Fitch Ratings press release: Fitch Affirms Hiscox's IFS Rating at 'A+'; Outlook Stab

18th July 2013

Fitch Affirms Hiscox's IFS Rating at 'A+'; Outlook Stable Ratings Endorsement Policy

18 Jul 2013 11:29 AM (EDT)

Fitch Ratings-London-18 July 2013: Fitch Ratings has affirmed Hiscox Group's (Hiscox) core entities' Insurer Financial Strength (IFS) ratings at 'A+'. Fitch has also affirmed the Long-term Issuer Default Ratings (IDRs) of all Hiscox holding companies at 'A-'. The Outlooks on all ratings are Stable. A full list of rating actions is at the end of this comment.

KEY RATING DRIVERS

The affirmations reflect Hiscox's strong level of risk-adjusted capitalisation and sound track-record of profitability underpinned by its well diversified business profile. The moderate scale of the company somewhat constrains the rating.

Hiscox's level of risk-adjusted capitalisation remains strong. The 10% increase in shareholders' funds at end-2012 was reversed by the payment of a special dividend in March 2013. Based on Fitch's own internal assessment, Hiscox's risk-adjusted capitalisation remains comfortably supportive of its current ratings.

2012 performance was in line with the company's historically strong performance despite Superstorm Sandy accounting for 7.5pp in the 85.7% Fitch-calculated combined ratio. The relative stability of the insurer's performance has been aided by a balanced mix in its sources of earnings, combining catastrophe-exposed business with lines that provide more stable earnings.

Hiscox's reserve releases have been relatively stable in recent years, which Fitch views as indicative of a consistent degree of prudence in Hiscox's reserving over time. Reserve releases generally contribute more to Hiscox's profitability compared with peers, but the agency expects Hiscox's reserving prudence to remain consistent.

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. 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


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