, are driving negative mark to market effects and adversely impacting investment income. Clearly over the medium term rising yields hold the promise of improved investment returns. Despite our modest allocation to riskier assets, turbulence in global equity markets is further dampening returns.

Given on-going economic and global political tensions, we expect our full year investment return to be subdued.

 

Brexit

Our preparations for Brexit are well advanced. We are already utilising the new Lloyd’s Brussels Subsidiary and our Part VII plans are on track. Our new European subsidiary, Hiscox S.A., is fully operational and expected to start writing business from 1 January 2019.

Our plans have always assumed a worst-case scenario ‘hard Brexit’ and we are prepared, irrespective of the outcome of the government’s negotiations.

The financial impact of re-organising the business in preparation for Brexit is $15 million across the Group in 2018, and we will inject incremental capital of approximately €40 million in the new entity. However, as we have said before, Brexit is just one of a number of regulatory projects which will have an on-going impact on expenses.

 

Hiscox Retail

Gross Written Premiums for the period:

 

  Gross Written Premiums

to 30 September 2018

Gross Written

Premiums

to 30 September 2017

 

Growth in constant currency

 

Growth in USD

 

  £m/€m US$m £m/€m US$m % %
Hiscox Retail

 

–    Hiscox UK & Ireland

 

–    Hiscox Europe

 

 

 

£453.2

 

€215.7

 

 

$611.9

 

$257.3

 

 

 

£417.4

 

€193.4

 

 

$532.2

 

$213.3

 

 

 

8.8%

 

11.6%

 

 

 

15.0%

 

20.7%

 

–    Hiscox USA

 

–    Hiscox Special Risks

 

–    DirectAsia

 

 

 

 

 

$611.9

 

$101.3

 

$14.2

 

 

 

 

 

$517.1

 

$94.1

 

$10.8

18.1%

 

5.1%

 

27.3%

18.3%

 

7.7%

 

31.5%

 

Hiscox Retail total   $1,596.6   $1,367.5 12.5% 16.8%

Hiscox UK & Ireland

Hiscox UK & Ireland increased gross written premiums by 9% in constant currency to $611.9 million (2017: $532.2 million), driven largely by commercial lines.

We have seen continued good performance in the direct channel, particularly in small commercial business, and from our partnerships with other financial services companies. Interest in our cyber offering has been strong. In direct home we have taken action to address rate inadequacy due to inflation and claims trends affecting the market. This has had an impact on the rate of new business growth in that area.

Growth in the broker channel is being driven by commercial lines, motor, fine art and last year’s transfer of contingency business from Hiscox London Market. However, as mentioned at the half year, the work we are undertaking to embed our new IT system and associated processes in the broker channel has impacted growth and we expect this to continue into the new year.

Hiscox Europe

Hiscox Europe delivered a strong performance, growing gross written premiums by 12% in constant currency to $257.3 million (2017: $213.3 million), with Germany and Spain performing particularly well, both up in excess of 20% year on year.

Commercial lines, including management liability, technology and cyber, continue to be the main drivers of growth in all regions. Our on-going investment in brand and marketing is generating above-budget new business growth and our claims service is helping to keep retention rates high.

In France, we have recently signed a deal which enabled us to grow our classic car book materially. We have also implemented a new pricing strategy in household business in France, where we remain very disciplined. In the Benelux, growth is being driven by cyber, fine art and household.

In cyber, our focus on recruiting and developing talent is paying off. We have built a strong position in Germany, our most developed European market for cyber, and the early signs in Spain are very encouraging. We continue to evolve our service capabilities and build stronger relationships with our network of third party service providers, which is critical to enabling us to provide high-quality service for our customers.

Hiscox USA

Hiscox USA continues to perform well, increasing gross written premiums by 18% to $611.9 million (2017: $517.1 million), as our direct and partnerships division delivered above-budget growth, benefiting from our long-term investment in the brand and an expanding appetite.

In the broker channel, there has been strong new business growth in healthcare and general liability where rates are attractive. In D&O we are experiencing an increased frequency of claims, combined with rate inadequacy. Consequently, in keeping with our disciplined approach, we are reshaping our portfolio and reducing our participation in more challenged segments.

The US business is benefiting from commission income generated by business written into our new commercial property MGA.

Hiscox Special Risks

Hiscox Special Risks grew premiums by 5% in constant currency to $101.3 million (2017: $94.1 million), however this figure benefited from the recognition of a number of multi-year policies. On an underlying basis the top line was flat.

