Hiscox Ltd 2019 Interim Results

Posted 29/07/2019 – Insights

Hiscox Ltd, the owner of Hiscox Syndicates Ltd (managing agent of syndicates 33 & 6104), has today (29 July) announced its half year 2019 annualised results.

Bronek Masojada, Chief Executive Officer, said:

“Hiscox delivered a profit of $168 million for the first half despite a more challenging claims experience. Looking ahead, with six consecutive quarters of rate growth in some Lloyd’s business, the market is in a better position than it has been for some time. In Retail, we will continue to invest in our infrastructure and marketing to drive sustainable growth. Our strategy of diversification gives us options.”

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Alpha comment

These interim results show a worsening underwriting performance. This was offset by a much improved investment result, which was driven by an upturn in its equities and US bond holdings, although Hiscox was quick to point out that falling bond yields will most likely reduce investment income for the second half of 2019 and into 2020. An increase in attritional losses and major claims in the London Market property binder and US directors’ and officers’ (D&O) books were cited as key reasons behind underwriting performance worsening in 2019. At $26m, the amount of releases from prior year reserves was much reduced on that recorded 12 months’ ago (H1 2018: $154m). A marked amount of loss creep from Typhoon Jebi, Hurricane Michael (both of which occurred in H2 2018) and the risk excess reinsurance book depleted reserves by $40m during the first six months of 2019. Furthermore, the 2018 figures benefited from a $25m improvement in claims reserves for hurricanes Harvey, Irma and Maria (H2 2017 losses).

The London Market division, which houses syndicates 33 and 6104, grew by 7%, which included a 5% improvement in rates across the portfolio, with D&O (+50%), marine cargo (+15%) and marine hull (+10%) highlighted as key areas of rate strengthening. The London Market combined ratio, however, was 103% (H1 2018: 89%) due to the aforementioned losses against the property binder book and adverse prior year development from Hurricane Michael.

A muted reaction to these interim results today has seen the Hiscox Ltd share price remain largely unchanged on Friday’s closing.

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