Forecasts & Results

Hiscox 1Q24 trading statement

Posted 02/05/2024 – Quick takes

Hiscox plc has released its trading statement for 1Q24 ending 31st March 2024

 

Main highlights

  • Group insurance contract written premiums (ICWP) of $1,537.5m (Q1 2023: $1,420.2m) grew 8.3% due to continued capital deployment in Re & ILS and the acceleration of Retail growth since full year 2023.
  • Hiscox Retail ICWP grew by 5.8% in constant currency. UK growth was 8.3% in constant currency and Europe continued to perform strongly; this was partially offset by continued headwinds within the US broker business.
  • Hiscox Re & ILS deployed additional capital with ICWP growing by 19.0% and net ICWP growing by 9.7%.
  • Hiscox London Market ICWP contracted temporarily, following the non-renewal of certain large binder deals in place of more open market business and also due to the impact of one-off accounting reclassification items. The first quarter contraction is expected to be offset by growth over the course of the year.
  • Large natural catastrophe losses were within expectations for the first quarter.
  • Investment income of $66.9m (Q1 2023: $98.1m) as duration was extended to 1.8 years in anticipation of falling interest rates.
  • Hiscox continues to guide for a FY Combined Ratio in the mid-80ies and a Return of Equity of around c20%.

 

Aki Hussain, Chief Executive Officer, said:

“A good start to 2024, with our focus on profitable growth continuing to deliver. Retail momentum has improved with growth accelerating in Hiscox UK and US DPD as our initiatives achieve targeted outcomes, and solid sustained growth in Hiscox Europe. In Hiscox London Market and Hiscox Re & ILS we continue to deploy capital where we see attractive opportunities. The outlook for the year remains positive.”

 

The group’s headline figures for 1Q24 are as follows:

Hiscox London Market highlights

  • Average rate increase across the portfolio of +3%, ahead of plan. Cumulative rate increases since 2018 of +76%.
  • Non-renewal of some large binder deals as planned, in favour of leading more open market business.
  • Property rates for binders and flood increased by +12% and +13% respectively.
  • Rates for cyber and D&O were down -9% and -6% respectively, but rate decreases are beginning to stabilise.
  • Multiple new opportunities for growth within energy, both for renewable and traditional industries.
  • Hiscox’s partnership with Google Cloud produced a successful proof of concept to reduce the time taken for terrorism quoting business from three days to three minutes. Hiscox is now looking to utilise this AI rapid quote technology across all other syndicate classes, beginning with property.

 

Hiscox Re & ILS highlights

  • Average rate increase across the portfolio of +2% with T&Cs holding firm. Cumulative rate increases since 2018 of +94%.
  • Positive market conditions are expected to continue throughout 2024.
  • The majority of premium for the division is earned in the second half of the year.

 

Claims

  • Catastrophe losses were well within expectations for the quarter
  • Hiscox’s exposure to the Baltimore bridge collapse is via reinsurance and losses are expected to be moderate. More detailed numbers will be provided for Q2.

Alpha comment

This is a good set of Q1 results published by Hiscox. Rates continue to increase for both Hiscox London Market and Hiscox Re & ILS where members have exposure via syndicate 33 and SPA 6104. Rates also remain adequate with most classes still seeing some increases. We were aware of Hiscox’s strategy to non-renew some property binders and redeploy this capacity into open market property risks and comments during the earnings call suggest that this strategy will continue. London Market premium income is expected to increase throughout the year, as the open market is particularly busy before the summer wind season. It is also very positive to learn that Hiscox has successfully implemented its terrorism AI quoting technology and plans to develop this further for all classes written by 33. Investing in technology to speed up processes and reduce administrative costs should help to give Hiscox and Lloyd’s a significant edge.

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