Interim results for the six months ended 30 June 2013

“An excellent start”

  H1 2013 H1 2012
Gross premiums written £1,017.9m £906.4m
Net premiums earned £628.7m £567.8m
Profit before tax £180.7m £125.8m
Earnings per share 42.4p 32.1p
Interim dividend per share 7.0p 6.0p
Net asset value per share 393.3p 337.2p
Group combined ratio 74.7% 81.7%
Return on equity (annualised) 25.8% 21.1%
Investment return (annualised) 1.5% 3.1%
Reserve releases £73.6m £116.3m


  • Interim pre-tax profit of £180.7 million (2012: £125.8 million), helped by low exposure to recent catastrophes and fewer attritional losses.
  • Gross premiums written increased by 12.3% (2012: 7.0%) driven by good insurance opportunities in property and small commercial lines.
  • Interim dividend increased by 16.7% to 7.0p (2012: 6.0p).
  • New leadership in Hiscox London Market insurance business to leverage opportunities.
  • Adapting to market changes with Hiscox Re; combined reinsurance functions in London, Paris and Bermuda.

Bronek Masojada, Chief Executive Officer, Hiscox Ltd, commented

“Our strategy is working. Our specialist businesses and insurance lines provide stability and opportunity as we navigate more turbulent times in reinsurance. We have a strong brand, good discipline and plenty of options.”



Jeremy Pinchin, Company Secretary, Bermuda
Kylie O’Connor, Head of Communications, London
+1 441 278 8300
+44 (0) 20 7448 6656
Tom Burns, Clemmie Raynsford +44 (0)20 7404 5959

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

The Group generated a record pre-tax profit of £180.7 million in the first half driven by low exposure to recent catastrophes combined with low attritional losses - a marriage of good underwriting and good luck. This is an excellent start to the year, but hurricanes happen in the second half so we remain cautious in our outlook and disciplined in our approach to underwriting.


The half-year result to 30 June 2013 was a pre-tax profit of £180.7 million (2012: £125.8 million). Gross written premiums rose by 12.3% to £1,017.9 million (2012: £906.4 million). Net earned premiums were £628.7 million(2012: £567.8 million). The Group has benefited from foreign exchange gains of £34.9 million (2012: losses of £4.5 million). The net combined ratio improved to 74.7% (2012: 81.7%). Earnings per share increased to 42.4p (2012: 32.1p) and net assets per share grew to 393.3p (2012: 337.2p). The annualised return on equity increased to 25.8% (2012: 21.1%).

Dividend, balance sheet and capital management

The Board of Hiscox Ltd has declared an interim dividend for 2013 of 7.0p per share (2012: 6.0p) an increase of 16.7%. The record date for the dividend will be 9 August and the payment date will be 18 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. On 12 August a circular will be sent to shareholders with details of the scrip dividend. The final date for making elections in order to be eligible to receive new shares in respect of the interim dividend will be 28 August 2013.

During the period, the Group made a special distribution of £150.2m and consolidated its shares. This reduced the number of ordinary shares by 11% from 414,870,740 to 369,234,958. The return of capital, combined with the final dividend equivalent of 12p per share, resulted in a total distribution to shareholders £197.6 million.

Net asset value per share has increased by 13.5% from the year end, and the balance sheet remains strong.

Overall comment

Our strategy of building balance and diversification within the business continues to work. We have taken advantage of improving markets and grown our insurance businesses in the USA, UK, Europe and in the London Market, whilst continuing to underwrite reinsurance very profitably.

Declining investment returns have not only squeezed margins for insurers and reinsurers but also attracted competition from investors such as mutual funds and life insurers who are chasing better yields and are aware of the recent good returns in reinsurance. The Insurance Linked Securities (ILS) market has been developing for a number of years and we believe it has now reached critical mass. Although ILS capacity is here to stay, we don’t believe that it will replace the conventional market but rather complement it, and so we are incorporating these developments in our own strategy.


Increased competition from the capital markets combined with lower loss levels are putting pressure on rates in reinsurance. Rates for US property catastrophe business were down on average by 15% at the 1 June Florida renewals and down by 10% at the 1 July renewals, off very high levels. Rates for international business are down by 5%. The overall portfolio however is still only down by a single digit percentage. We will continue to adjust our exposures depending on the claims experience and the future rating environment.

