Interim results for the six months ended 30 June 2012

“A healthy profit”

  H1 2012 H1 2011
Gross premiums written £906.4m £847.5m
Net premiums earned £567.8m £554.7m
Profit before tax £125.8m (£85.6)m
Earnings per share 32.0p (22.8)p
Interim dividend per share 6.0p 5.1p
Net asset value per share 339.3p 296.3p
Group combined ratio 81.7% 116.9%
Return on equity (annualised) 20.9% (13.3)%


  • Interim pre-tax profit of £125.8 million (2011: loss £85.6 million), a welcome return to profit after the unprecedented level of catastrophes in 2011.
  • Gross written premiums increased by 7.0% to £906.4 million (2011: £847.5 million) with targeted growth in areas where rates are rising.
  • Interim dividend increased by 17.6% to 6.0p (2011: 5.1p).
  • Group combined ratio 81.7% (2011: 116.9%).
  • Net asset value per share 339.3p (2011: 296.3p).
  • Catastrophe reserves holding steady.
  • Investment return of 3.1% annualised (2011: 2.0% annualised).
  • Robert Childs to succeed Robert Hiscox as Chairman.

Robert Hiscox, Chairman, Hiscox Ltd, commented:
“This has been a very good first half, not only due to the lack of catastrophes, but also from careful risk selection and growth in the right areas. All our businesses continue to underwrite with great skill and to search for new opportunities in new markets, backed by strong marketing. I am thoroughly enjoying my last year with the hand on the tiller.”

Commenting on the appointment of the new Chairman, Richard Gillingwater, Senior Independent Director, said:

“The Board conducted a thorough search and assessed a number of candidates. We concluded that Robert Childs is the outstanding candidate to succeed Robert Hiscox. Taking and managing risk is the core business of an insurer, and we believe that Robert's expertise in risk management and the continuity he will provide as Chairman of the Board will be of great benefit to our shareholders and policyholders alike. Mindful of the UK Corporate Governance Code, the Board consulted with the company’s major shareholders, holding about 30% of the company’s shares, who unanimously supported our view.”







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

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 profit of £125.8 million for the first six months of this year is a welcome return to our profitable course after the battering we and the insurance industry received from Mother Nature last year. As ever, I am writing this on the eve of the US hurricane season, but this year we enter it in good shape.


The half-year result to 30 June 2012 was a pre-tax profit of £125.8 million (2011: £85.6 million loss). Gross written premiums rose by 7.0% to £906.4 million (2011: £847.5 million). Net earned premiums were £567.8 million(2011: £554.7 million). The Group net combined ratio was 81.7% (2011: 116.9%). Earnings per share increased to 32.0p (2011: -22.8p) and net assets per share grew to 339.3p (2011: 296.3p). The return on equity was 20.9% (2011: -13.3%).

Dividend, balance sheet and capital management

The board of Hiscox Ltd proposes to pay an interim dividend for 2012 of 6.0p per share (2011: 5.1p) an increase of 17.6%. This increase is intended to bring the interim dividend back into line with our goal to pay one third of the annual total at the interim stage. The record date for the dividend will be 10 August and the payment date will be 19 September.

The board proposes to offer again a scrip dividend alternative in respect of the interim dividend, subject to the terms and conditions of Hiscox Ltd’s Scrip Dividend Alternative. A circular will be sent to shareholders with details of the scrip dividend on 13 August. The final date for making elections in order to be eligible to receive new shares in respect of the interim dividend will be 29 August 2012.

Net asset value per share has increased by 14.5% since June 2011, or 4.9% from the year end, and the balance sheet remains strong.

Overall Comment

Our reinsurance teams in London and Bermuda have benefited from the low incidence of catastrophes or large losses during the period and taken advantage of higher rates in selective areas. The retail businesses in the UK and Europe have both had some bad weather losses, but have demonstrated their core strength by turning in a reasonable profit even after increased marketing spend. The US business is developing strongly and Guernsey continues to shine.

Our UK businesses were distracted during the period by preparations for Solvency ll. The chorus of complaints to the regulators has had an effect and their demands have ameliorated to some extent. Sense must prevail and I hope we can make the processes which Solvency II requires an intrinsic part of our risk management without them stripping us of the use of intuition and common-sense. After all, no model could ever have predicted the amount of rain falling this year in the UK and tipping down outside my window as I write.


Rates for US property catastrophe reinsurance grew in excess of 10% in the first quarter, and then between 0-5% in the second quarter. Japanese earthquake catastrophe rates have doubled since the Tohoku Earthquake, and Japanese wind rates rose by between 10-30% at the April renewals.

Large casualty business is still under pressure, but rates are continuing to improve in internationally traded property lines.

In other specialty insurance lines rates are generally flat, with some under continuing downward pressure.


Since I announced in February my retirement as chairman in February 2013, the Nominations Committee has conducted a rigorous search for a new Chairman. Outside consultants searched from within and outside the company and a shortlist was produced. Ultimately, the Board accepted the Nominations Committee’s recommendation of our current Chief Underwriting Officer and member of the Board of Hiscox Ltd, Robert Childs.

