Interim results for the six months ended 30 June 2011


“A challenging first half”

Hamilton, Bermuda (1 August 2011) – Hiscox Ltd (LSE: HSX), the international specialist insurer, today announces its interim results for the half year ended 30 June 2011.


  H1 2011 H1 2010
Gross premiums written £847.5m £904.3m
Net premiums earned £554.7m £592.7m
(Loss)/profit before tax (£85.6)m £97.2m
Earnings per share (22.8)p 20.9p
Interim dividend per share 5.1p 5.0p
Net asset value per share 296.3p 318.9p
Group combined ratio 116.9% 93.6%
Return on equity (annualised) (13.3)% 14.8%


  • Interim pre-tax loss of £85.6 million (2010: profit £97.2 million), reflecting the costliest year ever for the industry.
  • Gross written premiums reduced slightly to £847.5 million (2010: £904.3 million) as the business shows discipline.
  • Record profit for UK business of £25.2 million (2010: £15.6 million) with gross written premiums up by 8.8%.
  • Interim dividend increased to 5.1p (2010: 5.0p) in line with progressive dividend policy.
  • Group combined ratio increased to 116.9% (2010: 93.6%), reflecting reduced income and unusually high level of catastrophe losses.
  • Catastrophe reserves remain unchanged.
  • Investment return of 1.0% for the half year, 2.0% annualised, (2010: 1.7%, 3.5% annualised).
  • US catastrophe reinsurance rates are improving, with average rate rises of 10% and substantially higher rises in loss affected areas.
  • Reinsurance cover materially unimpaired.
  • High quality claims service recognised within the UK and London Market businesses.

Robert Hiscox, Chairman, Hiscox Ltd, commented:
“It has been an exceptionally challenging first half-year, but we are in good shape to take advantage of increased rates in some catastrophe areas, and to accelerate the momentum of our retail businesses.”










Charles Dupplin, Company Secretary, Bermuda
Kylie O’Connor, Head of Communications, London
+1 441 278 8300
+44 (0) 20 7448 6656
Brunswick +44 (0)20 7404 5959
Tom Burns
Daniel Thole


Notes to editors
About Hiscox

Hiscox, headquartered in Bermuda, is an international specialist insurance group listed on the London Stock Exchange (LSE:HSX). There are three main underwriting parts of the Group – Hiscox London Market, Hiscox UK and Europe and Hiscox International. Hiscox London Market underwrites mainly internationally traded business in the London Market – generally large or complex business which needs to be shared with other insurers or needs the international licences of Lloyd’s. Hiscox UK and Hiscox Europe offer a range of specialist insurance for professionals and business customers, as well as high net worth individuals. Hiscox International includes operations in Bermuda, Guernsey and USA. For further information, visit

Chairman’s statement

A pre-tax loss of £85.6 million following a tumultuous first six months when nature, accidents and human error or malevolence have thrown an unprecedented variety of losses at us is a reasonable result in the circumstances.  2011 is reported to be the most expensive catastrophe year to the insurance industry on record after just six months, worse than the full twelve months of 2005, the previous highest on record.  The strategy of building retail businesses to soften the blows of such a period is vindicated by a sterling result from our UK regional business.  We will continue to build the European and US regional businesses to add their contribution.

The London Market and Bermuda have obviously been hit hardest, and I am writing this as usual at the start of the US wind season, but rates are rising in the affected areas and a further loss in the second half of the year should accelerate that rise.  History tells us that feast always follows famine in the insurance business.


The result for the half year to 30 June 2011 was a pre-tax loss of £85.6 million (2010: £97.2 million profit). Gross written premiums reduced to £847.5 million (2010: £904.3 million). Net earned premiums were £554.7 million (2010: £592.7 million). The Group combined ratio rose to 116.9% (2010: 93.6%). Earnings per share fell to a loss of 22.8p (2010: +20.9p) and net assets per share reduced to 296.3p (2010: 318.9p).

