Q3 Interim Management Statement

Hamilton, Bermuda (7 November 2011) -- 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 2011.

Hiscox’s gross written premiums year on year reduced as expected by 3.0% to £1,169.5 million (2010: £1,205.3 million) as the Group maintained underwriting discipline and continues to walk away from poorly rated risks.

Bronek Masojada, Chief Executive, commented: “Hiscox is in good shape. Our strategy of balance and diversity gives us options in challenging times and the strength of our UK business is proof of this. Although the wider market is slow to turn, the cumulative effect of international catastrophes is pushing reinsurance rates upwards. As nearly a third of our income comes from reinsurance, we are ready to benefit at the January renewal season.”

Gross Written Premiums for the period:

  Gross Written Premiums to
30 September 2011
Gross Written Premiums to
30 September 2010
Growth in local Currency Growth in Sterling
US$/€m £m US$/€m £m % %
Hiscox London Market   £475.3   £495.8 -3.2 -4.1
Hiscox International            
- Hiscox Bermuda US$265.9 £164.7 US$295.5 £192.6 -10.0 -14.5
- Hiscox Guernsey US$95.3 £59.0 US$93.2 £60.8 2.3 -2.9
- Hiscox USA¹ US$135.5 £83.9 US$157.5 £102.7 -14.0 -18.3
Hiscox UK   £280.0   £249.1 13.4 12.4
Hiscox Europe €123.3 £106.6 €119.1 £104.3 3.6 2.2
Total   £1,169.5   £1,205.3 -0.9 -3.0

At the half year we announced total reserves of £210 million for catastrophe claims, which has not materially changed. There has been upward pressure on gross claims estimates especially from the US tornadoes and the 2011 New Zealand earthquakes however this has largely been offset by our own reinsurance recoveries. We will continue to review our level of reserving as the year progresses and additional information becomes available.

In the third quarter Hurricane Irene made landfall in the US and we estimate net claims to be less than £10 million. It is too early to report any estimates for the recent flooding in Thailand.

Despite making significant recoveries our reinsurance protections remain substantially intact.

Low interest rates, severe market losses and the new catastrophe model RMS v11.0 continue to put upward pressure on catastrophe exposed reinsurance and insurance rates. We have seen average rises of between 5-10% in these areas so far this year, and we expect further increases during the January renewal season.

Investment return to 30 September 2011 was +0.5% year to date. The decline in the value of the portfolio since June reflects the impact of turbulent markets on our risk assets. Additionally, the contribution from the bond portfolio was affected by mark to market movements due to a widening of credit spreads. This partly offset the benefit of declining US and UK Government bond yields. In particular, financial bonds have been an area of concern for investors. Our holdings (which equate to about 15% of the bond portfolio) are concentrated on the senior debt of strategically important banks and other financial services companies. Our ownership of subordinated bank debt is minimal. We have no exposure to the sovereign debt of Greece, Ireland, Italy, Portugal or Spain.

Invested assets at the end of September totalled approximately £2.8 billion. Our asset allocation is largely unchanged although we increased the equity exposure by £30 million during the quarter. The investment return has improved substantially in October given the recent recovery in equity markets and corporate bonds however we expect uncertainty, volatility and low UK and US interest rates to persist for some time. We remain focussed therefore on preservation of capital over yield but ready to take advantage of any further dislocation, particularly in equity or credit markets, that is likely to benefit the Group over the longer term.

Hiscox London Market
Hiscox London Market reduced premium income as planned by 3.2% to £475.3 million (2010: £495.8 million). Reinsurance remains our largest line of business and we continue to make the most of improving rates in this area. Insurance lines remain broadly stable.

Hiscox London Market plans to increase Syndicate 33 2012 capacity to £950 million (2011:£900 million) which is a modest reduction from the figure announced at the half year (£1 billion). With the wider insurance market still under pressure, this area will continue to underwrite for profit over volume.

Since 2007 we have used our extensive expertise to underwrite reinsurance on behalf of third parties. Partnering with private equity investors or other corporates, we use additional capital in the form of quota share arrangements to earn fees and profit commission.

The London Market business achieved Chartered Insurer status from the Chartered Insurance Institute, recognising the professionalism, experience and skill of this team.

Hiscox Bermuda
Gross premium income for Hiscox Bermuda reduced by 10% to US$265.9 million (2010: US$295.5 million). Reinsurance rates declined at the beginning of the year and Hiscox Bermuda reduced income accordingly. This business is now planning to take advantage of an improving market in catastrophe reinsurance during the January renewals.

Hiscox Guernsey
Hiscox Guernsey grew premium income by 2.3% to US$95.3 million (2010: US$93.2million) balancing good growth in kidnap and ransom with discipline in piracy business where rates are under pressure.

Hiscox USA
Hiscox USA reduced premium income by 14% to US$135.5 million (2010: US$157.5 million). As stated in our half year results, the majority of this reduction reflects last year’s refocus of the business and an exit from several product lines. Our core Specialty and Wholesale lines continue to perform well and growth is ahead of plan this year.

Our direct to consumer small business insurance offering is making steady progress as we build the Hiscox brand in the US.

Hiscox UK
The retail business in the UK grew premium income by 13.4% to £280.0 million (2010: £249.1 million). This good steady growth continues to be driven by the Direct business and the new underwriting partnership with Dual. Rates in Hiscox UK are healthy.

Hiscox Europe
Hiscox Europe grew by 3.6% to €123.3 million (2010: €119.1 million). In 2010 Hiscox Europe introduced a higher deductible across the household book and this reduced gross written premium in the first half of the year. Household business is beginning to pick up in Q3 and the profitable commercial business continues to grow well across Europe.

1. Large global technology and media business moves from Hiscox USA to Hiscox London Market.


For further information:

Hiscox Ltd  
Charles Dupplin, Company Secretary +1 441 278 8300
Kylie O’Connor, Head of Communications +44 (0) 207 448 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 www.hiscox.com.

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