Q3 Interim Management Statement

10th November 2014

Hamilton, Bermuda (10 November 2014) - Hiscox Ltd (LSE:HSX), the international specialist insurer, today issues its Interim Management Statement for the first nine months of the year to 30 September 2014.

Gross written premiums were broadly stable at £1,361.3 million (2013: £1,370.5 million) as a disciplined approach in reinsurance is offset by steady growth in insurance lines.

Bronek Masojada, Chief Executive, commented: “Long term investment in our brand and in building our retail business has paid off as we continue to grow particularly in USA, London Market and Europe, while we sensibly reduce our catastrophe reinsurance book.”

Gross Written Premiums for the period:

  Gross Written Premiums to
30 September 2014
Gross Written Premiums to
30 September  2013
Growth in local Currency Growth in Sterling
US$/€m £m US$/€m £m % %
Hiscox Retail            
 - Hiscox UK   £324.0   £312.8 3.8% 3.6%
 - Hiscox Europe €153.1 £125.3 €140.7 £117.4 8.8% 6.7%
 - Hiscox Guernsey US$82.3 £49.2 US$84.4 £54.6 -2.5% -9.9%
 - Hiscox USA US$274.5 £164.5 US$220.3 £142.2 24.6% 15.7%
 - DirectAsia   £9.2        
Hiscox London Market   £364.2   £352.2 9.2% 3.4%
Hiscox Re US$543.0 £324.9 US$615.6 £391.3 -11.8% -17.0%
Total   £1,361.3   £1,370.5 3.8% -0.7%

Rates
We are experiencing the same environment as everyone else in reinsurance; our portfolio is down 15% in USA and down 10% in international business. The contagion has only spread into insurance on big ticket property and energy lines. In other insurance lines, rates remain fairly flat with reasonable margins. We will walk away from business where rates and conditions are unhealthy.

Investments
The investment return to 30 September 2014 was +1.3% (+1.7% annualised). Short term bond yields in the US and UK were little changed in the three months since June. Euro yields however declined as the ECB announced various measures in response to the growing threat of deflation in the region. Our bond portfolios therefore delivered a small positive return during the third quarter as did our portfolio of risk assets despite the volatility that set in towards the end of the period. Invested assets at the end of September totalled £3.2 billion and asset allocation remains largely unchanged from the end of June.

Market sentiment in October has seen yields across many government bond markets move lower and has delayed investor expectation of the timing and pace of rate rises in the US and the UK. It is also likely that further bouts of volatility will be an ongoing feature. We remain invested in the higher credit quality and relatively liquid areas of the bond market and as a result continue to expect our bond portfolios to produce modest returns in the near future. We still favour equities as an area of reasonable value and to that end an additional small allocation was made in mid October.

Claims
It has been a good year for claims across the Group - a combination of good underwriting and a benign environment. As reported earlier in the year Hiscox has very manageable exposure to the UK floods and storms, the summer storms in Europe and the tragic aviation losses affecting the market. Hiscox has no material exposure to the April tornadoes in the US or the Napa Earthquake, however we had a net loss of $11 million from Hurricane Odile which hit the Mexican peninsula in September.

Capital
In line with our standard practice, we will review our position on capital when the result for the year is known.

Hiscox Retail

Hiscox UK
Hiscox UK increased gross written premiums by 3.6% to £324.0 million (2013: £312.8 million) where discipline in certain lines is masking stronger growth in our core UK lines.

Growth is being driven by professions and specialty commercial lines, with all UK regions performing well.

Phase one of our new core underwriting and claims system launched successfully with direct home insurance. Hiscox UK returned to TV last month with a home advert that will be supported by a cinema, print and poster campaign aimed at driving brand affinity in target areas such as London and the South East.

During the period we launched a series of new and refreshed products including home and contents, personal accident, cyber and data risks - the result of a sustained focus on product innovation.

The Government is implementing changes to Pool Re, the UK terrorism reinsurance company funded by insurers and underpinned by a Government loan in the event of extremely large losses. Pool Re has been very successful in delivering certainty for the UK over the last 20 years, and the fund has built a substantial safety net the UK public can draw upon in the event of a terrorist attack. We are disappointed by the Government’s haste and lack of consultation in imposing new terms.

