TIDMHSX
RNS Number : 7174V
Hiscox Ltd
07 November 2017
Interim Management Statement
Hamilton, Bermuda (7 November 2017) - Hiscox Ltd (LSE:HSX), the
international specialist insurer, today issues its Interim
Management Statement for the first nine months of the year to 30
September 2017.
Gross written premiums grew by 12.4% to GBP2,088.8 million
(2016: GBP1,858.2 million) reflecting a strong performance across
all segments, particularly from Hiscox USA where premiums grew 29%
in constant currency.
Bronek Masojada, Group Chief Executive Officer, commented: "2017
is turning out to be an historic year for catastrophes and Hiscox's
first priority is to help our customers get back on their feet. Our
long-held strategy of balance and diversity was built for this
environment, as our retail businesses provide stability when
volatility impacts the big-ticket areas. Our balance sheet is
strong, and we are in a good position to capitalise on changes in
the market."
Gross Written Premiums for the period:
Gross Written Gross Written Growth in Growth
Premiums Premiums constant in Sterling
to 30 September to 30 September currency
2017 2016
US$/EURm GBPm US$/EURm GBPm % %
------------------------------ ------------ ------------ ------------ ------------ ---------- -------------
Hiscox Retail GBP1,072.5 GBP871.2 16.2% 23.1%
* Hiscox UK and Ireland GBP417.4 GBP369.4 12.2% 13.0%
EUR193.4 GBP167.3 EUR173.9 GBP136.1 11.2% 22.9%
* Hiscox Europe US$94.1 GBP73.8 US$96.4 GBP69.2 (2.3%) 6.7%
US$518.0 GBP405.6 US$400.9 GBP286.3 29.2% 41.7%
* Hiscox Special Risks GBP8.4 GBP10.2 (24.3%) (17.0%)
* Hiscox USA
* DirectAsia
Hiscox London Market GBP463.0 GBP520.2 (17.1)% (11.0)%
-------------------------------------------- -------------------------- ---------- ---------- -------------
Hiscox Re US$705.9 GBP553.3 US$649.2 GBP466.8 8.7% 18.5%
------------------------------ ------------ ------------ ------------ ------------ ---------- -------------
GBP1,858
Total GBP2,088.8 .2 4.9% 12.4%
-------------------------------------------- -------------------------- ---------- ---------- -------------
Catastrophes
Our early estimates for Hurricanes Harvey and Irma have proved
to be prudent. As a result, we now estimate combined net claims for
Hurricanes Harvey, Irma and Hurricane Maria of US$225 million
against a previous estimate US$225 million for Harvey and Irma
alone. This is based on an insured market loss of US$25 billion for
Harvey (excluding the government backed National Flood Insurance
Program), US$35 billion for Irma, and US$30 billion for Maria.
Claims arising from the Mexico earthquakes and California
wildfires are not expected to be material for the Group.
Rates
The recent catastrophes are estimated to have cost the industry
$100 billion and follow a decade of rate reductions. Therefore, it
is not surprising that we are seeing signs of a hardening market.
Price corrections are occurring in loss-affected and loss-exposed
US property lines business where we are seeing increases of between
10% and 50% and sometimes more. In other London Market insurance
lines, momentum is building ahead of the busy renewal season and
reductions are coming to an end.
For reinsurance, we anticipate double-digit increases in rates
for US catastrophe-exposed business at the important January
renewals, with higher increases on loss-affected accounts and retro
business.
Rates in our retail business are broadly flat with significant
rises in US commercial property.
Investments
The investment result to 30 September 2017 was 1.6% on a non
annualised basis. The third quarter proved to be a challenging one
for bond investors as central banks continued to prepare the market
for a gradual move towards a less accommodative monetary policy.
The fixed income portfolios delivered modest positive returns
overall in the period largely due to their allocation to
non-government bonds. Our risk assets have made further gains as
equity markets benefited from a more optimistic outlook for global
growth. Invested assets totalled GBP4.4 billion at the end of
September, with asset allocation remaining largely unchanged from
the end of June.
Hiscox Retail
Hiscox UK and Ireland
Hiscox UK and Ireland increased gross written premiums by 12.2%
in constant currency to GBP417.4 million (2016: GBP369.4 million).
This growth was driven by all regions and all distribution
channels.
In our broker channel, the professions and specialty commercial
business is performing well, with an expanded appetite for larger
risks attracting new business. In the direct-to-consumer channel,
we have seen good growth from our core direct commercial and home
portfolios.
The power of the Hiscox brand has been an important driver of
our growth. In the UK we have returned to TV with a sponsored
Channel 4 series 'Best Laid Plans' to support our renovations and
extensions product for home insurance customers.
Hiscox Europe
Hiscox Europe performed well, growing gross written premiums by
11.2% in constant currency to EUR193.4 million (2016: EUR173.9
million).
This was driven by a strong performance across all regions, with
commercial lines in Germany, Spain and the Netherlands performing
particularly well.
Hiscox Europe is benefiting from a focus on products where we
have strong specialist expertise and a solid reputation,
particularly in cyber and classic cars.
Hiscox Special Risks
Hiscox Special Risks reduced by 2.3% in constant currency to
US$94.1 million (2016: US$96.4 million).
New business growth has been challenging, however Security
Incident Response, the broad security-based product for corporates
and private clients we launched earlier in the year, has been well
received and is gaining traction. After a successful roll out in
the US, Spain and Japan, we expect to introduce the product into
other markets over time.
Hiscox USA
Hiscox USA delivered another strong performance, growing gross
written premiums by 29.2% in constant currency to US$518.0 million
(2016: US$400.9 million) driven by growth in general liability and
professional risks.
