Hamilton, Bermuda (2 November 2021) – Hiscox Ltd (LSE:HSX), the international specialist insurer, today issues its trading statement for the first nine months of the year to 30 September 2021.
Highlights:
- Group gross premiums written up 6.1% to $3,462.9 million, as strong rate momentum continues across all business segments.
- Hiscox Retail gross premiums written up 5.9% (1.4% in constant currency). The Retail go-forward portfolio grew by 5.7% on a constant currency basis, after planned reductions in sections of the US broker channel.
- Within Hiscox Retail there was continued strong growth in Digital Partnerships and Direct (DPD) business with gross premiums written up 19.3% (15.8% in constant currency). US DPD continues to perform particularly strongly, growing 26.6% to $326.9 million.
- Retail combined ratio is progressing in line with expectations.
- Hiscox London Market continues to benefit from aggregate rate increases across the portfolio, with gross premiums written up 7.2%.
- Improved rate outlook for January renewals in Hiscox Re & ILS following elevated natural catastrophe losses in the third quarter. Net premiums written grew 46.0%.
- Investment result of $62.7 million (1.2% annualised return), as mark-to-market losses on our bond portfolio from rising interest rate expectations largely offset interest income received during the quarter.
- $110 million net reserved for Hurricane Ida based on an insured market loss of $35 billion and $40 million net for European floods based on an insured market loss of $9 billion.
- Non-catastrophe loss experience across the Group remains favourable.
- The Group’s net Covid-19 loss estimate remains unchanged at $475 million for 2020 and $17 million for lockdowns announced in 2021.
Bronek Masojada, Group Chief Executive Officer, commented:
“Hiscox London Market and Re & ILS are performing strongly and we continue to benefit from excellent growth in our Retail digital business. Our capital position is robust. As I make my last quarterly trading statement as CEO of Hiscox it is pleasing to see the business in such good shape.”
Gross premiums written for the period:
|
|
Gross premiums written to 30 September 2021 |
Gross premiums written to 30 September 2020* |
Growth in USD |
Growth in constant currency |
|
|
US$m |
US$m |
% |
% |
|
Hiscox Retail |
1,756.4 |
1,659.2 |
5.9 |
1.4 |
|
Hiscox London Market |
900.0 |
839.6 |
7.2 |
5.7 |
|
Hiscox Re & ILS |
806.5 |
763.6 |
5.6 |
2.0 |
|
Total |
3,462.9 |
3,262.4 |
6.1 |
2.6 |
*2020 gross premiums written have been represented to reflect reclassification of the Special Risks division.
Rates
Rate momentum continues to be favourable across all Hiscox businesses. Hiscox London Market achieved aggregate rate increases of 13% across the portfolio, with cyber growing at a significant double digit rate. In other lines, such as D&O, general liability and major property, rates remain double digit albeit momentum is slowing.
In Hiscox Re & ILS rates were up 8% on average. At mid-year we expected rate increases in the reinsurance business to moderate due to the abundance of capital and continued interest in the sector. However, European floods in July and Hurricane Ida’s landfall in August are once again a useful reminder of loss costs borne by property catastrophe reinsurers. Hiscox Re & ILS will continue to be disciplined in the market to ensure business is rated to make a sustainable profit.
In Hiscox Retail, rates are rising across all regions. In Hiscox UK rates were up 7.5%, which is ahead of our claims inflation expectations and with the strongest momentum in contingency, cyber and traditional professional indemnity lines. In Hiscox Europe rates were up 4%, largely driven by cyber and traditional professional indemnity business. In Hiscox USA rates increased 6% on average, predominantly driven by the broker channel. This is broadly in line with our claims inflation expectations in the market.
Claims
We have been working closely with customers and brokers in the UK to pay business interruption claims as quickly as possible. As of 30 September 2021, we have made final or interim payments to 5,153 insured claimants, a 60% increase on 30 July 2021, and we expect to maintain the current claim settlement momentum in the fourth quarter. Whilst claims frequency is higher than estimated, the severity is lower, resulting in business interruption claims in aggregate continuing to settle within the actuarial best estimate.
