Interim results for the six months ended 30 June 2015

27 July 2015

"An excellent start"

  H1 2015 H1 2014
Gross premiums written £1,096.3m £978.9m
Net premiums earned £709.8m £643.5m
Profit before tax £135.1m £124.6m
Earnings per share 43.7p 36.4p
Interim dividend per share 8.0p 7.5p
Net asset value per share 505.5p 425.6p
Group combined ratio 82.5% 82.0%
Return on equity (annualised) 19.9% 18.9%
Investment return (annualised) 1.8% 2.0%
Reserve releases £122.6m £90.0m
Foreign exchange impact £(15.7)m £(16.4)m


  • Hiscox Retail delivered record profits of £59.3 million (2014: £37.4 million)
  • Strong growth in Hiscox London Market and Hiscox USA improves capital utilisation
  • Hiscox Re benefits from product innovation and an absence of catastrophes to deliver excellent profits of £59.6 million (2014: £75.6 million)

Bronek Masojada, Chief Executive Officer, Hiscox Ltd, commented

"We are reaping the benefits of our growing retail specialty businesses in the UK, Europe and the USA. Although conditions for reinsurance and big ticket insurance remain tough, our teams have demonstrated their creativity and determination to succeed. Hiscox has the brand, distribution and talent for a bright future."



Jeremy Pinchin, Company Secretary, Bermuda
Kylie O'Connor, Head of Communications, London
+1 441 278 8300
+44 (0) 20 7448 6656
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.

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Chairman's statement

Hiscox delivered a pleasing profit of £135.1 million in the first half, thanks to a combination of sound underwriting, the growing strength of our retail operations, and a paucity of major catastrophes. The top line was up by 12.0% (2014: - 3.8%) driven mainly by opportunities in the London Market business and a continued good performance from Hiscox USA. As usual, we are reporting on the cusp of the hurricane season and Mother Nature can still deliver some surprises in the second half.

Strong results across the industry mask what we regard as a market that is defying gravity, as pension funds and others pour capital in, fuelling further competition in big-ticket insurance and reinsurance. Rating levels are being gnawed away, yet attritional losses remain constant, and thus underlying loss ratios are creeping up. The market's profitability is being propped up by a lack of meaningful catastrophe losses.

Hiscox is well placed to deal with any challenges that lie ahead. Our strategy remains unchanged, balancing volatile big-ticket business with more stable specialty retail lines. It provides us with opportunities regardless of prevailing conditions, and we see plenty of room for further expansion in our chosen markets.


The half-year result to 30 June 2015 was a very good pre-tax profit of £135.1 million (2014: £124.6 million). Gross written premiums increased to £1,096.3 million (2014: £978.9 million). Net earned premiums were £709.8 million (2014: £643.5 million). The impact of foreign exchange was relatively constant at a loss of £15.7 million (2014: loss of £16.4 million). The net combined ratio was a healthy 82.5% (2014: 82.0%). Earnings per share were 43.7p (2014: 36.4p) and net assets per share grew to 505.5p (2014: 425.6p). The annualised return on equity was 19.9% (2014: 18.9%).

Dividend, balance sheet and capital management

The Board of Hiscox Ltd has declared an interim dividend for 2015 of 8.0p per share (2014: 7.5p) an increase of 6.7%. The record date for the dividend will be 7 August and the payment date will be 16 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. A circular with further details will be sent on 10 August.

During the period the Group returned capital via a special distribution of £192 million (60p per share), including a final dividend equivalent of £48 million (15p per share). Net asset value per share has increased by 9.3% from the year end.

At this stage in the year it is too early to anticipate capital returns as the hurricane season has just started and earthquakes can happen at any time. In addition, the impact of Solvency II, continued desire to invest in the brand, and ongoing growth, especially in more long-tail casualty business means that our capital requirements are increasing. These will all affect our assessment of what constitutes excess capital at the end of the year.


Rating levels in insurance lines are still satisfactory across many territories and products, although we are seeing a downward trend in some lines such as property, marine and energy.

