TIDMHSX
RNS Number : 2602G
Hiscox Ltd
05 November 2018
Hiscox Ltd trading statement
Hamilton, Bermuda (5 November 2018) - Hiscox Ltd (LSE:HSX), the
international specialist insurer, today issues its trading
statement for the first nine months of the year to 30 September
2018.
Gross written premiums increased by 14.3% to $3,043.1 million
(2017: $2,663.2 million), with good growth reported in all
segments.
Bronek Masojada, Chief Executive Officer, commented: "We have
had strong growth, but as the market remains challenging, we will
remain disciplined, and I expect our growth to moderate over the
balance of the year. It has been an active third quarter for claims
across the Group, both from large losses and catastrophes, and I am
pleased with how we have responded."
"Hiscox Retail continues to benefit from investment in the
brand, and we were pleased to welcome our one millionth retail
customer. Our new European subsidiary is fully operational and
expected to start writing business from 1 January 2019."
Gross Written Premiums for the period:
Gross Written Premiums Gross Written Growth in constant currency Growth in USD
to 30 September 2018 Premiums
to 30 September 2017
---------------------- ----------------------- ---------------------- ---------------------------- --------------
US$m US$m % %
---------------------- ----------------------- ---------------------- ---------------------------- --------------
Hiscox Retail $1,596.6 $1,367.5 12.5% 16.8%
---------------------- ----------------------- ---------------------- ---------------------------- --------------
Hiscox London Market $664.1 $590.3 10.4% 12.5%
---------------------- ----------------------- ---------------------- ---------------------------- --------------
Hiscox Re & ILS $782.4 $705.4 9.9% 10.9%
---------------------- ----------------------- ---------------------- ---------------------------- --------------
Total* $3,043.1 $2,663.2 11.4% 14.3%
---------------------- ----------------------- ---------------------- ---------------------------- --------------
* excludes business allocated to Corporate Centre of $1.5m.
Claims
After a benign first half for claims, the Group experienced a
more active environment for both natural catastrophes and large
claims in the third quarter. This activity extended into
October.
Hiscox was impacted by catastrophes in the US and the Far East.
The Group has reserved net $125 million to cover claims and reduced
profit commissions resulting from Hurricanes Florence and Michael,
which made landfall on the US East Coast, and Typhoons Jebi and
Trammi, which impacted Japan. The losses are within our modelled
assumptions for these events.
Hiscox has also seen a number of larger individual claims in
both our big-ticket and retail businesses, including a large marine
loss of $13 million. Hiscox USA has experienced a higher frequency
of D&O claims, and Hiscox UK & Ireland has seen an uptick
in subsidence claims following a particularly dry summer, as well
as a continuation of escape of water claims.
Rates
In Hiscox London Market, rates have increased across the
portfolio by 5% year to date, with double-digit increases in major
property and 5% in casualty lines. More recently we have seen
increases in areas targeted by the Lloyd's 'Decile 10' directive,
which has forced the whole market to take action in unprofitable
areas. Cargo business, for example, has seen much-needed rate
improvement of more than 20% since August. Overcapacity in cyber
and terrorism continues to drive pricing pressure in those
classes.
In Hiscox Re & ILS, rates in US catastrophe-exposed business
are up mid-single-digits, while rates in the international book are
down slightly. Looking ahead to January and further into 2019
renewals, we expect the market to recognise material adverse
development from the hurricanes of 2017 and the recent events in
the US and Japan. To date we have seen the most significant rate
improvement in our risk excess book, which is up almost 10%, and
our wildfire book which is up 50% year to date.
Rates in our retail business are broadly flat, with some
increases in UK home insurance as the market responds to claims
trends.
Investments
The investment return for the first nine months of 2018 was $44
million (2017: $83million), or 0.9% on an annualised basis (2017:
1.6%). Assets under management at 30 September 2018 were $6,438
million (2017: $6,129 million).
Market sentiment in 2018 has remained challenging, with most
asset classes in which Hiscox invests generating low or even
negative returns. Rising yields, most apparent in our US fixed
income portfolio, are driving negative mark to market effects and
adversely impacting investment income. Clearly over the medium term
rising yields hold the promise of improved investment returns.