Given the claims settlement patterns and reinsurance recoveries the Group’s net Covid-19 loss estimate remains prudent and unchanged at $475 million for 2020 and $17 million for new lockdowns in 2021.The UK business interruption book has now been fully renewed with the appropriate pandemic exclusion terms. We have maintained continuous and transparent dialogue with our reinsurance panel throughout this period and the reinsurance recoveries are now being made.
The market has seen an active wind season in the third quarter. The Group has reserved $110 million net including reinstatement premiums for Hurricane Ida, based on an insured market loss of $35 billion. Hurricane Ida is the sixth costliest US landfalling Hurricane in history and the majority of our exposure is in big-ticket lines: $52 million net in London Market, $50 million net in Re & ILS, with Retail incurring a modest net loss of $8 million. In addition, the Group has reserved $40 million net including reinstatement premiums for European floods based on an insured market loss of $9 billion. Our Retail businesses benefits from reinsurance which contains the net loss to $20 million for Europe and the UK. The remaining $20 million net is in the Re & ILS business, mostly through our retrocession book, a modest impact in line with our underweight exposure to Europe.
Non-catastrophe experience across the Group remains positive, with claims frequency in many lines lower than expected. Increases in construction material and labour costs and the ongoing concern regarding casualty social inflation are making claims inflation a frequently discussed matter. While economic inflation has increased, we believe rates are being achieved in excess of inflation expectations across the majority of the business. In addition we are taking pre-emptive actions across the portfolios to ensure adequate sums insured to cover the inflationary impact on rebuild costs. We have also taken a more prudent view in our claims inflation assumptions across all of our portfolios.
Investments
The investment result for the first nine months of 2021 was $62.7 million (2020: $129.9 million), or 1.2% on an annualised basis (2020: 2.5%). This is largely unchanged since the six months to 30 June 2021, as mark-to-market losses on our bond portfolio from rising interest rate expectations offset interest income received over the quarter. Assets under management at 30 September 2021 were $7.4 billion (2020: $7.6 billion).
Earlier in 2021, bond market fears of inflation were calmed by reassurance from central banks that pressures were temporary. Markets are now less certain that price rises will be short lived and are again focused on the scaling back of asset purchases by policymakers and the potential for interest rates to rise faster than initially expected.
The third quarter ended more cautiously, with equity markets taking a breath and government bond yields moving back towards the highs seen earlier in the year. The current yield to maturity on the bond portfolio increased above 0.6%. The potential for interest rises earlier than initially thought may result in further mark to market losses in the fourth quarter, albeit improving future reinvestment opportunities.
Hiscox Retail
Hiscox Retail delivered performance in line with our expectations and previous guidance.
Gross premiums written grew by 5.9% to $1,756.4 million (2020: $1,659.2 million), or 1.4% in constant currency. This reflects good growth in Europe, a resilient performance in the UK and the expected slight decline in the USA, where the execution of the US broker channel course correction actions was partially offset by growth in US digital partnerships and direct business. We are now three quarters of the way through the $100 million US broker gross premium reduction programme. Adjusting for this, the Retail go-forward portfolio grew by 5.7% on a constant currency basis.
With a focus on small, micro and nano businesses, our digital partnerships and direct operations grew gross premiums written by 19.3% during the period, or 15.8% on a constant currency basis. This continued growth is underpinned by the large structural opportunity across our key markets and is benefitting from the Group’s multi-year investments in technology and marketing. Over a half of the Group’s direct and partnerships premiums now come from the US, where top line growth continues to be particularly strong at 26.6%.
Gross premiums written for the period:
|
|
Gross premiums written to 30 September 2021 |
Gross Premiums written to 30 September 2020* |
Growth in USD |
Growth in constant currency |
Growth in constant currency adjusting for US course correction |
||
|
|
£m/€m |
US$m |
£m/€m |
US$m |
% |
% |
% |
|
Hiscox Retail Hiscox UK Hiscox Europe |
£448.4 €355.9 |
$619.0 $428.2 |
£443.6 €325.8 |
$565.2 $364.9 |
9.5 17.4
|
1.3 9.4 |
|
|
Hiscox USA Hiscox Asia |
|
$674.1 $35.1 |
|
$693.3 $35.8 |
(2.8) (2.2) |
(2.8) (2.6) |
8.1
|
|
Hiscox Retail total |
|
$1,756.4 |
|
$1,659.2 |
5.9 |
1.4 |
5.7 |
*2020 gross premiums written have been represented to reflect reclassification of the Special Risks division.