Conditions remain challenging in the kidnap and ransom market, however growth in our Security Incident Response (SIR) product is very encouraging. We have re-launched the product with a specialised wording in order to further differentiate SIR from our kidnap and ransom offerings, and we are investing significantly in development and distribution by expanding the team.

DirectAsia

DirectAsia grew gross written premiums by 27% in constant currency to $14.2 million (2017: $10.8 million).

In Thailand we have enjoyed strong growth in new business, benefiting from improved lead conversion and an increased focus on customer acquisition. In Singapore we have seen good growth across all product lines, where our product innovation, dynamic pricing, distribution, partnerships and claims service continue to differentiate us.

Hiscox London Market

Gross written premium in our London Market business grew by 10% in constant currency to $664.1 million (2017: $590.3 million), in response to rate improvement in many classes of business. Growth has been particularly strong in major property and general liability, where we continue to see good margins.

Hurricane Florence struck the US East coast in September, bringing significant flooding to parts of North and South Carolina. Our FloodPlus products for homeowners and commercial customers have again been tested by this event and are responding well. We remain focused on helping our customers recover by paying claims quickly.

During the period we refocused our ambitions in D&O to concentrate on areas where we see the best margin and can trade profitably. We are also beginning to see the benefits of the tough decisions we have taken over the last two years to reduce or exit areas such as extended warranty, aviation hull and aviation liability. The Lloyd’s ‘Decile 10’ directive has challenged the whole market to take similarly tough action in unprofitable lines and it is already having an effect. We are seeing positive movement in rates and signs of a re-balance of influence with brokers.

Our 2019 business plan for Lloyd’s has been approved with capacity of £1.4 billion for Syndicate 33 (2018: £1.6 billion). We remain disciplined in the face of market conditions that, while better than previous years, have not improved sufficiently to warrant additional capacity for growth. We expect to maintain the level of premiums written into the Syndicate year-on-year.

Hiscox Re & ILS

In Hiscox Re & ILS, gross written premiums increased by 10% in constant currency to $782.4 million (2017: $705.4 million). The growth rate has reduced since the half year, as strong rate improvement experienced at the beginning of the year has begun to recede. The year on year growth rate has been impacted additionally by inwards reinstatement premiums written in the corresponding period in 2017, following the material catastrophe events in the third quarter last year. The year to date growth rate excluding reinstatements is 20% in constant currency.

Property catastrophe reinsurance has delivered the bulk of the growth, and our risk excess and specialty portfolio, where we see the best risk-adjusted returns, has also grown well. Our specialty book, which includes cyber, wildfire and financial lines business, is a key area of focus and we have secured positive rate improvement for ourselves and our third-party capital partners.

Japan is a key market for Hiscox Re & ILS and we have taken losses from Typhoon Jebi, as primary insurers exhausted their deductibles. The reinsurance division had comparatively moderate exposure to Hurricane Florence, however the business was exposed to a number of market losses, including in the marine portfolio. As we reported in July, our risk excess and specialty portfolios, where we retain a greater proportion of exposure on our own balance sheet, have experienced a more active claims environment compared to the benign experience of previous years.

Hiscox Re ILS funds reached $1.7 billion AUM in the period.

ENDS

For further information:

Hiscox Ltd
Marc Wetherhill, Group Company Secretary                     +1 441 278 8321
Kylie O’Connor, Head of Communications                        +44 (0) 20 7448 6656 

Brunswick
Tom Burns                                                                          +44 (0)20 7404 5959
Simone Selzer                                                                    +44 (0)20 7404 5959
Notes to editors

About The Hiscox Group

Hiscox is a global specialist insurer, headquartered in Bermuda and listed on the London Stock Exchange (LSE:HSX). Our ambition is to be a respected specialist insurer with a diverse portfolio by product and geography. We believe that building balance between catastrophe-exposed business and less volatile local specialty business gives us opportunities for profitable growth throughout the insurance cycle. It’s a long-standing strategy which in 2017 saw the business deliver a profit before tax (excluding foreign exchange) of $120.6 million despite reserving net $225 million for claims in the most costly year ever for natural catastrophes.

The Hiscox Group employs over 2,700 people in 14 countries, and has customers worldwide. Through the retail businesses in the UK, Europe, Asia and the US, we offer a range of specialist insurance for professionals and business customers as well as homeowners. Internationally traded, bigger ticket business and reinsurance is underwritten through Hiscox London Market and Hiscox Re & ILS.

Our values define our business, with a focus on people, quality, courage and excellence in execution. We pride ourselves on being true to our word and our award-winning claims service is testament to that. For more information, visit www.hiscoxgroup.com.