Monday 27 February 2012
“Balance provides stability”
|Gross premiums written||£1,449.2m||£1,432.7m|
|Net premiums earned||£1,145.0m||£1,131.2m|
|Profit before tax||£17.3m||£211.4m|
|Profit after tax||£21.3m||£178.8m|
|Earnings per share||5.5p||47.2p|
|Total dividend per share for year||17.0p||16.5p|
|Net asset value per share||323.5p||332.7p|
|Group combined ratio excluding foreign exchange||99.3%||89.8%|
|Group combined ratio||99.5%||89.3%|
|Return on equity||1.7%||16.5%|
- Pre-tax profit of £17.3 million (2010: £211.4 million) - a good result considering natural catastrophe losses of £270 million
- Gross written premiums level at £1,449.2 million (2010: £1,432.7 million)
- Earnings per share 5.5p (2010: 47.2p)
- Total dividend for the year increased by 3.0% to 17.0p (2010: 16.5p)
- Net assets per share decreased by 2.8% to 323.5p (2010: 332.7p)
- Combined ratio 99.5% (2010: 89.3%)
- Robert Hiscox to step down from the Board in 2013
- UK retail business delivers good growth and another record profit of £49.0 million (2010: £28.8 million)
- Hiscox London Market achieved a profit of £57.6 million (2010: £121.4 million), offsetting catastrophe reinsurance losses with profits in international property, marine, and other specialist lines
- Rates are rising in reinsurance and slowly increasing in other specialty lines
- Hiscox USA is progressing well with 29% growth in core broker lines and over 6,000 policies sold by the direct business in the first year of operation
Robert Hiscox, Chairman of Hiscox Ltd, commented:
“We have made a small profit in an unusually difficult year. Some key rates are rising, we are employing some brilliant talent, we have fledgling businesses poised for growth and profit, and our mature businesses have small market shares and enormous opportunities. I look forward to my final year as Chairman confident that the next era of the business will be rewarding to both shareholders and staff”.
For further information:
|Charles Dupplin, Group Company Secretary||+1 441 278 8300|
|Kylie O’Connor, Head of Group Communications, London||+44 (0) 20 7448 6656|
|Brunswick||+44 (0)20 7404 5959|
Notes to editors
Hiscox, the international specialist insurer, is headquartered in Bermuda and 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 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
Again we have been well and truly tested by Mother Nature and a small profit is a good result in the circumstances. By any measurement, it was a phenomenally catastrophic year with definitely more economic damage caused by natural catastrophes than ever before, including in the second half of the year the major international loss from the Bangkok floods. We were able to absorb these considerable losses, despite much reduced investment returns, through the profits from our specialist books in the London Market, and the retail businesses in the UK, Europe and Guernsey. In particular, a £49.0 million profit from the UK business, the most mature of our retail accounts, demonstrates the potential for our similar accounts in Europe and the US. Our strategy of balance worked well.
The result for the year ending 31 December 2011 was a profit before tax of £17.3 million (2010: £211.4 million) on a gross written premium income of £1,449.2 million (2010: £1,432.7 million). The combined ratio was 99.5% (2010: 89.3%). Earnings per share 5.5p (2010: 47.2p) and net assets per share 323.5p (2010: 332.7p). The return on equity was 1.7% (2010: 16.5%).
Dividend, balance sheet and capital management.
The Board proposes to pay a final dividend of 11.9p (2010: 11.5p) on 19 June 2012 to shareholders on the register on 11 May 2012, making total dividends for the year of 17.0p (2010: 16.5p) an increase of 3%, in line with our policy of steady dividend growth. A scrip dividend alternative to the cash dividend will continue to be offered to shareholders.
