Fitch affirms Hiscox's IFS

11th December 2013

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.

RATING SENSITIVITIES

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

Contact:

Primary Analyst

Anna Bender

Associate Director

+44 20 3530 1671

Fitch Ratings Limited

30 North Colonnade

London E14 5GN

Secondary Analyst

Martyn Street

Director

+44 20 3530 1211

Committee Chairperson

Stephan Kalb

Senior Director

+49 69 768076118

Media Relations: Hannah Huntly, London, Tel: +44 20 3530 1153, Email:

[email protected]

Additional information is available at www.fitchratings.com.

Applicable criteria, 'Insurance Rating Methodology', dated 13 November 2013 are available at

www.fitchratings.com.

Applicable Criteria and Related Research:

Insurance Rating Methodology -- Amended

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=723072

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