Q1 Interim Management Statement

Hamilton, Bermuda (9 May 2011) -- Hiscox Ltd (LSE:HSX), the international specialist insurer, today issues its Interim Management Statement for the first three months of the year to 31 March 2011.

Hiscox’s gross written premiums year on year reduced as expected by 8.0% to £453.5 million (2010: £504.1 million) as the Group maintained underwriting discipline and walked away from poorly rated risks.

Bronek Masojada, Chief Executive, commented: “We continue to underwrite for profit over volume in these tough market conditions. This discipline has allowed us to keep our powder dry and we are ready to take advantage of rising reinsurance rates. Our own reinsurance cover remains substantially in place for the upcoming US hurricane season.”

Gross Written Premiums for the period:

  Gross Written Premiums
to 31 March 2011
Gross Written Premiums to 31 March 2010 Growth in local Currency Growth in Sterling
US$/€m £m US$/€m £m % %
Hiscox London Market   £182.4   £234.8 -19.8% -22.3%
Hiscox International            
- Hiscox Bermuda US$139.0 £86.8 US$136.3 £87.3 1.9% -0.6%
- Hiscox Guernsey US$30.0 £18.8 US$33.1 £21.2 -9.2% -11.5%
- Hiscox USA US$39.3 £24.6 US$39.8 £25.5 -1.2% -3.7%
Hiscox UK   £86.2   £79.8 9.3% 8.0%
Hiscox Europe €64.3 £54.7 €62.1 £55.5 3.5% -1.4%
Total   £453.5   £504.1 -8.0% -10.1%

The first quarter began with rate reductions in reinsurance lines but the recent catastrophes have changed the market. Reinsurance rates are now back to 2010 levels with increases in some areas, especially in the Asia Pacific. We expect increases to become widespread during the June/July renewal period with potential average rate rises of around 10% in US catastrophe business, as the market is also impacted by the new RMS 11 model.

Other rates are mostly stable or rising with few classes of business experiencing reductions.

Our claims estimates for the 2011 New Zealand earthquake and Queensland floods remain unchanged at £60 million and £15 million respectively based on an insured market loss of US$10 billion for the New Zealand Earthquake and US$2.4 billion for the floods in Queensland.

Our previously announced position on the Japanese earthquake also remains unchanged. Although considerable uncertainties still exist, we believe our previously published model1 is valid. From an insured market loss of approximately US$24 billion, Hiscox could incur net claims of between $60 million and $150 million with a mean loss of $100 million.

Hiscox’s own reinsurance programme
The Group’s strategy to reinsure catastrophe exposure predominantly on a pro-rata basis means we have substantial protection in the event of a large individual loss, or a series of losses. Pro-rata reinsurance shares with the reinsurer a proportion of the overall liability, premium and losses of risks underwritten, giving greater depth of cover than a conventional excess of loss or aggregate reinsurance policy.

The investment result to 31 March 2011 was +0.4%. Government bonds and cash provided little by way of return with our allocation to corporate bonds and risk assets accounting for the bulk of the gains. Invested assets totalled approximately £2.8 billion at the end of March and asset allocation was substantially unchanged during the first quarter.

Whilst the timing remains uncertain, our expectation is that interest rates in the US and the UK will rise. Duration will therefore remain short in our US Dollar and Sterling bond portfolios in line with our focus on preserving capital rather than chasing yield in current market conditions. Equities appear more reasonably valued and we remain optimistic that our weighting towards risk assets will add incremental value to returns.

Hiscox London Market
Hiscox London Market reduced premium income as planned by 22.3% to £182.4 million (2010: £234.8 million). In the first quarter this business cut back in areas where rates were under pressure, mainly reinsurance and professional indemnity, but now sees opportunity where markets are improving, for example reinsurance.

Hiscox Bermuda
Gross premium income for Hiscox Bermuda was stable at US$139.0 million (2010: US$136.3 million) with increased capacity from third party quota shares in 2011.

Hiscox Guernsey
Hiscox Guernsey reduced premium income by 9.2% to US$30.0 million (2010: US$33.1million) mainly due to a disciplined approach in the piracy market.

Hiscox USA
Hiscox USA reduced by 1.2% to US$39.3 million (2010: US$39.8 million). The small reduction in income reflects last year’s refocus of the business. Growth in core Specialty and Wholesale lines is ahead of plan this year.

Hiscox UK
The retail business in the UK grew premium income by 8.0% to £86.2 million (2010: £79.8 million). This continued good growth came from the Direct business and the new underwriting partnership with Dual.

Hiscox Europe
Hiscox Europe maintained its premium income at €64.3 million (2010: €62.1 million). The Art and Private Client book reduced slightly after a higher deductible was applied. Profitable commercial business grew by 20% as we increased its distribution.

Scrip dividend
As previously announced, subject to shareholder approval at the forthcoming AGM, a scrip dividend alternative to the cash dividend is to be offered to shareholders and the Company's Dividend Access Plan will be suspended. The Scrip Reference Price is 381.36p being the average of the closing share price for the 5 days following the announcement of the cash dividend.

1 Twice a year Hiscox publishes its expected losses for modelled catastrophes. Our latest boxplot and whisker diagram of Hiscox Ltd modelled net losses was published in the 2010 results Analysts’ presentation 28 February 2011 (available on hiscox.com)


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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