Forecasts & Results
Hiscox 1Q22 trading statement
Posted 05/05/2022 – Quick takes
Hiscox plc has provided a trading statement for the first quarter of the year to 31 March 2022.
The highlights are:
- Group gross written premiums (GWP) are +10.3% to US$1,386m primarily driven by growth in Hiscox Re & ILS.
- Hiscox London Market GWP declined by 3.1% to US$295m (vs. US$304m in 1Q21) due to a deliberate reduction in under-priced natural catastrophe exposure. Rate has not moved uniformly across the portfolio – classes impacted by losses in prior years (e.g. cyber and marine liability) saw significant rate hardening, whilst historically profitable classes (e.g. Kidnap & Ransom, terrorism and D&O) saw low or negative rate increases. Property binders continue to see double digit growth as capacity continues to be withdrawn from the market.
- Hiscox Re & ILS saw GWP +45.8% to US$421m (US$289m in 1Q22) on ILS net inflows of US$218m, allowing Hiscox to capitalise on the hard market in North American catastrophe and retrocession.
- 1Q22 saw group investment losses of US$119m (vs. a profit of US$201m in 1Q21) which equates to a negative return of -1.7% for 1Q22 (vs. +0.3% in 1Q21). This reflects unrealised (i.e. non-cash) losses in the group’s bond portfolio due to the rises in interest rates globally. The corollary of this is that reinvestment yields have improved to 2.4%.
- Natural catastrophe losses in 1Q22 (including European storms, Australian floods and an earthquake in Japan) are within the group’s first quarter budget and in-line with expectations.
- 1Q22 incurred losses from the war in Ukraine are described as “minimal” with the group reserving (largely IBNR) c$40m (net of reinsurance) for expected losses, primarily in the political violence (PV), war and terror portfolio (together referred to as PVWT).
- The impact of Russian sanctions on the Group in 1Q22 is also described as “minimal” (cUS$4.4m), with the FY22 impact expected to be less than US$20m.
- The group’s cyber book has seen reduced frequency and severity of claims in 1Q22, the result of earlier re-underwriting actions and the clamp down on ransomware by governments globally.
- The group’s COVID-19 estimates are unchanged.
- Hiscox London Market achieved an average rate increase across the portfolio of 8% year-on-year in 1Q22, in addition to a 60% cumulative rate increase since 2017 that the group reported with the FY21 results. This momentum is expected to continue, particularly in classes such as terrorism.
- Hiscox Re & ILS saw an average rate increase of 10% across the portfolio year-on-year in 1Q22, driven by capacity constraints in retrocession and North American catastrophe. Rate momentum is expected to continue as the year progresses.
Aki Hussain, CEO, said: “The Group delivered a solid performance in the first quarter. The rate environment remains favourable … we continue to position our businesses for strong and sustainable returns by growing where we see opportunity and reducing exposures where we believe risks are under-priced.”
The first estimates for the group’s Ukrainian losses (probably the most closely watched aspect at present) are lower than market expectations (cUS$70m), largely due to the fact that that the London Market business exited Aviation Hull in 2018 and exited Political Risk / Trade Credit in 2017 (with no residual exposure). This is a positive statement for those members who support Hiscox 33 and Hiscox 6104 for the 2021 & 2022 years of account. We continue to monitor the Ukraine situation very closely and will keep members informed as we receive more granular data on exposures.