Despite our modest allocation to riskier assets, turbulence in
global equity markets is further dampening returns.
Given on-going economic and global political tensions, we expect
our full year investment return to be subdued.
Brexit
Our preparations for Brexit are well advanced. We are already
utilising the new Lloyd's Brussels Subsidiary and our Part VII
plans are on track. Our new European subsidiary, Hiscox S.A., is
fully operational and expected to start writing business from 1
January 2019.
Our plans have always assumed a worst-case scenario 'hard
Brexit' and we are prepared, irrespective of the outcome of the
government's negotiations.
The financial impact of re-organising the business in
preparation for Brexit is $15 million across the Group in 2018, and
we will inject incremental capital of approximately EUR40 million
in the new entity. However, as we have said before, Brexit is just
one of a number of regulatory projects which will have an on-going
impact on expenses.
Hiscox Retail
Gross Written Premiums for the period:
Gross Written Gross Written Growth in Growth
Premiums Premiums constant in USD
to 30 September to 30 September currency
2018 2017
-----------------------
GBPm/EURm US$m GBPm/EURm US$m % %
------------ --------- ---------
Hiscox Retail
* Hiscox UK & Ireland GBP453.2 $611.9 GBP417.4 $532.2 8.8% 15.0%
EUR215.7 $257.3 EUR193.4 $213.3 11.6% 20.7%
* Hiscox Europe
$611.9 $517.1 18.1% 18.3%
* Hiscox USA
$101.3 $94.1 5.1% 7.7%
$14.2 $10.8 27.3% 31.5%
* Hiscox Special Risks
* DirectAsia
------------------------------- ------------ --------- ----------- --------- ---------- --------
Hiscox Retail total $1,596.6 $1,367.5 12.5% 16.8%
--------------------------------------------- --------- ----------- --------- ---------- --------
Hiscox UK & Ireland
Hiscox UK & Ireland increased gross written premiums by 9%
in constant currency to $611.9 million (2017: $532.2 million),
driven largely by commercial lines.
We have seen continued good performance in the direct channel,
particularly in small commercial business, and from our
partnerships with other financial services companies. Interest in
our cyber offering has been strong. In direct home we have taken
action to address rate inadequacy due to inflation and claims
trends affecting the market. This has had an impact on the rate of
new business growth in that area.
Growth in the broker channel is being driven by commercial
lines, motor, fine art and last year's transfer of contingency
business from Hiscox London Market. However, as mentioned at the
half year, the work we are undertaking to embed our new IT system
and associated processes in the broker channel has impacted growth
and we expect this to continue into the new year.
Hiscox Europe
Hiscox Europe delivered a strong performance, growing gross
written premiums by 12% in constant currency to $257.3 million
(2017: $213.3 million), with Germany and Spain performing
particularly well, both up in excess of 20% year on year.
Commercial lines, including management liability, technology and
cyber, continue to be the main drivers of growth in all regions.
Our on-going investment in brand and marketing is generating
above-budget new business growth and our claims service is helping
to keep retention rates high.
In France, we have recently signed a deal which enabled us to
grow our classic car book materially. We have also implemented a
new pricing strategy in household business in France, where we
remain very disciplined. In the Benelux, growth is being driven by
cyber, fine art and household.
In cyber, our focus on recruiting and developing talent is
paying off. We have built a strong position in Germany, our most
developed European market for cyber, and the early signs in Spain
are very encouraging. We continue to evolve our service
capabilities and build stronger relationships with our network of
third party service providers, which is critical to enabling us to
provide high-quality service for our customers.
Hiscox USA
Hiscox USA continues to perform well, increasing gross written
premiums by 18% to $611.9 million (2017: $517.1 million), as our
direct and partnerships division delivered above-budget growth,
benefiting from our long-term investment in the brand and an
expanding appetite.