As usual, the CEO Bronek Masojada will comment in detail on conditions in the general markets and the performance of our various businesses in them. I can see that rates are rising in many of our key areas, especially those which have suffered large losses, which bodes well for 2012. Some comment that the rises are not big enough but they suit me. If we get a great surge in rates, which happens only rarely and then after a major event following a lean period, prices go too high and start coming down almost immediately. In an ideal world rates would bump along at a level at which good underwriters could make money and the bad ones wither and die. Given that the insurance market is remorselessly cyclical, I like small rises which help margins for the good without encouraging foolishness in the bad.
There is still too much capacity in the insurance world, some of it new from hedge funds and the like. The reinsurance market is more stable than the insurance market as there are fewer well rated reinsurers and more disciplined adherence to catastrophe models. In the insurance market, we daily walk away from risks where uneducated capacity has plunged into the market at rates which can only lose them money. The curse of the industry is that we sell a product the cost of which is only discovered years later when the claims roll in. This breeds optimism, and nobody is more optimistic than the new entrant with no legacy problems (they think), but also no legacy book of business or experience. All existing business in the world is already placed with an insurer, and which broker is going to switch it to a new entrant unless they cut the price or widen the terms?
When I started underwriting (with unlimited liability for the first 21 years - and nothing could make an underwriter more conscious of risk than taking it with everything they own), there was no computer adding up aggregate liabilities. Premium income could be counted, but not the exposure, and claims come from exposure not income. Statistics and management information have improved enormously over the years, and every year I believe that management of our competitors will force commercial discipline on their underwriters, but some foolish underwriting continues. In Lloyd's, if rates are being cut foolishly, the Franchise Director moves in to test the business plan, and if necessary to stop it. I hope the discipline of Solvency II will similarly test the “we will beat whatever price the competition has quoted” underwriting that you even see advertised regularly.
I have decided to step down as Chairman of the Board while I still feel near the top of my game and have informed my fellow directors that I would like to retire from the board this time next year when I will have just turned 70. My passion for the business remains undiminished, and I will be available if the new chairman or others wish to draw on my 47 years of experience. The independent directors have instituted a search from both within and without the company, and I know that they will find a suitable candidate to lead the board for the next exciting era of the business.
There is no better fun than building a business. It has been an enormous privilege to lead Hiscox since 1970 when my father died and I am very grateful to those who have helped me to achieve what has been achieved so far. I have always aimed to employ people brighter than I am, and have always believed that a businessman should only be judged a success if the business thrives after he has gone. I am convinced that the current top executives prove that I have achieved my employment ambition, and I know that they have the talent and the drive to create a truly great business well into the future. Since before we became publicly quoted in 1993 we have had strong non-executive directors and I am grateful to them for their excellent advice on our strategy and tactics, and their robust challenge when they see the need. The regulator likes to see evidence of regular robust challenge, but it has to be said that challenge for its own sake is pointless, and if correct decisions are being made, calm agreement can be found without artificial contrarian debate.
We first expanded from Lloyd's into the UK regions in 1989, then into Europe from 1993. We bought an ailing UK insurance company in 1996 which was on the regulator's monthly watch list and have turned it into a thriving company which made £49.2 million last year. We have built successful insurance companies in Guernsey and Bermuda, and have started an insurance company in the US which is growing to profitability. We have developed direct businesses in the UK, France and the US. We have grown from a Lloyd’s syndicate to a truly international insurance business, headquartered in Bermuda.
We also have a very strong corporate ethical culture which has led us through some very stormy waters in our early days at Lloyd’s when it went through its period of lack of integrity and appalling underwriting in the 1980’s and 1990’s. I was privileged to play an early part in regulation at Lloyd’s when basic standards were being imposed, and a substantial part in the Reconstruction and Renewal of Lloyd's (together with Bronek Masojada who was on the McKinsey team), especially the Renewal through the introduction of Corporate Membership which created a renaissance of the UK insurance industry. With Solvency II the industry is now going through a massive assessment of the capital each business needs by codifying all the risks in great detail into a computer model, and I am glad that our massive housekeeping exercise has thrown up no surprises. Risk is our business and I have spent 47 years assessing it, and as I said before, 21 of them with unlimited liability.
