Forecasts & Results

Hiscox Ltd annual results 2020

Posted 03/03/2021 – Quick takes

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

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These results from the Hiscox group were much as expected, with the worse result primarily a function of COVID-19. After the well-publicised UK Supreme Court decision, Hiscox expects $475m of COVID-19 related claims net of reinsurance, the majority for event cancellation (written mainly by the Lloyd’s syndicates) and for UK business interruption claims on commercial property policies (written in the retail book of Hiscox plc, but not by the Lloyd’s syndicates). These group results saw the share price fall a further 12% this morning, with the shares down approximately 50% in the last 18 months.

Gross written premiums for the group were stable, in contrast to its fellow listed Lloyd’s businesses Beazley (+19%) and Lancashire (+15%), suggesting that Hiscox is cutting back on its under-performing lines but has also suffered some brand damage on its retail book. The group’s combined ratio of 115% also compares unfavourably with both Beazley (109%) and Lancashire (108%).

It is encouraging that the London Market division (which houses much of the direct business written in syndicate 33) performed very well, enjoying 6% growth and a combined ratio of 93.7%, and delivering a profit of $97m. This division saw rate improvements of 20% in 2020, with 16 of their 17 lines enjoying price rises. This is now the fourth year of rate increases with cumulative increases of 43% since 2017. In contrast, the Hiscox Re & ILS division (which houses the reinsurance SPA 6104) did not fare so well, and despite 12% rate increases and an average year for catastrophe losses, it produced a combined ratio of 131.8% (an improvement nevertheless on the 169.9% of 2019). This division saw its premium reduce by 14% and is still going through a period of remediation, removing lines of business (eg casualty excess of loss reinsurance) and reducing exposures (in Japan, for instance).

It is encouraging to be told by the CEO that the 2020 performance, while understandable (Hiscox advise that without COVID-19 they would have produced a profit of over $200m) was not satisfactory. Hiscox, as a group, should have learnt a significant lesson last year, and the combination going forward of disciplined underwriting and a strong rating environment should enable the Hiscox syndicates to be the first part of the group to report much improved results.

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