I know that the UK Corporate Governance Code favours an independent chairman. However, I agree with the recommendation of the Nominations Committee as do the major shareholders who were consulted. The Board believes that Robert Childs has the strength of character, the commercial experience and the detailed knowledge of our business that will make him an excellent Chairman of the Board. He was the active underwriter of our Lloyd’s Syndicate 33, he then started and built our businesses in Bermuda and the US, and he has recently had an oversight role covering all the underwriting in the Group as Chief Underwriting Officer.

During consultation, the question was asked whether he can move from reporting to the CEO to having the CEO report to him. I believe that in underwriting matters he has been in effect the ultimate arbiter, and underwriting is our business, and I know (and have witnessed) that he has the strength to insist if need be. Another question was can he move from executive to non-executive (if any chairman can be deemed non-executive). Well, I have seen him go from CEO of Bermuda and Executive Chairman of Hiscox US to an oversight role, and his Chief Underwriting Officer role is an oversight role in the main, so I am confident that he can and will.

Finally, if I am to leave my life’s work and my family’s financial health in the hands of others, I feel safe in the knowledge that the chairman at the head of the table has an incisive knowledge of the risks in our business, and is unlikely to allow foolishness to take place. A few more insiders at the helms of some other financial institutions in the City might have stopped some of the idiocy that occurred.

I am also pleased to announce that Jeremy Pinchin has been appointed Chief Executive of Hiscox Bermuda and Group Company Secretary as of 14 August taking over from Charles Dupplin who will be returning to the UK. Charles performed these roles for the past three years and certainly made his mark in Bermuda. Jeremy joined us in 2005 as Group Claims Director and he will also continue to oversee group claims.

Hiscox London Market

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

Profit before tax £69.5 million (2011: £26.6 million loss)
Gross written premiums £371.3 million (2011: £349.0 million)
Combined ratio 68.4% (2011: 113.9%)

Hiscox London Market had an extremely low combined ratio due to the absence of catastrophe losses and through avoidance of attritional losses from the considerable number of weather events in the US and the earthquake in Italy. This resulted in an excellent first half profit of £69.5 million. Premium income grew by 6.4% with growth in terrorism, upstream energy, commercial property and aviation, and a stable income in other lines. Terrorism business is ahead of budget due to our continued strong focus on the class and increased new business from the Middle East and North Africa. Rates remain strong in political risks business. After several years of pulling back whilst rates were falling, the property division is once again growing, with well-rated business coming from the US as well as loss impacted areas such as New Zealand.

The gross premium income of the reinsurance division grew 2% year-on-year. Increased writings of Japanese catastrophe business were offset by the non-renewal of certain inwards proportional treaties, and the (welcome) lack of reinstatement premiums due to the absence of catastrophe losses. Rates on the core US catastrophe reinsurance account remain strong.

Hiscox UK

This division writes personal insurances (high value households, art, luxury motor, and associated risks) and commercial insurances for small to medium businesses which in the main rely on their brains (rather than infrastructure) to make money. It also specialises in insuring technology and media companies. All three areas made profits in the period.

Profit before tax £15.8 million (2011: £25.2 million)
Gross written premiums £184.0 million (2011: £182.9 million)
Combined ratio 95.2% (2011: 87.9%)

Premium income was marginally ahead of last year despite our previously announced withdrawal from two underwriting partnerships as they had not lived up to expectations. We replaced the lost income through strong growth in the specialty commercial business.

Despite the appalling weather there have been fewer than expected flood or cancellation losses, but we have made an appropriate reserve in case of late notifications. We do specialise in event cancellation, so the underwriters are to be congratulated for avoiding the high profile outdoor events which have had to be cancelled. We will cover such events at a fair price, but others have had a lower definition of ‘fair’. However, we did suffer our largest-ever residential fire where the fire started on the top floor of a house in London, but the efforts of the fire brigade to put the fire out swamped the rest of the house with water – a regrettably common experience in household fires.

The direct to consumer business continues to grow and we have returned to TV advertising in the UK with a message on our values and service. The campaign has already had a measurable impact on how people view Hiscox, and we hope that our target insureds will choose a trustworthy and principled insurer over the cheapest. We are acutely aware that proclaiming that we will adhere to strong ethical and service standards means we must perform to a high level or be deservedly condemned.

We have long regarded excellent service and the swift and fair settlement of claims to be our core product. Insurance is a promise to pay and only when a customer makes a claim can that promise be tested. So it is very pleasing that our efforts have been recognized by winning the Customer Care Award at the prestigious British Insurance Awards.

Hiscox Europe

This division’s core business is much the same as the UK’s: household, and specialist commercial accounts. It also underwrites larger fine art risks, technology and media risks and kidnap and ransom insurance.

Profit before tax £0.6 million (2011: £0.1 million)
Gross written premiums £84.0 million (2011: £80.6 million)
Combined ratio 102.1% (2011: 100.2%)

A profit of £0.6 million is a fair result, considering that France was hit by a severe winter freeze and our Benelux household book experienced higher-than-normal claims activity, mainly from armed burglary.