The work we are doing should make us a safer business which brings me comfort as my family and I have a substantial percentage of our worth in Hiscox shares and as I get older I get more risk averse as I cannot make it again. We have always encouraged our staff to buy or hold shares in the company as we strongly believe that a feeling of ownership breeds responsibility, and I know that our investors like the fact that we have plenty of skin in the game.
The general insurance market has had an excellent record for the last 10 years despite enormous natural and man-made catastrophes (although it feels unrecognized with the ever increasing blanket of regulation with which we are smothered). It is an exciting business being in reality bookmaking as we quote odds on almost every conceivable event, loss or tragedy happening around the world. It is a fulfilling career as we enable private ownership and commercial endeavour to flourish through adversity. I think that the boring image, which could not be further from the truth, is dissipating, and we are attracting some extremely talented young people into our business which again bodes well for the future.
We have built a brand based on trust and service and have been rated as the most trusted insurer in the UK. The value of our brand depends on our integrity and our fair treatment of customers which acts as a sharp pencil in the small of the back of every member of staff to live up to the advertised standard. I would like to thank them all for carrying the flag so well.
Some key rates are rising, we are employing some brilliant talent, we have fledgling businesses poised for growth and profit, and our mature businesses have small market shares and enormous opportunities. I look forward to my final year as Chairman confident that the next era of the business will be rewarding to both shareholders and staff.
27 February 2012
2011 Chief Executive’s report
As the Chairman has said, 2011 was a year dominated by natural catastrophes. Earthquakes, floods, tornadoes, hurricanes and a tsunami caused insured losses in excess of $100 billion making it one of the most expensive years on record for the industry. The fact that Hiscox made a profit of £17.3 million for the year (2010: £211.4 million) is a demonstration of the strength and resilience of our Group. The UK, Guernsey and European operations and several of our London Market divisions contributed strong profits, which offset the net £270 million (2010: £165 million) in catastrophe related claims reserved in our London and Bermuda reinsurance units, and the lower investment returns.
Our strategy of balance and diversification has therefore shown its value once again. We will continue, with ever greater effort, to grow our retail-focused businesses around the world and invest in our specialist businesses in London. This will further enhance our capacity to weather future catastrophes and provide attractive returns to shareholders.
Hiscox London Market
Our London Market business navigated its way through the thick of the storm in 2011 with amazing resilience thanks to its spread of business. Profits in international property, marine, and other specialist lines offset reinsurance losses allowing it to make an aggregate profit of £57.6 million (2010: £121.4 million). This is a fantastic achievement given the exposure it had to the global catastrophes of 2011. Revenues increased marginally to £585.4 million (2010: £572.7 million) showing yet again the truth of the mantra “profit is sanity: revenue vanity”. Looking at each business line in turn:
- Reinsurance: Although underweight in most loss affected areas, this team was impacted by the many natural catastrophes in 2011. The team took advantage of distressed conditions following the events in the first half to expand their writings at the important mid-year renewals. They have also continued to build their partnerships with third party providers of reinsurance support. The team retains their nerve and are optimistic about 2012.
- Property: Discipline over many years has seen our core property account shrink, but the result is good. The team have expanded their book into insuring non-catastrophe exposed contractors equipment for fire and theft and this is developing well. In 2012 they have seen upward pressure on rates, and business which had threatened ‘never to come back to London’, unless written at uneconomic prices, is returning from the US domestic market. This augurs well for the future. The division has also benefited from subrogation recoveries on property claims resulting from the events of 9/11.
- Energy and Marine: This team suffered from the large Maersk Gryphon loss – a North Sea oil platform which was put out of production by poor weather - in the early part of the year, but discipline and its smart spread of business have allowed it to make a profit in the year. In 2012, we reserved $20 million net for the sinking of the Costa Concordia. We expect that this event will result in upward pressure on rates in the marine market.