Hiscox Europe
Hiscox Europe grew gross written premiums by 8.8% to €153.1 million (2013: €140.7 million).

Our European operations have performed well, benefiting from a focused business plan and improving expense management. Our multi-lingual, pan-European shared service centre in Lisbon continues to grow and deliver efficiencies.

In Germany we are seeing strong demand for our technology product. Spain’s focus on partnerships with banks and other financial service providers to improve distribution is also delivering good growth.

Hiscox Guernsey
Hiscox Guernsey reduced premium income by 2.5% to US$82.3 million (2013: US$84.4 million).

Despite competition, Hiscox Guernsey continues to perform well and is maintaining market share as clients value our expertise and relationship with security provider Control Risks.

Hiscox USA
Hiscox USA continues its good performance, increasing premium income by 24.6% to US$274.5 million (2013: US$220.3 million).

The professions products are a key area of growth, particularly in allied healthcare and technology. We are seeing increased demand for our crime product and are developing new opportunities here. Commercial property continues to be under pressure, and we remain disciplined in this area.

The direct to small business offering continues to do well with 75,000 policies now in force.

Hiscox USA will roll out Hiscox Pro in Q4, a new overarching name for our suite of professions products. Hiscox Pro will give us a broader focus on liability products for the admitted market, with the aim to increase significantly distribution in this important market.

Hiscox USA launched a brand building campaign in October under the theme of Encourage Courage which aims to differentiate Hiscox as an insurer that understands the challenges of building businesses and the value in taking risk.

DirectAsia
This newly acquired insurer in Asia is meeting our expectations, growing premium income to £9.2 million.

Our investment in marketing is well underway and in time will differentiate the business in a market where agent based channels with high distribution costs dominate.

Hiscox London Market
Hiscox London Market grew premium income by 3.4% (9.2% in local currency) to £364.2 million (2013: £352.2 million).

Our investment in casualty business is delivering double-digit premium income growth, as we find good opportunities despite flat rates. In specialty lines we have seen growth of 6%. Our energy team is finding good opportunities despite pressure on rates.

In property lines, the picture is mixed. Big ticket business remains challenged and renewals competitive, so we are exercising caution in this space. Healthy rates within our binding authority business are pleasing and we are growing here.

Despite numerous industry losses, rates in aviation remain broadly flat. In aviation war however, we are seeing large rate increases and we are writing more business as a result.

We’ve bound our first risks under the Willis Global 360 facility. The process is running smoothly and we look forward to doing more business like this while maintaining our underwriting integrity.

Hiscox Re
Hiscox Re reduced premium income by 11.8% to US$543.0 million (2013: US$615.6 million), as the team continues its disciplined response to falling rates after increased competition and a benign period for catastrophes.

Successful product innovation is differentiating Hiscox in this soft market and bringing business back into the market. The team is getting a good response from products like RAP (Risk Aggregate Protection) and SECAT (Second Event Cat with Aggregate Trigger) which aim to provide clients with a tailored more responsive approach.

In healthcare and casualty reinsurance where rates are healthy, business is growing well. The team is responding to client needs with innovative products, recently launching Ebola Liability Wrap for the US Healthcare Industry, which aims to close gaps in cover clients may have.

We continue to make good progress with our Insurance Linked Securities (ILS) strategy.

ENDS

For further information:

Hiscox Ltd  
Jeremy Pinchin, Company Secretary +1 441 278 8300
Kylie O’Connor, Head of Communications +44 (0) 207 448 6656
Brunswick  
Tom Burns +44 (0)20 7404 5959

Notes to editors

About Hiscox
Hiscox, the international specialist insurer, is headquartered in Bermuda and listed on the London Stock Exchange (LSE:HSX). There are three main underwriting divisions in the Group - Hiscox Retail (which includes Hiscox UK and Europe, Hiscox Guernsey, Hiscox USA and subsidiary brand, DirectAsia), Hiscox London Market and Hiscox Re. Through its retail businesses in the UK, Europe and the US Hiscox offers a range of specialist insurance for professionals and business customers, as well as homeowners. Hiscox underwrites internationally traded, bigger ticket business and reinsurance through Hiscox London Market and Hiscox Re.

For further information, visit www.hiscoxgroup.com.

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