Dividend, balance sheet and capital management

The board of Hiscox Ltd proposes to pay an interim dividend for 2011 of 5.1p per share (2010: 5.0p) in line with our policy of progressive dividend growth. The record date for the dividend will be 12 August 2011 and the dividend will be payable on 21 September 2011.

As with the final 2010 dividend, the board of Hiscox Ltd proposes to offer a scrip dividend alternative in respect of the interim dividend, on and subject to the terms and conditions of Hiscox Ltd's Scrip Dividend Alternative. The scrip reference share price will be announced on 15 August 2011. The final date for electing to join Hiscox Ltd's Scrip Dividend Alternative in order to be eligible to receive new shares in respect of the interim dividend will be 31 August 2011.

The terms and conditions of Hiscox Ltd's Scrip Dividend Alternative, including how to join the scheme, are contained in the circular dated 14 March 2011 which is available to view on Hiscox Ltd's website  

The Net Asset Value per share was reduced by the loss, the weakness of the dollar on our capital held in dollars in Bermuda and Guernsey and of course by the payment of the dividend since the year end.

Overall comment

The first six months have been notable for the variety and size of losses the industry has faced. On top of Earthquakes in New Zealand and Japan, the industry suffered losses from floods in Australia and the worst tornadoes on record in the US. We have reserved £210 million for catastrophe events in the first half (2010: £110 million) which we trust will stand the test of time as has been true of our reserving in recent years. We have also suffered from some large attritional losses across the Group, including moving oil platforms, repatriation from the unrest in North Africa, fine art losses and some recessionary related claims in the UK.

Excellence in the rapid and fair payment of claims is a differentiator we strive to achieve.  This period has been one of the busiest the Hiscox Claims team has ever experienced, so it is pleasing that their high performance has been recognized by the industry.  Our UK business won the Personal & Commercial Claims Team of the Year 2011, awarded by Post Magazine.  The Syndicate claims team were placed in the top three for managing claims in a recent Gracechurch survey of London Market brokers.  Despite the most active first half ever for catastrophe claims, Hiscox is managing to process reinsurance claims in two days.

Hiscox London Market

This division uses the global licences, distribution network and credit rating available through Lloyd’s to serve clients throughout the world.

Loss before tax  £26.6 million (2010: profit £69.8 million)
Gross written premiums    £349.0 million (2010: £383.1 million)
Combined ratio  113.9% (2010: 82.2%)
Combined ratio before monetary FX 109.6% (2010: 90.7%)



The large catastrophe reinsurance losses were mitigated by strong profits in the insurance lines.



Reinsurance makes up 42% of Hiscox London Market and this is dominated by our catastrophe excess of loss account.  We reduced this account by 26% in January due to rate reductions.  The catastrophes reversed the decline with rate increases averaging 10% and substantially higher in affected areas, and in May and June we underwrote 20% more than last year demonstrating the underwriters’ nimble reaction to market conditions.   We are well prepared to benefit from changes in other markets.     
 Rates in our insurance lines are mixed; there is some upward pressure in property and energy lines, though rates are broadly flat elsewhere and we continue to see small reductions in a few areas such as terrorism.  The offshore energy market has been seriously impacted by a number of significant losses including storm damage to a North-Sea Floating Production, Storage and Offloading unit (FPSO), the Gryphon Alpha.  The insured loss is estimated at up to US$950 million (with a net impact to Hiscox estimated to be around £14 million) and this is expected to increase upward pricing pressure for energy classes.  Rates in big-ticket professional indemnity lines continue to disappoint, and we have continued to reduce our writings appropriately.
The kidnap and ransom, and political risks lines have paid significant claims through their crisis management services to corporate clients repatriating employees to safety from those regions affected by Arab Spring unrest resulting in a hardening of rates and a tightening of conditions.

