Hiscox Ltd 2020 Interim Results

Posted 05/08/2020 – Insights

Hiscox Ltd., the owner of Hiscox Syndicates Ltd (managing agent of syndicate 33 & SPA 6104), has announced its half year 2020 annualised results.

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The interim figures from the Hiscox group were disappointing, primarily because of the reported worsening impact of COVID-19. Hiscox has now set aside $232m for claims arising from COVID-19, which includes the previously disclosed figure of $150m net claims from event cancellation, media, entertainment and other segments including travel. The remaining $82m derives from: the London Market division, UK and Europe property; UK and Europe travel bonds; and third-party claims in US allied healthcare. The potential impact on Hiscox Re & ILS is more uncertain. In addition to this, Hiscox’s scenario analysis (based upon a 12-week lockdown) suggests a range of possible outcomes of between £10m and £250m net of reinsurance in relation UK business interruption claims, which are the subject of the current ongoing case brought by the FCA in the High Court. The outcome of this legal action will have a considerable bearing on the full year result, as too will the level of any hurricane activity during the next three months. The results saw Hiscox’s share price fall c3%, with the shares down approximately 50% since the start of the year.

Gross written premiums for the group fell by -4%, in notable contrast to Beazley (+12%) and Lancashire (+15%). The group’s combined ratio of 115% also compares unfavourably with its peer group of listed Lloyd’s businesses, with both Beazley and Lancashire posting 107% for the first six months of the year.

The London Market division (which houses syndicate 33) recorded rate rises of +13%. A 5% increase in gross written premium (from $485m to $508m) implies an approximately 8% reduction in the division’s gross exposures, which Hiscox explained was due to reduced appetite for some household and commercial binders as the result of higher attritional loss ratios. The division reported a combined ratio of 107% for the first six months of 2020, which compares to 103% for the corresponding period in 2019. Hiscox stated that without the impacts of COVID-19, it would have reported a H1 2020 combined ratio of 103% (i.e. the same as H1 2019).

Despite the group underwriting losses, it is worth noting that the London Market division reported a profit before tax of $7.6m in H1 2020 ($34.4m in H1 2019) due to investment income of $24m ($42m in H1 2019).

Hiscox Re & ILS (housing SPA 6104) reported that its loss-making H1 2020 combined ratio of 124% would have been a profitable 88% excluding the impacts of COVID-19 (unlike H1 2019, which produced a combined ratio of 111%). Gross written premiums reduced by 21%, from $698m in H1 2019 to $552m in H1 2020. The rate rises of +11% suggest an even larger reduction in exposure than for the London Market, albeit due to a reduced catastrophe risk appetite and less deployable capital from third-party capital providers.

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