Hiscox Europe’s premium income rose slightly, with art and household business remaining flat but good growth in professional liability and specialty commercial lines.

We continue to distribute through financial institutions. Some banks and composite insurers understand the benefits of giving their clients access to a specialist insurer rather than trying to build expertise themselves in a product which may never be a core part of their business. To that end, Hiscox France has forged a new relationship with Generali France to provide high-value household cover to its clients.

Hiscox International

This division comprises our Bermuda, USA and Guernsey units.

Profit before tax £46.2 million (2011: £82.2 million loss)
Gross written premiums £267.2 million (2011: £234.9 million)
Combined ratio 78.7% (2011: 160.1%)

Hiscox Bermuda

Hiscox Bermuda underwrites catastrophe reinsurance and healthcare business.

The division made a healthy profit thanks to the absence of catastrophe losses and grew by 11.4% helped by the steep rise in rates that followed last year’s series of very large natural disasters. Rates for Japanese earthquake excess of loss business have doubled since the Tohoku Earthquake, and Bermuda has quadrupled its income in this area. We had followed our usual practice of gently withdrawing as rates drop and others wish to take our place, and then increasing rapidly when the inevitable loss drives prices up and wounded competitors away.

In Bermuda and London we are currently underwriting a book of catastrophe business on behalf of Aviva, but following their recent reorganisation they will not be renewing this quota share arrangement next year. We are working to replace them as it is commercially sensible for us to be able to use our specialist expertise for others, and for our partners to gain profitable diversification if they are not involved in this area.

Hiscox Guernsey

Hiscox Guernsey underwrites kidnap and ransom, as well as personal accident, terrorism and fine art risks.

Guernsey has for long been one of the jewels in our crown and it continues to perform well. The team has concentrated on expanding its distribution in the Middle East and Far East. They have remained cautious about the piracy market, choosing to underwrite only those risks which they regard as being sensibly priced.

Hiscox USA

Hiscox USA underwrites a book of small commercial business to wholesale brokers, and larger specialist business mainly to retail brokers. It also sells cover directly to small commercial businesses through the internet.

Hiscox USA continues to benefit from the decisions we made two years ago to narrow its product range and focus its distribution channels to better effect. It saw good top-line growth of 29.1%, with particularly strong performances in construction, terrorism and management liability. The expense ratio continues to improve as the business grows and is better than plan.

We continue to invest in developing our brand in the US and have been accelerating our marketing efforts to promote our direct-to-consumer business. This includes the second season of our branded web series Leap Year which has had over one million views since June. These efforts are having a positive effect with weekly sales three times 2011 levels on a year-on-year basis. This business is performing well and recently expanded to include coverage for allied health professionals, which expands our target appetite by over two million small businesses. New distribution and marketing partnerships are also helping drive sales.


Assets under management at 30 June 2012 totalled £2,989 million (2011: £2,859 million) and the annualised return was 3.1% (2011: 2.0%) leading to an investment return on financial assets of £44.5 million (2011: £27.6 million). In the world of low interest rates that we currently operate in, this can be considered as a creditable result.

Once again investment markets have been prone to bouts of “risk on” or “risk off” sentiment with moments of financial or political stress being countered by central bank action or political compromise. As a result of the improved tone in the first quarter our non-government bonds recovered sharply from their year end weakness and contributed to a better than expected result from the bond portfolios. Our allocation to equities provided a useful additional return. The second quarter proved less productive as worries over Spain and Greece tested nerves once again. The bonds essentially earned their yield and risk assets trimmed some of their earlier gains. For the first six months, the return from our bonds of 1.5% far exceeded the short dated government bond benchmark of a paltry 0.2%.

Economic uncertainty, volatile capital markets and sovereign debt issues remain a feature of the investment landscape. The latest concerns over the outlook for economic growth have driven yields in many bond markets to historic lows with, in some cases, investors having to settle for a negative return on their money. Against this background our asset allocation has remained largely unchanged albeit that cash levels have increased following distributions from Syndicate 33 and due to a high level of cash equivalents in some of the bond portfolios. The allocations to cash and highly rated Government securities provide substantial liquidity but we retain a good weighting to corporate bonds in order to earn some extra yield from solvent borrowers. Our conservative stance still precludes investment in higher yielding European sovereign debt and entails close monitoring of the banks we have exposure to in the bond and money markets. We continue to view equities as an asset class which is likely to generate capital gains over the medium term and would be inclined to add more if good opportunities occur as they did last autumn.

A return to normalised interest rates and more stable equity markets appears to be some way off and our expectation for investment returns are accordingly relatively modest for the time being.


Investment returns have traditionally been a large part of the return for us and the insurance industry. Now that they are so much reduced, our underwriting skill will be even more essential in the near future. Reinsurance rates are healthy and property rates in some areas are rising. Otherwise in our retail books life remains competitive, but it always has been and we have specialist products and volume which enables us to compete and grow profitably. As usual, we wait to see what Mother Nature throws at us in the second half, but given nothing absolutely extraordinary happens, I believe I will be handing over to Robert next February the chairmanship of a very healthy business.

Robert Hiscox
30 July 2012

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