In 2002 Robert Childs began a legal challenge to recover money from the airlines operating the planes involved in the September 11 attacks on the World Trade Center, with a successful conclusion this year.  Most of the recovery goes to our reinsurers, but we have received US$9 million net with potential for some further recovery. 

We have increased our 2012 capacity for Syndicate 33 to £1 billion from £900 million in 2011, to take advantage of hardening conditions.

Hiscox UK

This division’s core products are high value household insurances, including luxury motor, as well as commercial insurances for small to medium businesses which in the main use their brains to make money as opposed to infrastructure, and some specialist technology and media.  All three areas made profits in the period.

Profit before tax    £25.2 million (2010: £15.6 million)
Gross written premiums  £182.9 million (2010: £168.1 million)
Combined ratio 87.9% (2010: 91.8%)

A record half year profit despite competitive conditions, with steady growth of 8.8%.  Our ambition is to make money whatever the state of the market and this we have achieved by concentrating on good underwriting backed by great service and our powerful brand.  Rates are being increased by some competitors in commodity areas which could lead to increases flowing through to our specialist areas in future.  Even if they do not, we have winning products and service which will win orders at our price.

Direct business grew 17% and is making good profits.  Now we have reached critical mass, the future looks very robust with opportunities to sell added products to a large and good client base.

As always, we walked away from weakly rated business, especially traditional liability business such as Accountants, Solicitors and IFAs. 

We continued to invest in our brand and in the Reputation Institute UK Pulse survey for 2011, Hiscox was rated at the upper level of financial services brands in the UK.  Hiscox scores particularly well in products and services, performance and governance.  We will continue to leverage our knowledge and expertise in brand and marketing as we expand in Europe and the US.

Hiscox Europe

This division’s core business is much the same as the UK - household and specialist commercial accounts.  Also written are larger fine art risks, technology and media risks and kidnap and ransom insurance, sometimes in partnership with the London Market division.

Profit before tax  £0.1 million (2010: £4.0 million)
Gross written premiums £80.6 million (2010: £80.1 million)
Combined ratio 100.2% (2010: 96.8%)



Europe suffered some large losses (un-correlated again) but this time managed to break even.  One was a theft of paintings from a museum in Holland, and there is the usual strong likelihood that they will be recovered as they are unsaleable in the open market; another was a large kidnap claim and the third was a technology loss.  The European teams are expanding in the fine art, technology and kidnap and ransom accounts in which the Group has a strong specialization.  These are specialist and profitable areas for the Group, and will benefit the European teams greatly as they grow, but will cause a measure of volatility until the accounts are larger.



Our core household and small commercial businesses did well.  The household business benefited from some firm underwriting decisions which have caused the loss of some business and a reduction in income of 12%, but the account returned to profit.  Growth in other product lines resulted in a modest overall 4% increase (in local currency) for Europe at the top line. 

The small direct operation in France which sells commercial liability products to businesses with 0-10 employees is growing steadily.  The team is leveraging our direct experience in the UK, and is about to embark on a brand building campaign later in the year.

Hiscox International

This division comprises our Bermuda, USA and Guernsey units.

Loss before tax £82.2 million (2010: £6.4 million)
Gross written premium  £234.9 million (2010: £273.1 million)
Combined ratio 160.1% (2010: 114.0%)
Combined ratio before monetary FX   160.7% (2010: 106.8%)



Bermuda underwrites a reinsurance catastrophe account (Bermuda is the largest reinsurance market in the world) and healthcare business.



Gross written premiums declined by 9.3% as we walked away from weaker rates earlier in the year.  The catastrophes have had an expected impact, and with rates already rising and signs of capacity constraints in some affected areas, the outlook is promising for opportunities in the second half.  The small healthcare book is growing slowly and profitably.

Guernsey underwrites kidnap and ransom, personal accident and fine art business.

Premium income grew slightly by 2.3% driven by demand for our personal accident and non-marine kidnap and ransom products.  As mentioned above in the London Market report, conditions and rates in kidnap and ransom are improving following a volatile period.  We suffered a large fine art loss where a painting was damaged in transit.   