Hiscox UK
Hiscox UK delivered a resilient performance in the first nine months of the year with gross premiums written growing 1.3% in constant currency to $619.0 million (2020: $565.2 million). We added 34,000 customers this year, mainly through new schemes business and good customer retention rates. This is despite the fact that the fine art and specialty lines continued to be impacted by the effects of Covid-19 in the earlier part of the year and have not yet returned to pre-pandemic levels.
Hiscox UK has benefitted from good growth in core commercial lines driven by premium persistency and rate increases. Across the book, rates were up 7.5% with material rate increases in five consecutive quarters and the positive momentum is being maintained. Rate impact is moderated in premium growth as we continue to take underwriting actions to further improve the quality of the book and increasingly focus on well-rated smaller average premium business. As the UK has started to open up, we resumed a UK brand campaign, including both outdoor advertising and a fully refreshed digital marketing strategy.
Hiscox Europe
Hiscox Europe delivered another strong top line performance, growing gross premiums written by 9.4% in constant currency to $428.2 million (2020: $364.9 million). Rates are up 4% and we expect this trend to continue in 2022, with cyber seeing the largest increases.
Hiscox Germany, our largest business in Europe, achieved top line growth of 12.6% in constant currency, with a strong performance in both personal and commercial lines. Hiscox France, our second largest European business, is growing gross premiums written by 2.4% despite the impact of continuing course correction actions and reduced appetite in cyber. Hiscox Benelux grew top line by 16.8% in constant currency, with strong performance in both Belgium and the Netherlands. Iberia grew gross premiums written by 15.7% in constant currency, driven primarily by broker channel and a very healthy pipeline in partnerships. Ireland’s performance is in line with prior period, as the business continues to undertake course correction.
The roll out of the new core technology is progressing well in Germany and France and we continue to enhance our data infrastructure to drive more sophisticated underwriting and pricing.
Hiscox USA
Hiscox USA saw gross premiums written decline 2.8% to $674.1 million (2020: $693.3 million). This is in line with our expectations and previous guidance, as a result of planned reductions in our US broker channel to reshape the business towards customers with revenues under $100 million and in particular those under $25 million. We have now exited approximately $75 million of large cyber, stand-alone general liability and other broker channel business which is no longer within our appetite. These actions were partially off-set by rate strengthening of 10% in our core broker channel. Excluding the effect of the course correction actions, Hiscox USA go-forward portfolio grew by 8.1%.
Our US digital partnerships and direct business continues to deliver excellent performance, with top line growing 26.6% to $326.9 million, on track to exceed $400 million by the end of the year. This channel is benefitting from a rebound in the US economy and an increased demand for digital solutions which has been accelerated by the pandemic. We have added around 20,000 customers in the third quarter with approximately 510,000 now insured. We are also expanding our customer reach through new partnerships. In August Hiscox joined a small network of insurance providers selected by Amazon to provide general liability insurance for businesses selling in Amazon’s marketplace through our existing platform integrations with Bold Penguin and Simply Business.
The roll out of new core technology in the US is in its final stage, as it benefits from the Group’s capital investment strategy. The new platform will widen our footprint and will increase agility by enhancing the digital experience for agents and customers as well as through to product and underwriting changes.
Following the appointment of Kevin Kerridge as Hiscox USA CEO in May 2021, we continue to add to our executive bench strength. On 1st November, Jerry Cox was appointed as Chief Financial Officer of Hiscox USA. Prior to joining Hiscox, Jerry spent 22 years at Hartford, covering a number of divisional CFO roles in casualty insurance.