Rates on our small ticket specialty insurance lines are typically flat to slightly up. The bigger ticket business including aviation, energy and large property are suffering due to excess capital in the market. We have grown our business however, in the well rated areas.


So far in 2013 catastrophes including the Oklahoma tornadoes and the European and Calgary floods have cost the industry approximately US$11.5 billion. Our exposure has been satisfactorily low at net US$22.0 million. In addition, we have seen fewer attritional losses across the business.

Despite the considerable increase in the P&I club’s estimate for the Costa Concordia event, our net loss has slightly reduced to US$19 million. Our reserves for the various 2010-2012 catastrophes are stable to improving.

For the first half, the Group released reserves of £73.6 million (2012: £116.3 million).

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 £78.0 million (2012: £69.5 million)
Gross written premiums £432.5 million (2012: £371.3 million)
Combined ratio 64.0% (2012: 68.4%)

Hiscox London Market’s excellent first half profit was the result of disciplined underwriting, a very benign claims environment and a favourable movement in foreign exchange. Premium grew by a very healthy 16.5%.

The Property division continues to grow, both in the USA and internationally where rates and conditions are improving. The Terrorism team, under new leadership, has performed particularly well improving on prior year records. In addition, our Property team was awarded Team of the Year at the 2013 Reactions awards.

Over the last twelve months we augmented our Casualty team, in anticipation of a hardening market caused by low investment income. We are seeing rating improvements and we are growing the account carefully.

Our reinsurance account has grown slightly in the first half but we expect it to be under budget at the full year as competition increases.

During the period Paul Lawrence was promoted to lead our insurance businesses within the London Market.

Hiscox UK

This division, which covers the UK and Ireland, writes personal insurances (high-value households, art, luxury motor, and associated risks) and commercial insurance for small to medium businesses, such as technology and media companies, which in the main rely on their brains (rather than infrastructure) to make money. These products are distributed via brokers, direct-to-consumer or through a growing network of partnerships.

Profit before tax £34.0 million (2012: £15.8 million)
Gross written premiums £205.5 million (2012: £184.0 million)
Combined ratio 87.7% (2012: 95.2%)

Premium income grew by 11.7% with good retention of existing business and strong growth through our network of regional offices. This rise in premium was driven primarily by specialty commercial lines and helped by the ‘superb service’ initiative, which has improved our interactions with brokers and clients.

The higher value household product has pleasingly returned to growth after tough pricing decisions made in 2010-11 and the prestige motor business continues to perform well, with Hiscox now firmly established in the luxury motor industry.

We have focused on our schemes business during the half year (collections of customers with similar risks who benefit from negotiated premiums and bespoke cover) and the results have been good. New partnerships launched include schemes for wedding and classic cars.

We have produced another record profit, due to strong top-line growth, with disciplined underwriting contributing to a particularly low claims experience. A lack of freeze, and generally favourable weather conditions, resulted in a decrease in household claims.

Marketing for the direct-to-consumer commercial business has been effective. Advertising to target small businesses is driving expansion outside the South East of the UK, particularly in Manchester and Birmingham. Across the UK, this business is attracting 2,000 new customers a month.

Last year we announced our intention to open a multi-function office in York including a support centre for our direct-to-consumer household business. 40 people are pioneering our York venture while we build a permanent home that will provide space for up to 500. We are glad to support the York economy and are already benefitting from its skilled workforce.

Our ability to help our customers with expert advice, quickly and compassionately, sets our retail businesses apart. So it is very pleasing that our efforts have been recognised by winning the Personal Lines Team of the Year from Post magazine, and Outstanding Insurer Claims Team of the Year from Insurance Times.

Hiscox Europe

In line with our strategy we distribute the same core products in Europe as we do elsewhere in our retail businesses: high value household, and specialist commercial. We also underwrite larger fine art risks, technology and media risks, and kidnap and ransom insurance.

Profit before tax £10.4 million (2012: £0.6 million)
Gross written premiums £89.6 million (2012: £84.0 million)
Combined ratio 88.7% (2012: 102.1%)

Gross written premiums encouragingly grew by 6.8% driven mainly by specialist commercial business and technology and media risks. Growth was particularly good in France, Germany and Spain against a tough general economic backdrop. The art and private client business also returned to growth after a drive in 2010 to improve profitability.

A record profit of £10.4 million this year was assisted by the absence of weather related losses and a favourable foreign exchange gain.