In the broker channel, there has been strong new business growth
in healthcare and general liability where rates are attractive. In
D&O we are experiencing an increased frequency of claims,
combined with rate inadequacy. Consequently, in keeping with our
disciplined approach, we are reshaping our portfolio and reducing
our participation in more challenged segments.
The US business is benefiting from commission income generated
by business written into our new commercial property MGA.
Hiscox Special Risks
Hiscox Special Risks grew premiums by 5% in constant currency to
$101.3 million (2017: $94.1 million), however this figure benefited
from the recognition of a number of multi-year policies. On an
underlying basis the top line was flat.
Conditions remain challenging in the kidnap and ransom market,
however growth in our Security Incident Response (SIR) product is
very encouraging. We have re-launched the product with a
specialised wording in order to further differentiate SIR from our
kidnap and ransom offerings, and we are investing significantly in
development and distribution by expanding the team.
DirectAsia
DirectAsia grew gross written premiums by 27% in constant
currency to $14.2 million (2017: $10.8 million).
In Thailand we have enjoyed strong growth in new business,
benefiting from improved lead conversion and an increased focus on
customer acquisition. In Singapore we have seen good growth across
all product lines, where our product innovation, dynamic pricing,
distribution, partnerships and claims service continue to
differentiate us.
Hiscox London Market
Gross written premium in our London Market business grew by 10%
in constant currency to $664.1 million (2017: $590.3 million), in
response to rate improvement in many classes of business. Growth
has been particularly strong in major property and general
liability, where we continue to see good margins.
Hurricane Florence struck the US East coast in September,
bringing significant flooding to parts of North and South Carolina.
Our FloodPlus products for homeowners and commercial customers have
again been tested by this event and are responding well. We remain
focused on helping our customers recover by paying claims
quickly.
During the period we refocused our ambitions in D&O to
concentrate on areas where we see the best margin and can trade
profitably. We are also beginning to see the benefits of the tough
decisions we have taken over the last two years to reduce or exit
areas such as extended warranty, aviation hull and aviation
liability. The Lloyd's 'Decile 10' directive has challenged the
whole market to take similarly tough action in unprofitable lines
and it is already having an effect. We are seeing positive movement
in rates and signs of a re-balance of influence with brokers.
Our 2019 business plan for Lloyd's has been approved with
capacity of GBP1.4 billion for Syndicate 33 (2018: GBP1.6 billion).
We remain disciplined in the face of market conditions that, while
better than previous years, have not improved sufficiently to
warrant additional capacity for growth. We expect to maintain the
level of premiums written into the Syndicate year-on-year.
Hiscox Re & ILS
In Hiscox Re & ILS, gross written premiums increased by 10%
in constant currency to $782.4 million (2017: $705.4 million). The
growth rate has reduced since the half year, as strong rate
improvement experienced at the beginning of the year has begun to
recede. The year on year growth rate has been impacted additionally
by inwards reinstatement premiums written in the corresponding
period in 2017, following the material catastrophe events in the
third quarter last year. The year to date growth rate excluding
reinstatements is 20% in constant currency.
Property catastrophe reinsurance has delivered the bulk of the
growth, and our risk excess and specialty portfolio, where we see
the best risk-adjusted returns, has also grown well. Our specialty
book, which includes cyber, wildfire and financial lines business,
is a key area of focus and we have secured positive rate
improvement for ourselves and our third-party capital partners.
Japan is a key market for Hiscox Re & ILS and we have taken
losses from Typhoon Jebi, as primary insurers exhausted their
deductibles. The reinsurance division had comparatively moderate
exposure to Hurricane Florence, however the business was exposed to
a number of market losses, including in the marine portfolio. As we
reported in July, our risk excess and specialty portfolios, where
we retain a greater proportion of exposure on our own balance
sheet, have experienced a more active claims environment compared
to the benign experience of previous years.
Hiscox Re ILS funds reached $1.7 billion AUM in the period.
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 2017
saw the business deliver a profit before tax (excluding foreign
exchange) of $120.6 million despite reserving net $225 million for
claims in the most costly year ever for natural catastrophes.
The Hiscox Group employs over 2,700 people in 14 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 &
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.
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END
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