The direct and partnership business has performed particularly
well, with strong partnership distribution and an increased
effectiveness in marketing activity. This area has also benefited
from an expansion of underwriting appetite into adjacent small
business segments such as food trucks.
Hiscox USA is also seeing significant rate increases on new and
renewal business for commercial property, a trend we expect to
continue in Q4.
DirectAsia
DirectAsia has seen gross written premiums reduce by 24.3% in
constant currency to GBP8.4 million (2016: GBP10.2 million). This
is partly due to the on-going impact of the sale of the Hong Kong
business in August 2016, as well as the extremely competitive
environment in Singapore.
We are making progress with investment in the brand. In
Singapore, marketing and product innovation continues to
differentiate us. We have launched a new partnership with Shell
which is yielding encouraging results, as well as a number of new
features in our core product range, including NCD60 for car
customers and cover for motorcycle delivery riders. In Thailand we
have launched a new TV campaign to drive volume.
Hiscox London Market
Our London Market business reduced during the period as planned
with gross written premiums decreasing by 17.1% in constant
currency to GBP463.0 million (2016: GBP520.2 million).
This reduction is in line with previous guidance and follows our
decision to re-focus the division over the last year. We have
reduced in areas where margins have eroded, such as healthcare,
aviation, big-ticket property, and extended warranty, while
targeting growth in marine cargo, general liability, product recall
and US flood.
Hurricane Harvey was an historic flood event and exposed the
lack of flood cover in the US. In 2016 we launched FloodPlus, an
alternative to the National Flood Insurance Program (NFIP), in
anticipation of deregulation in the US flood market. Harvey has
taught us a lot about the responsiveness of this product and we
have seen strong increase in demand. We believe the opportunity to
write more US flood business is significant and we are well
positioned to serve more customers.
In order to participate fully in any widespread market turn, we
have secured Lloyd's approval to increase the capacity of Syndicate
33 by GBP450 million to GBP1.6 billion. As a result of the
improving environment, we are expecting to return Hiscox London
Market to growth in 2018.
Kate Markham, Managing Director Hiscox Direct in the UK, has
been appointed to the new position of Chief Executive Officer of
Hiscox London Market, where she will work closely with Chief
Underwriting Officer Paul Lawrence.
Hiscox Re & ILS
Gross written premiums increased by 8.7% in constant currency to
US$705.9 million (2016: US$649.2 million) driven by on-going growth
in Hiscox Re ILS funds.
Property catastrophe reinsurance makes up over 60% of GWP for
Hiscox Re & ILS where, following the Hurricane activity in Q3,
we are seeing signs of material hardening of rates with some risks
expected to rise by 30% in loss-affected areas. The wildfires in
California are also putting upward pressure on US renewal
rates.
In the third quarter, Hiscox Re launched FloodXtra, our new US
flood product which reinsures personal lines carriers. FloodXtra
complements FloodPlus, and helps insurers address the coverage gap
in areas underserved by the NFIP.
Hiscox Re ILS funds reached $1.35 billion AUM in the period.
Brexit
As we have said previously, Brexit is a structural rather than
strategic event for Hiscox. Our new European insurance company,
Hiscox S.A., has been formally incorporated in Luxembourg where we
have started to build a small local team. Subject to final
regulatory approval, we are on track to start writing into the new
carrier from Q2 2018.
Proposed US Tax reform
Recently the US House Committee on Ways and Means released a tax
reform bill which aims to lower business and individual tax rates
and modernise US international tax rules. Among many measures, the
draft bill seeks to levy a 20% excise tax on payments made to
foreign affiliates. This measure could have an impact on our
internal Group reinsurance arrangements. It is still early days in
the legislative process and the final shape of the bill is far from
clear. We are following that process through several of our trade
association partners and will update the market in due course.
Functional and reporting currency change
The functional currency of our syndicates and the reporting
currency of the Group will change to US dollars effective 1 January
2018. This change will significantly reduce the volatility of the
Group's earnings due to foreign exchange movements, in particular
due to translation of foreign currency balances. Given that a
significant majority of Group earnings are denominated in US
dollars, we believe that this change will give investors and other
stakeholders a clearer understanding of Hiscox's performance over
time.
We will report to the market on this new basis when disclosing
the Q1 Interim Management Statement in May 2018. Ahead of our
interim results we will publish comparative restated data for
Hiscox's final and interim results of 2017.
ENDS
For further information:
Hiscox Ltd
Marc Wetherhill, Group Company Secretary +1 441 278 8321
Kylie O'Connor, Head of Communications +44 (0) 20 7448 6656
Brunswick
Tom Burns +44 (0)20 7404 5959
Simone Selzer +44 (0)20 7404 5959
Notes to editors
About The Hiscox Group
Hiscox is a global specialist insurer, headquartered in Bermuda
and listed on the London Stock Exchange (LSE:HSX). Our ambition is
to be a respected specialist insurer with a diverse portfolio by
product and geography. We believe that building balance between
catastrophe-exposed business and less volatile local specialty
business gives us opportunities for profitable growth throughout
the insurance cycle. It's a long-standing strategy which in 2016
helped generate gross premiums written of GBP2,402.6 million and a
record profit before tax of GBP354.5 million.
The Hiscox Group employs over 2,300 people in 13 countries, and
has customers worldwide. Through the retail businesses in the UK,
Europe, Asia and the US, we offer a range of specialist insurance
for professionals and business customers as well as homeowners.
Internationally traded, bigger ticket business and reinsurance is
underwritten through Hiscox London Market and Hiscox Re and
ILS.
Our values define our business, with a focus on people, quality,
courage and excellence in execution. We pride ourselves on being
true to our word and our award-winning claims service is testament
to that. For more information, visit www.hiscoxgroup.com.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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