Trading conditions in reinsurance remain tough, though there are signs that rates are now finding their floor. Rates for US property catastrophe business were down on average by 10% at the 1 June and 1 July renewals. International property catastrophe business was down by 10% at the July renewals. In our retrocession book we saw increases of between 5% and 20% on mid-year renewals, as demand outstripped supply. Other non-catastrophe exposed lines of business saw more modest reductions.

Hiscox Retail

The Hiscox Retail segment comprises Hiscox UK and Europe, and Hiscox International.

Hiscox UK and Europe

This division provides personal lines cover – from high-value household, fine art and collectibles to luxury motor – and commercial insurance for small and medium sized businesses, typically operating in white collar industries. These products are distributed via brokers and through a growing network of partnerships. For some simple risks we distribute policies direct-to-consumer in the UK, France and Germany.

Gross written premiums £318.2 million (2014: £309.4 million)
Profit before tax £45.4 million (2014: £26.3 million)
Combined ratio 87.0% (2014: 92.9%)

Hiscox UK and Europe delivered another good result helped by a very quiet period for claims. Weather conditions have been mostly perfect for insurers – not too wet, not too cold nor too dry.

After a period of strong investment, these businesses are finding efficiencies in underwriting practices – delivering electronic trading solutions to our brokers and partners and finding ways to automate the simple risks, leaving underwriters to focus on complex risks where they add more value to customers.

Hiscox UK and Ireland

Premium income grew by 5.2% to £223.6 million (2014: £212.6 million). The regional network of offices across the UK continues to perform very well, producing good growth particularly in commercial lines. Excellent business retention of 86% is also driving profitability.

In personal lines, the luxury motor area has benefited from improvements to customer segmentation, pricing and claims handling. Building on our ambition to be a top specialist car insurer in the UK, we recently announced that we have reached an agreement with Willis to acquire its specialist UK classic car business, RH Specialist Insurance. This acquisition will provide us with new opportunities to distribute our existing products to members of prestigious vehicle clubs.

We continue to invest heavily in marketing as we see real value in building a strong brand, which has driven growth in our direct-to-consumer small business operation by 16%.

The project to insource the customer sales and service function for our direct commercial business is nearly complete with our team in York now taking over 97% of calls. I am pleased that customer satisfaction scores remained at world-class levels throughout the transition.

Hiscox was awarded ‘personal lines claims initiative of the year' at the Insurance Times' Claims Excellence Awards 2015, recognition of our team's effort to create customers for life, through which we have improved customer satisfaction from 95% to 98%.

Hiscox Europe

Gross written premiums in local currency grew by 8.1% to €125.9 million (2014: €116.5 million) and decreased by 2.3% to £94.6 million (2014: £96.8 million) in Sterling. Growth was mainly driven by our businesses in the Benelux, Germany and Spain, with contributions from all product lines. Adverse foreign exchange movements also impacted profits but, like other territories, the business benefited from modest claims activity and has delivered good profitability.

Hiscox Europe is building on successes in the UK market by extending the specialty commercial product in France and Germany to include a wider range of property and liability risks. This is our largest business line within Hiscox UK and Ireland, and we are replicating this success in Europe. We have also increased our appetite for schemes business, where we work with brokers to offer insurance solutions to customers with similar risk profiles. These initiatives are receiving very positive feedback from brokers, and we are looking at other ways to share products and knowledge across the Group.

The small business cyber and data risks product launched in the UK and across Germany, France and the Netherlands is gaining momentum as the markets gradually evolve from expressions of interest to preparedness to buy.

Fine art continues to perform very well and our private client business has recovered historical growth rates.

Building quality specialty retail businesses takes time, continued investment and a lot of local knowledge. In 2015, we are celebrating the 20th anniversary of our French and German businesses, which are now significant contributors to profit and income for the Group.

Hiscox International

This division comprises Hiscox Guernsey, Hiscox USA and DirectAsia.