- Global Response: Our team has continued to serve clients around the world in the terrorism, kidnap and ransom, piracy and political risk areas. Piracy remains challenging as prices are inadequate for the risks being run and our book continues to shrink. The Arab Spring created repatriation losses but again the spread of business allowed the division to perform well in the year.
- Specialty: This division consists of the bloodstock, contingency, personal accident, specie, media and technology businesses written in the London market. It had a very good year. The specie and technology accounts benefited from the settlement of some old claims which resulted in substantial releases from reserves. Our contingency team supported the Rugby World Cup organizers in New Zealand as they dealt with the impact of the Christchurch earthquakes on their seminal event, demonstrating our claims handling ability in such an unusual situation. During the course of the year we closed our bloodstock account as poor rating had caused it to shrink to a size where it was no longer viable.
- Casualty: This was once one of our biggest and most profitable lines, but relentless rate reductions and disciplined underwriting by the team has seen it shrink to less than a sixth of its cyclical high. The account remains profitable: we think that the suicidal competition in the 2012 renewal season will make a turn in pricing inevitable so we are investing in extending our capability in this area.
- Aviation and space: We have had a presence in the space market for many years and this business continues to perform well. Our aviation venture is now in its second year and we have established a small market presence with a reputation as a considered and disciplined participant.
Our London Market business is primarily conducted in London through Lloyd’s with a focus on large internationally traded syndicated risks and on the specialist and the unusual. Hiscox is a brand to be proud of, but we know in the global insurance market the continued high regard for the Lloyd’s brand and the success of the market as whole is necessary for us to out-perform. We therefore believe in the value of the Lloyd’s licenses, the need for a secure, well supervised market and the benefits of shared central services such as policy production, money collection and claims settlement and payment. Some of our competitors believe that they can gain individual advantage by performing many of these tasks themselves, independent of the market. We do not, as we believe that fragmentation will lead to poorer service to clients and brokers leading to an erosion of Lloyd’s, and hence our own competitiveness. We are therefore supportive of efforts to improve the volume claims service which acts on behalf of the market and will continue to oppose efforts to fragment this community resource. We are also supportive of Lloyd’s efforts to invest in upgrading the central market processing environment, but again with the concern that fragmentation must not be allowed. In all these matters we believe in holding Lloyd’s and other central service providers to account, as if they do the job well, more business will flow to London and Lloyd’s and we will win more than our fair share of the best business.
Hiscox UK and Europe
Our businesses in the UK and Europe focus on insuring higher net worth personal insurances and small businesses active in areas such as marketing, consulting and other office-based professional services. We market these products both through brokers and direct to the customer. The year saw continued growth, pushing premium income up 9.5% to £498.0 million (2010: £454.7 million). At the same time, we were able to increase our profits in this segment to £51.4 million (2010: £39.6 million), a fantastic result.
- Hiscox UK: Our UK business has become a powerhouse, achieving another record profit of £49.0 million (2010: £28.8 million) despite a big fall in investment income and the competitive market conditions which prevailed. It had substantial top-line growth of 12.3% to £367.1 million (2010: £327.0 million). This result was driven by a focus on disciplined underwriting and by the strength of the Hiscox brand. Most satisfying has been the performance of our high net worth team. They reaped the rewards of their efforts in 2009 and 2010 when, against prevailing market trends, they maintained discipline, increased prices marginally and as a result made a very healthy profit this year. Their nascent luxury motor account also made a good profit - a real achievement in its third year. The commercial business had a reasonable year, despite being challenged by claims arising from mistakes by some of the professionals we insure which have been revealed by the recession.