Hiscox Asia
Our operations in Asia, DirectAsia, saw gross premiums written decline 2.6% in constant currency to $35.1 million (2020: $35.8 million) due to a highly competitive trading environment and the ongoing impact of Covid-19 related restrictions. Disciplined underwriting and pricing as well as lower claims frequency during Covid-19 lockdowns are driving an improved underwriting result, with a new brand-building campaign planned for the fourth quarter.
Hiscox London Market
Hiscox London Market continued to perform well, growing gross premiums written by 7.2% to $900.0 million (2020: $839.6 million), helped by double digit rate growth in 10 out of 17 lines, most notably in cyber. The strong performance in the third quarter was driven predominantly by our casualty and crisis management lines.
We continue to invest in our electronic trading platforms. Our residential and commercial BindPlus and FloodPlus products all gained traction in the third quarter and we continue to look for new opportunities to access profitable business which may not otherwise be written in London.
Third quarter underwriting performance has been impacted by Hurricane Ida, particularly in our upstream energy account and property business. In contrast non-catastrophe experience in London Market has continued to be favourable, consequently the London Market result remains strong.
In August Helen Rose was appointed as Chief Financial Officer of Hiscox London Market and Hiscox Syndicates Limited, effective from February 2022. With more than a decade in the insurance industry, Helen held a number of roles with Aspen Group, including Insurance CFO, UK CFO and most recently Chief Accounting Officer.
Hiscox Re & ILS
In Hiscox Re & ILS, gross premiums written increased by 5.6% to $806.5 million (2020: $763.6 million), as course correction actions, selective cyber appetite and less capacity deployed on behalf of others continued to impact the top line. Excluding reinstatement premiums, mainly as a result of the Winter Storm Uri, Hurricane Ida and European floods, premiums are down by 2.5%. However, net premiums written grew by 46.0% as we retained more risk on the balance sheet to take advantage of the favourable rating environment and reassessed our mix of quota share and excess of loss reinsurance.
Portfolio rate increases and good growth in our North America property book partially off-set underwriting action taken in specialty lines of wildfire and a reduction in retrocession opportunity.
The underwriting result for Hiscox Re & ILS business has been affected by the elevated natural catastrophe losses in 2021, including the previously reported $33 million net loss from Winter Storm Uri, $50 million net loss from Hurricane Ida and $20 million net loss from European floods, all including reinstatement premiums. Non-property catastrophe experience and prior year reserve development remains favourable leading to a robust result at the end of the third quarter.
With the reinsurance account now largely written for 2021, attention turns to the upcoming January renewals and we expect a necessary further rate hardening as the market responds to its fifth year of elevated natural catastrophe losses.
Capital management
The Group remains well capitalised with flexibility to maintain a prudent balance sheet and invest in long-term structural growth opportunities, as well as shorter term favourable market conditions.
ENDS
For further information
Investors and analysts
Yana O’Sullivan, Group Head of Investor Relations, London +44 (0)20 3321 5598
Marc Wetherhill, Group Company Secretary, Bermuda +1 441 278 8300
Media
Kylie O’Connor, Director of Communications, London +44 (0)20 7448 6656
Tom Burns, Brunswick +44 (0)20 7404 5959
Simone Selzer, Brunswick +44 (0)20 7404 5959
Notes to editors
About The Hiscox Group
Hiscox is a global specialist insurer, headquartered in Bermuda and listed on the London Stock Exchange (LSE:HSX). Our ambition is to be a respected specialist insurer with a diverse portfolio by product and geography. We believe that building balance between catastrophe-exposed business and less volatile local specialty business gives us opportunities for profitable growth throughout the insurance cycle.
The Hiscox Group employs over 3,000 people in 14 countries, and has customers worldwide. Through the retail businesses in the UK, Europe, Asia and the USA, we offer a range of specialist insurance for professionals and business customers as well as homeowners. Internationally traded, bigger ticket business and reinsurance is underwritten through Hiscox London Market and Hiscox Re & ILS.
Our values define our business, with a focus on people, courage, ownership and integrity. We pride ourselves on being true to our word and our award-winning claims service is testament to that. For more information, visit www.hiscoxgroup.com.
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