Gross written premiums £183.9 million (2014: £146.4 million)
Profit before tax £13.9 million (2014: £11.1 million)
Combined ratio 92.9% (2014: 92.1%)

Hiscox Guernsey – Hiscox Special Risks

Hiscox Special Risks underwrites kidnap and ransom, personal accident, classic car, jewellery and fine art risks. Led from Guernsey, Hiscox Special Risks has teams in London, Munich, Paris, New York, Los Angeles and Miami.

Despite the competitive market, Guernsey continues to perform well with gross written premiums increasing to £36.3 million (2014: £34.0 million). We are maintaining our market share in the increasingly competitive kidnap and ransom business, where clients benefit from our expertise and exclusive relationship with Control Risks.

Hiscox USA

Hiscox USA underwrites the small-to-mid market commercial risks through brokers, other insurers and directly to businesses online and over the telephone.

Hiscox USA has built on the success of last year, increasing premiums by 28.2% to £138.1 million (2014: £107.8 million), 16.9% in local currency, despite the impact of withdrawing from unprofitable construction property business in 2014. Hiscox USA also benefited from a continued good claims experience. The professions business, which includes E&O (errors and omissions) and general liability cover, did extremely well, more than offsetting reductions in lines where rates are under pressure, such as commercial property.

The USA team continues to add new specialist business to the Hiscox Pro portfolio. This range of E&O solutions designed for emerging industries has now expanded to include security and staffing services, and testing labs.

Ongoing investment in building the Hiscox brand in the US, including the Courageous Leaders documentaries and continued thought leadership is delivering results, with our direct-to-consumer policies now numbering 100,000.


DirectAsia is a direct-to-consumer business in Singapore, Hong Kong and Thailand that sells motor insurance with ancillary lines in travel, healthcare and life. Hiscox acquired the business in April 2014.

DirectAsia continues to perform in line with our expectations, growing its premium income to £9.5 million. The business is making good progress across all markets, with revised marketing activities helping to drive record sales.

Hiscox London Market

This segment uses the global licences, distribution network and credit rating available through Lloyd's to insure clients throughout the world.

Gross written premiums £306.4 million (2014: £251.7 million)
Profit before tax £23.4 million (2014: £24.8 million)
Combined ratio 89.8% (2014: 87.2%)

Hiscox London Market had an excellent start to the year despite fierce competition in many lines. Good growth of 21.7% (13.6% in local currency) was achieved despite the team walking away from poorly rated business. Growth was mainly driven by our support for the Willis 360 facility, our auto physical damage business where rates continue to rise, and business generated by our new teams in personal accident and casualty.

Hiscox London Market had a better claims experience in this half, despite losses in aviation and space, two moderate energy losses, and potential claims arising from political unrest in the Ukraine which we have reserved at net £20 million. We also significantly reduced the price and improved the efficiency of our outwards reinsurance programme.

Our relationship with White Oak, a specialist automotive and equipment underwriting agency, continues to grow.

Disruption in the market caused by frenetic merger and acquisitions activity has given us the opportunity to attract high quality people. We have boosted our expertise in three lines where we see potential for prudent profitable growth: general liability, product recall and marine cargo.

Small bolt-on acquisitions that complement our existing expertise and strengthen our distribution capability are an important area of potential growth for the Group. During the period, we acquired R&Q Marine Services (RQMS) for £9 million, an established managing general agent (which also underwrites on behalf of other insurers). RQMS specialises in yachts and general marine leisure insurance and we will continue to combine their knowledge with our distribution and marketing capabilities to serve more customers in our target segments. RQMS will form the core of a new managing agency business, which will underwrite on behalf of other capital providers as well as Hiscox.

Hiscox Re

The Hiscox Re segment comprises the Group's reinsurance businesses in London, Paris and Bermuda, Insurance Linked Security (ILS) activity and healthcare business.