We have worked for several years to build our distribution with a broader range of partners. In late 2010 we entered into an agreement with the Dual underwriting agency, for them to underwrite and market our products, and our business together has developed well. We have also created a specialist team to focus on Marsh, Aon and Willis, the three largest national brokers with whom we have strong Group relationships but with whom we do little business in the UK. Our business with them is growing slowly, but much remains to be done. We have also created new relationships with a number of independent brokers who have moved books of specialist business to us. We have won their support because our underwriters and operations staff respond to their requests for assistance faster than the competition and because of our reputation for paying valid claims fast and fairly. Not all of our underwriting partnerships have gone well, and at the end of 2011 we cancelled a household partnership which had not performed to our expectations. This will have a negative impact on Hiscox UK’s 2012 top-line growth, but we expect that it will have a positive effect on profitability.
Our direct business continues to go from strength to strength and is now a £65 million business. Both our commercial and personal lines units achieved excellent profits in 2011. We have added a new travel product to our personal lines offering and expect to follow with more choices of cover during 2012.
Building the direct business requires us to spend significant amounts on our marketing which offers very tangible benefits to the whole Group and in 2011 we were short-listed as one of the five best brands in the UK at the Marketing Society Awards alongside household names such as John Lewis and British Airways. It is a real achievement for our UK team to have created such a recognizable brand when we operate in what is thought of as a grey industry.
- Hiscox Europe: Although its profits fell to £2.4 million (2010: £10.8 million), 2011 is Europe’s third successive year of overall profitability. Most of the profit fall was due to a decline in investment income and a single large reserve. Hiscox Europe is now at the same stage of development as the UK business in 2001 and as its scale grows I expect that profits will grow. The top line was flat at £130.9 million (2010: £127.6 million), though this masks some changes in its business mix. Our art and private client business shrank, as expected, as the impact of underwriting actions taken in 2010 fed through. This decline was offset by growth in the commercial area where our specialist kidnap and ransom, media, technology and related products performed well, as have our partnerships with other financial institutions. Our relationship with the bank BBVA in Spain, through whose branches we sell our specialist commercial products, has performed particularly well.
Despite the economic challenges that Europe faced, and will no doubt face in 2012, we are continuing to invest on the continent. For the past two years we have been building a direct business in France focusing on small commercial lines. In 2012 we will be supporting this direct business with an expanded marketing campaign – in fact our first French television commercial aired in January. Early responses have been positive, and if all goes well we hope to build a direct business to match that in the UK.
Hiscox International has suffered most visibly from the catastrophe losses in 2011. It swung to a loss of £89.5 million (2010: profit of £43.1 million) and its premiums shrank 9.7% to £365.8 million (2010: £405.2 million). As trends in each business unit within the division vary materially I comment on each separately below:
- Hiscox Bermuda: The focus of our business in Bermuda is overwhelmingly on catastrophe reinsurance so in a year like 2011 it is not surprising that the unit suffered a big loss. Hiscox Bermuda’s disciplined underwriting saw its written premiums reducing by 9.5% to £177.7 million (2010: £196.4 million). It is the nature of reinsurance to be volatile but on average the results are very attractive. Since we created our business in Bermuda in 2006 it has achieved an aggregate combined ratio, including 2011, of around 80% - a very respectable result.
- Hiscox USA: The US has made good progress in 2011. Its revenue fell by 15.5% to £108.3 million (2010: £128.2 million) which was mainly due to the withdrawal from two lines of business at the end of 2010 and the transfer of our large technology and media portfolios to Hiscox London Market. It saw strong growth of 29.0% in our core areas of kidnap and ransom, construction, terrorism, media and professional lines and we believe this progress will continue. Our network of offices across the US has been crucial in helping us attract business.
2011 also saw the launch of our US direct commercial offering aimed at start ups and small businesses. We have been building the brand in the US through traditional and digital marketing. We have been using social media in the form of a branded entertainment web TV series called Leap Year, aimed at budding entrepreneurs which has been watched by over 4 million viewers. The series won a coveted Digital Luminary award for branded entertainment in the company of brands like Yahoo and NASA. We have also entered into marketing partnerships with GEICO and other major insurers, a real testament to the quality of the products we have on offer. We sold over 6,000 policies direct to consumers by the end of the year. The trend remains positive and we will continue to invest further in this fledgling business in 2012.