Hiscox Germany has launched a direct-to-consumer business for start-ups and small knowledge-based professions, including IT, management and business consultants. This builds on the experience we have in the UK and France as well as the USA. It complements the existing broker channel by focusing on risks that are smaller and more suited to an online trading environment. Hiscox Spain launched an e-trading platform for brokers, (quoting commercial business online in real time), with good early results.

Hiscox International

This division comprises our Bermuda, USA and Guernsey business units.

Profit before tax £50.1 million (2012: £46.2 million)
Gross written premiums £290.3 million (2012: £267.2 million)
Combined ratio 72.7% (2012: 78.7%)

Hiscox Bermuda

Hiscox Bermuda underwrites catastrophe reinsurance and healthcare business.

When the wind doesn’t blow and the ground doesn’t shake we expect Bermuda to make money and it has done. Gross written premiums were broadly flat at £161.9 million (2012: £159.4 million) despite increased competition from capital markets and general excess capacity. The Healthcare insurance book continues to grow steadily and profitably.

Hiscox Guernsey

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

Guernsey continues to perform well despite the competitive market with gross written premium broadly stable at £35.8 million (2012: £36.3 million). The main focus of growth is on the international war and political violence book where rates remain strong.

Hiscox USA

Hiscox USA underwrites an account 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.

This business achieved excellent growth, increasing premiums by 29.6% to £92.6 million (2012: £71.5 million), with every region and product area contributing.

A good claims experience has delivered a profit in the first half. Reserves for Superstorm Sandy remain largely unchanged with no new claims notifications.

We continue to invest in building brand awareness in the US. On the back of some encouraging growth numbers, with our direct-to-consumer business now exceeding 33,000 policies, we are investing an additional US$8 million in marketing in the second half of 2013. In parallel we are making good progress distributing our direct products through third parties, including a pilot to allow brokers to market our direct-to-consumer products.


We have had a satisfactory investment performance in the context of what makes a good return in very unsure times. Assets under management at 30 June 2013 totalled £3,153 million (2012: £2,989 million) and our investment return, before derivatives, was £23.3 million (2012: £44.5 million), 1.5% on an annualised basis (2012: 3.1%).

We have pursued a conservative policy in our approach to bond markets for some time now, refusing to stretch for yield. Despite this approach of short duration and high credit quality, the last six weeks of the first half have left our bond portfolios struggling to make gains this year. Our risk asset portfolio has been the mainstay of our investment performance this half and has continued to add value so far in the second half.

Perhaps we are seeing some sort of return to more normal yields but the path is far from clear and further turbulence seems the only certainty. The US looks more positive than elsewhere with Europe and Japan (for different reasons) yet to prove that their routes to economic recovery will work. With interest rates more likely to rise than fall at some stage, we expect to retain our cautious stance on bonds in respect of duration and credit quality and to remain highly selective towards sovereign and bank exposure. Whilst bonds may be fundamentally overvalued we view equities as being less so and we are maintaining an allocation, the level of which will be managed as opportunities arise.

Hiscox Re

In response to the changing dynamics of the reinsurance market, Hiscox is combining its reinsurance functions in London, Paris and Bermuda to form a new single business unit, Hiscox Re. Led by Jeremy Pinchin and operational in time for 2014 renewals, this new structure will provide keen service, faster underwriting decisions, and better support for key clients.

Hiscox has a history of leveraging the expertise we have built in reinsurance, from the first side-car at Lloyd’s with Wilbur Ross in 2006, to the Third Point reinsurance partnership in 2012. Between 2008 and 2013 we ceded US$600 million gross written premiums through quota share arrangements. This year we formed Kiskadee Re, a new special purpose vehicle writing collateralised reinsurance.

We will continue to study the alternative risk transfer methods that are being developed and use them or underwrite them, depending on price levels.


We continue to see huge value in our strategy of underwriting a balanced portfolio, with the bigger ticket business supporting the growth of the smaller ticket retail businesses and the latter balancing the volatility of the former. Reinsurance pricing will remain under pressure for the foreseeable future, and we will remain disciplined here. Opportunities exist in insurance, and we will grow where rates are rising. There is also plenty of room for growth in our specialist retail areas where investment in our distribution and brand continues.

We have experienced leadership and a dedicated team, I thank them for their efforts in the first half and encourage them for the second.

Robert Childs
29 July 2013

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