Fitch Ratings-London-11 December 2013: Fitch Ratings has affirmed Hiscox Group (Hiscox) core
entities' Insurer Financial Strength (IFS) ratings at 'A+'. Fitch has also affirmed the Long-term Issuer
Default Ratings (IDRs) of all Hiscox's holding companies at 'A-'. The Outlooks on all ratings are
Stable. A full list of rating actions is provided at the end of this comment.
KEY RATING DRIVERS
The affirmations reflect Hiscox's strong risk-adjusted capitalisation and expectations of a continually
sound record of profitability underpinned by well-diversified business activities. The ratings are
somewhat constrained by the moderate scale of the company.
The ratings are supported by Hiscox's strong underwriting performance which Fitch expects to be
maintained. The 1H13 Fitch-calculated combined ratio was 80% (1H12: 84%), comparing favourably
to peers. The stability of the insurer's performance continues to benefit from a balanced mix in its
sources of earnings, combining a potentially volatile catastrophe-exposed business with lines that
provide more stable earnings.
Investment returns are likely to remain subdued in the low interest rate environment. In 1H13,
net investment income, excluding realised and unrealised investment gains and losses, contributed
GBP22m (1H12: GBP23m). However, overall net income of GBP158m in 1H13 (1H12: GBP125m)
was strong and in line with the company's historical performance which Fitch expects to continue.
Hiscox's reserve releases have been fairly stable in recent years, which Fitch views as indicative of
consistent prudence in Hiscox's reserving. Reserve releases generally contribute more to Hiscox's
profitability compared with peers, but the agency expects Hiscox to continue to reserve prudently.
An upgrade is unlikely in the near term, given the medium scale of the company.
A downgrade could be triggered by a considerable erosion of capital equivalent to a sustained increase
in net underwriting leverage to 1.5x (2012: 0.9x). A marked deterioration in profitability compared
with peers could also result in downward rating pressure.
Hiscox is a specialist non-life insurance underwriting group focusing on a particular range of personal
and commercial risks. Hiscox Syndicates Limited is the managing agent of Syndicates 33, 3624
and 6104. Hiscox Insurance Company Limited operates in the UK and Europe outside the Lloyd's
market, covering a wide range of specialist insurance for professionals and business customers.
The group's other insurance vehicles include Hiscox Insurance Company (Bermuda) Limited and
Hiscox Insurance Company (Guernsey) Limited. Hiscox Ltd is the ultimate Bermudian-based holding
company of Hiscox.
The rating actions are as follows:
Hiscox Insurance Company Limited: IFS affirmed at 'A+'; Outlook Stable
Hiscox Insurance Company (Guernsey) Limited: IFS affirmed at 'A+'; Outlook Stable
Hiscox Insurance Company (Bermuda) Limited: IFS affirmed at 'A+'; Outlook Stable
Hiscox Ltd: Long-term IDR affirmed at 'A-'; Outlook Stable
Hiscox Plc: Long-term IDR affirmed at A-'; Outlook Stable
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Additional information is available at www.fitchratings.com.
Applicable criteria, 'Insurance Rating Methodology', dated 13 November 2013 are available at
Applicable Criteria and Related Research:
Insurance Rating Methodology -- Amended
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