- Hiscox Guernsey: This business underwrites kidnap and ransom, piracy, fine art and terrorism and continues to be a star performer. Its revenues declined marginally to £79.8 million (2010: £80.6 million) despite a very disciplined underwriting approach towards piracy. The team made a profit despite suffering a large fine art loss when a painting was being transported from the auction house to a client. This team is concentrating on expanding its distribution and expects to strengthen this in several territories in 2012.
Insurance is basically a promise to pay. Claims are where that promise is tested. In 2011 our UK claims team dealt professionally with the welter of claims resulting from the severe winter freezes, while our Bermuda and London Market claims teams have been at the forefront of adjusting and paying claims arising from the string of natural catastrophes. It is pleasing to see that during all of this they kept their promise with prompt and fair payment of valid claims with a smile.
In 2011 we released £199 million (2010: £133 million) from prior years’ reserves. We have benefited from some legal victories, most prominently in our long running litigation over subrogation from the World Trade Centre, and from some large technology and professional liability cases. At the end of 2011 our actuarial analysis shows that we continue to hold the same size margin above best estimate as at the end of 2010.
In the UK we took the big step of insourcing all of the claims from our direct to consumer business, recruiting a small number of staff from our outsource partner and expanding the services which we offer to claimants. Our claims service remains one of the best in the industry and in 2011 we were awarded Post Magazine’s Commercial Lines and Personal Lines claims team of the year. We continue to invest in claims and a priority in 2012 will be Europe. The challenge is to use our skills on a pan European basis as the individual operations remain quite small.
2011 was a challenging year for our investments. This is not a surprise given the continuing volatility and uncertainty in world financial markets. We achieved a total return of £25.9 million before derivatives with a yield of 0.9% (2010: £98.8 million, 3.6%).
We started the year concerned about a possible increase in interest rates but happy to take some credit risk and we positioned the bond portfolios accordingly. The stance on duration in particular proved to be too cautious in light of the flight to quality that took place in Government bond markets in the second half. Additionally, in some cases, our non Government bonds incurred mark to market losses. However, we have the resilience to hold these through periods of market turbulence as we will eventually realise value for them as they move to maturity.
We took advantage of some of the market weakness in the summer to increase our equity weighting slightly. Again, we believe we have a strong enough balance sheet to withstand the volatility that inevitably comes with owning shares and are prepared to do so as long as we can see value in the longer term.
Looking forward we expect investment returns to remain depressed. We are not tempted by the range of products which may offer higher apparent returns but would rather accept what the market has to offer from conventional sources.
Operations and IT
Great underwriting only delivers value to customers if supported by excellent operations. During the year we continued to improve our operational capabilities. In Hiscox London Market we re-engineered our processes so that all risk details are entered into our systems within 48 hours of binding, providing us with real underwriting insight and control benefits. Across our European and UK businesses we improved the quality of our data leading to more timely and accurate customer documentation. In Hiscox UK we introduced sophisticated capacity planning tools to ensure that we had the resources in place to meet spikes in demand. Our quality, as perceived by our customers, is measured using Net Promoter scores and we are now receiving industry-leading scores. In the US our new service centre, which supports the direct business, is also getting very positive customer reviews.
All this operational improvement has been mirrored in improvements in our IT performance. The IT team re-organized themselves during the year to match our business unit structure, allowing for more interaction between teams and greater accountability to the business for delivering specific projects. As a result, we have seen a higher number of projects being completed more efficiently and to a higher standard.