Gross written premiums £287.8 million (2014: £271.5 million)
Profit before tax £59.6 million (2014: £75.6 million)
Combined ratio 45.5% (2014: 41.8%)

Gross written premiums for Hiscox Re increased by 6.0%, as we successfully developed business for our third party ILS partners in our Kiskadee funds. Healthcare and specialty lines continue to grow steadily. Hiscox Re continues to benefit from the lack of major catastrophes, and had minimal exposure to Cyclone Marcia and the severe weather that hit Texas in April and May.

Our focus on product innovation has paid dividends, as brokers and cedants appreciate our efforts to address their more complex needs. The release of 12 new products over the past 18 months has added $50 million in gross written premiums.

As of 1 July our Kiskadee family of insurance linked funds has attracted over $540 million in capital, up from $400 million anticipated at 1 January 2015, and during this period Kiskadee wrote gross written premiums of $87 million.


Uncertainty and low yields continue to be a feature of financial markets. With our conservative bond portfolio and an exposure to equity markets the investment performance for the first six months has been in line with expectations. Following the £192 million return of capital to shareholders in April, and excluding the Kiskadee Funds, assets under management at 30 June 2015 were £3,032 million (2014: £2,965 million) and our investment result, before derivatives, was £27.9 million (2014: £30.1 million), 1.8% on an annualised basis (2014: 2.0%).

After a positive start to the year, on the back of the ECB's quantitative easing programme, the investment background was less supportive in the second quarter and was particularly challenging for bond investors. We were largely protected by our cautious stance on duration but the gains from our fixed income portfolios were modest, being reliant mostly on the extra yield from non-government bonds. The result was however supplemented by a useful contribution from our risk assets portfolio, which despite the setbacks in June delivered good returns.

With the Federal Reserve and, latterly, the Bank of England paving the way for official rate increases, we continue to position the bond portfolios with a view to minimising the impact of rising yields. We expect that such a move will be accompanied by a pick-up in volatility but remain comfortable with our allocation to risk assets which now represent 9% of the overall portfolio.

Regulatory response to market events

Although in our industry we regularly model the impact of a wide range of serious catastrophes, we fully support the Prudential Regulation Authority's (PRA) new stress test to show how insurers would cope in the event of a range of extreme scenarios. However, I feel this does not go far enough, and that there needs to be a detailed practical ‘dry run' of how a serious catastrophe may play out involving all London Market players, including our supervisors at the PRA and Lloyd's.

It is nearly 14 years since the September 11 attacks, and I think it is more important than ever to test how our market would handle another major calamity. Much has changed since 2001 – both within our business and wider society – and our regulatory framework is in the process of fundamental change. Mega-catastrophes create huge disruption and panic, but supervisors gave us the green light to trade through the aftermath of 9/11, despite the widespread uncertainty. Their pragmatism enabled us to keep the wheels of global business turning. However, with Solvency II, a new regulator in the PRA (with a different remit from its predecessor), and a prevailing mood of suspicion and skepticism towards the financial services industry, I'm unsure whether this pragmatic approach will exist next time round.

Running such a simulation would, in my opinion, help to reassure regulators (and ratings agencies) that our market could withstand a shock loss giving them the confidence to allow us to perform our primary role, which is to deal with the fallout from catastrophes. The London Market needs to act boldly in a major crisis, to provide clients with risk capital when they need it most, if it is to fulfill its role as the world's specialty insurance centre.


We expect the current tough conditions to continue for our big-ticket insurance and reinsurance businesses into 2016. The importance of balancing our desire to grow in these areas with managing our exposure (particularly when prices are close to walk-away levels) remains crucial. Our teams in Bermuda and the London Market have shown good discipline, dexterity and creativity thus far and I believe have the energy and strong relationships to succeed in the future.

The balance and diversity of our business, has long been a key driver of the Group's profitability. Our retail businesses have plenty of room for profitable growth, and will continue to find new opportunities where others find the conditions more challenging. Hiscox has excellent people, a restless spirit and a strong independent future.

Robert Childs
27 July 2015

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