In June this business celebrated US$ 1 billion aggregate of premium since it was formed in 1998, a huge achievement and throughout that time it has been a significant profit contributor to the Group.

Hiscox USA underwrites a book of small commercial business to wholesale brokers, and larger specialist business mainly to retail brokers.  In late 2010 it launched a direct internet-based offering for small commercial businesses.

There is a good story from Hiscox USA.  We narrowed our range of products in 2010 to concentrate on fewer specialist lines, given weak market conditions in those we exited, and focused our distribution channels to better effect, resulting in improved ratios this year.  Premium income reduced 15.0% (which is less than budgeted), but the expense ratio improved – a very satisfactory vindication of the actions taken.  Underwriting is good, but we need to grow to keep improving the expense ratio which is always true for our start-up operations. 

Our new and unique direct business for small commercial businesses is growing satisfactorily and developing brand awareness among SME’s.  When we are fully satisfied that the IT is totally robust we will put our foot on the marketing accelerator.  All indications show a substantial appetite for our offering.


Assets under management at 30 June 2011 totalled £2,859 million (2010: £2,705 million) and the annualised return was 2.0% (2010: 3.5%) leading to an investment return on financial assets of £27.6 million (2010: £46.6 million).  With only meagre income continuing to be available from cash and short dated government bonds, the investment portfolio has delivered the result that we expected. 

We began the year with a conservative ambition to beat cash returns by being prepared to take some credit and equity risk but little interest rate risk.  This worked particularly well in the early part of the year as confidence grew that a sustainable economic recovery in developed markets was underway.  However, more recent data, combined with events in Europe and Japan, suggested that this was a false dawn and prompted an unexpected decline in government bond yields, renewed volatility in riskier assets and lower profits from the portfolio in May and June.  With the authorities in our main markets of the UK and the US apparently determined to keep interest rates low whilst tolerating a degree of inflation, real returns from cash and bonds are likely to remain unexciting for the balance of the year.  Nevertheless, we remain wary of strategies to enhance yield and mindful of the damage that can be done to bond portfolios in a less benign environment.  This caution extends to an ongoing avoidance of the sovereign debt of Greece, Ireland, Italy, Portugal and Spain. 

Our allocation to equities and hedge funds during the period was largely unchanged and added value to the portfolio overall.  Whilst the same cannot be said for many fixed income investments, equities in general appear reasonably valued.  However, the outlook for equity markets is far from certain with further volatility to be expected and some scope for earnings disappointment in 2012 if the low growth world implied by bond markets persists. Group cash levels have drifted up recently as a result of distributions from Syndicate 33, but this should prove temporary as we still believe that our bond managers will beat cash.  With the future of the Euro zone in the balance, and, as I write, the US on the verge of a technical default, capital preservation remains our priority and patience is required.


We have suffered extraordinary losses during the period, but that which does not destroy you makes you stronger, and we are definitely stronger.  We need tough times in the catastrophe reinsurance arena to keep the faint-hearted at bay and to stop foolish competition from some commodity players.  We have preached discipline for years and have proved that discipline by cutting back the reinsurance account recently.  Our reinsurance protection is virtually entirely intact, we are now facing much better rates and the underwriters are seizing the opportunities.

In our insurance and retail areas, some are making good money despite fierce competition, and others are making good gross underwriting profits and climbing remorselessly towards net profit when they reach critical mass.  The brand is very strong in the UK.  We have had over a million hits on our promotional web TV series in the US (, aimed at young entrepreneurs, which is a strong start to brand recognition there, and in Europe we are due to expand our marketing shortly.  We are patient starters of businesses, some of which are in healthy profit and the others heading there.

Over the whole group, our product is providing intelligent solutions to clients’ risks, and more importantly, paying claims and repairing insureds after loss, and this we have done well. 

Robert Hiscox
1 August 2011

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