Robert’s announcement that he intends to retire as Chairman in 12 months time marks a watershed for the Group. Robert joined Hiscox in 1965 and took over its leadership in 1970 when we had two small boxes at Lloyd’s and controlled premium income of just over £2 million. We now have controlled premiums of £1,664 million and operate from 27 locations in 11 countries. During this time Robert has steered Hiscox through the many challenges such as 9/11 which have occasionally shaken the industry to its foundations. He has also served the Lloyd’s marketplace with distinction in a number of roles during its toughest times. He was a member of the Rowland Taskforce in 1991 and was Deputy Chairman of Lloyd’s during its turbulent years of Reconstruction and Renewal from 1993-1995. He has done all of this with drive, energy, perspicacity, determination, iconoclasm, wit and aplomb. We will not be losing Robert’s guidance as in 2013 he will remain with the business as Honorary President.
A huge part of Robert’s success has been formed around his ability to recruit great people and he has given them the freedom to build their businesses. One of the most important of these hires was Nicholas Thomson who will be standing down as a Non Executive of our UK based subsidiary boards shortly. Nick joined Robert in 1973, becoming Underwriter of Syndicate 33 from 1976 until 1993 and Director of Underwriting from 1993 until 2001. Nick served as a Hiscox plc Board Director from 1993 until 2001. He has also always served on our UK based subsidiary boards, moving to a Non Executive position in 2001. Nick’s contribution to our underwriting culture has been immense and we will miss the grenades of underwriting and business insight that he rolled down the board room table with unfailing regularity.
Strong experienced Non Executives have also been of huge value to the Group. Foremost amongst these has been Anthony Howland-Jackson who will also be standing down shortly. After a distinguished career in broking, Anthony joined the Board of Hiscox plc and our UK based subsidiaries in 1997. He served as Senior Independent Director on the Board of Hiscox plc standing down from this Board when we re-domiciled to Bermuda in 2006. Since then he has continued to serve as a Non Executive Director of our UK based businesses. Anthony’s well timed questions caused us to re-assess many of our more fanciful ideas and his words of advice were always listened to.
The Board has initiated a selection process to find a successor to Robert. This process is being led by the Chairman of the Remuneration and Nomination Committee, Andrea Rosen, supported by our Senior Independent Director, Richard Gillingwater, and with input from all Hiscox Ltd Non Executive Directors who form the Committee. The Remuneration and Nomination Committee have appointed a leading search firm as advisors and we will make an announcement on succession in due course.
We are always working to attract the most talented people to work here, to retain them and to help them to develop. Robert has led by example in this and we seek to live up to his standards. In 2011 both Hiscox London Market and Hiscox UK achieved Chartered Insurer status. This reflects the investment we have put into ensuring our staff achieve industry qualifications which we then back up with internal training and development programs.
We really believe the quality of our staff is a competitive advantage in the industry, and the resilience of our result this year reflects their individual contributions on a risk-by-risk and day-by-day basis. I thank them all.
We have seen substantial rises in rates for catastrophe reinsurance in loss affected territories such as Japan, New Zealand and Australia, but areas which were already well rated, such as the United States, have seen more modest increases. Unfortunately, catastrophe reinsurance in areas which continue to need price rises such as Europe have remained flat. In non catastrophe areas the trends are more mixed. European insurance pricing remains reasonable in our lines, and in the UK there is some downward pressure in commercial insurance, whilst personal lines are flat albeit at healthy levels. In the US we are seeing modest upward pressure.
In this environment we believe that we can thrive. The UK will continue with its consumer and brand led expansion; Europe will focus on driving growth in current product areas and current territories, developing greater scale and with that improved profitability; the US will continue to drive for scale in current areas and build on the exciting possibilities of its direct business; The London Market, Bermuda and Guernsey insurance businesses will take advantage of areas with rate increases, expanding judiciously in property related lines but continuing to shrink in casualty; overall Reinsurance is even better rated than in previous years and unless the world turns upside down, should return to its usual profitability. I feel excited as I see these plans coming together and am confident the profits they generate will benefit shareholders and staff.
27 February 2012
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