TIDMHSX
RNS Number : 7034S
Hiscox Ltd
08 November 2023
Hiscox Ltd trading statement
Hamilton, Bermuda (8 November 2023) - Hiscox Ltd (LSE:HSX), the
international specialist insurer, today issues its trading
statement for the first nine months of the year to 30 September
2023 .
Highlights:
-- Group insurance contract written premiums (ICWP) increased by
6.8% in constant currency to $3,759.4 million (Q3 2022: $3,563.4
million), as the Group continues to deploy capital in London Market
and Re & ILS and build scale in Retail to drive profitable
growth across the Group.
-- Net Group ICWP increased by 11.0%, driven by the acceleration
of net growth in Re & ILS to 23.6% and in London Market to
18.1%, reflecting our cycle management and capital deployment
strategy to maximise potential earnings.
-- Hiscox Retail ICWP of $1,836.4 million (Q3 2022: $1,769.4
million) grew 4.7% in constant currency, driven by continued
excellent growth in Europe and continued positive momentum in US
DPD. This was partly offset by adopting a disciplined approach to
growth in the face of continued rate softening in US cyber in the
broker business, and ongoing action to exit non-core underwriting
partnerships in the UK. Excluding these factors, the underlying
Retail growth is within the 5% to 15% target range. We expect the
impact of US cyber to start to moderate in the fourth quarter and
result in a pick-up in the overall growth rate as the US broker
initiatives start to take effect.
o US DPD ICWP growth continues to accelerate, up 9.2% in the
third quarter from 8.9% and 6.8% in the previous two quarters; on
track to deliver the full year 2023 US DPD guidance of growth
towards the middle of the 5% to 15% range.
o Hiscox Retail remains on track to deliver the full year 2023
growth guidance to be in line with the half year trend.
-- Hiscox London Market net ICWP increased by 18.1% to $676.7
million (Q3 2022: $572.9 million), a further acceleration from
14.2% at half year, underpinned by strong double-digit growth in
marine, energy and specialty and property.
-- Hiscox Re & ILS deployed capital in the hard market,
delivering net ICWP growth of 23.6%, up from 17.9% at half year, to
$438.3 million (Q3 2022: $354.7 million). Hiscox ILS funds have
delivered record performance, generating an increasing amount of
fee income for the Group.
-- Aggregate natural catastrophe losses year to date are within
budget despite an active third quarter.
-- Investment result gain of $201.7 million (Q3 2022: loss of
$293.9 million), representing a positive return of 2.8% year to
date (Q3 2022: negative return of 4.2%).
-- The Group remains well capitalised and we continue to invest
in our business to support profitable growth.
Aki Hussain, Group Chief Executive Officer, Hiscox Ltd,
commented:
"I am pleased we have continued to deliver disciplined
profitable growth across the Group. Through a combination of
management actions to improve the quality of our portfolios,
increased capital deployment in big-ticket and a focus on the
quality of growth in Retail, we are in the best position for many
years to grow and deliver strong risk-adjusted returns in each of
our segments.
"As we look forward, market conditions remain positive across
the Group and we see plenty of attractive opportunities ahead."
Insurance contract written premiums for the period :
Insurance contract Insurance contract Growth in USD Growth in constant
written premiums written premiums currency
to 30 September 2023 to 30 September 2022
---------------------- ------------------------ ------------------------- -------------- -------------------------
US$m US$m % %
---------------------- ------------------------ ------------------------- -------------- -------------------------
Hiscox Retail $1,836.4 $1,769.4 3.8% 4.7%
---------------------- ------------------------ ------------------------- -------------- -------------------------
Hiscox London Market $947.5 $844.2 12.2% 13.6%
---------------------- ------------------------ ------------------------- -------------- -------------------------
Hiscox Re & ILS $975.5 $949.8 2.7% 4.7%
---------------------- ------------------------ ------------------------- -------------- -------------------------
Total $3,759.4 $3,563.4 5.5% 6.8%
---------------------- ------------------------ ------------------------- -------------- -------------------------
Hiscox Retail
Hiscox Retail ICWP increased by 4.7% in constant currency to
$1,836.4 million (Q3 2022: $1,769.4 million), or 3.8% in US
Dollars. This comprises excellent growth in Europe and a continued
improvement in the growth trajectory of US DPD. This positive
performance has been offset in the period by our planned exit from
non-core underwriting partnerships in the UK, as previously
indicated, as well as ongoing cyber-related headwinds in the US
broker business. Excluding these factors, the underlying Retail
growth is within the 5% to 15% target range. We expect the adverse
impact of US cyber to start to moderate in the fourth quarter and
result in a pick-up in the overall growth rate as the US broker
initiatives start to take effect. Hiscox Retail remains on track to
deliver the full year 2023 growth guidance to be in line with the
half year trend.
Hiscox Retail, as the Group's less cyclical business, benefitted
from an average rate increase of 6%, with rates remaining in
aggregate positive across all markets and the most significant
re-rating continuing to be in the US .
US DPD delivered 8.3% ICWP growth year-to-date, up from 7.8% at
half year and 6.8% in the first quarter, as the management team
deployed purposeful investment into direct acquisition marketing
spend, re-engaged with partners and increased rates where
appropriate. This demonstrates a consistently improving trajectory
as the business remains on track to deliver growth towards the
middle of the 5% to 15% range in 2023.
Insurance contract written premiums for the period :
Insurance contract Insurance contract Growth in Growth
written premiums written premiums USD in constant
to 30 September to 30 September currency
2023 2022
----------------------- ---------------------- ---------- -------------
GBPm/EURm US$m GBPm/EURm US$m % %
------------ --------- ----------- --------- ---------- -------------
Hiscox Retail
- Hiscox UK GBP482.5 $600.3 GBP467.4 $593.7 1.1% 3.3%
- Hiscox Europe EUR455.3 $491.6 EUR410.3 $445.5 10.3% 11.1%
- Hiscox USA $700.1 $693.0 1.0% 1.0%
- Hiscox Asia $44.4 $37.2 19.4% 17.5%
------------------ ------------ --------- ----------- --------- ---------- -------------
Hiscox Retail
total $1,836.4 $1,769.4 3.8% 4.7%
-------------------------------- --------- ----------- --------- ---------- -------------
Hiscox UK
Hiscox UK's ICWP of $600.3 million (Q3 2022: $593.7 million)
grew 3.3% on a constant currency basis. The exiting of non-core
delegated authority partnerships business is progressing as planned
and we expect the impact on top line growth to dissipate by the end
of the year.
Our new brand campaign launched in the UK in September and is
the start of a global initiative to continue to build the strength
of our brand. It is a significant milestone as we look to increase
awareness and recognition of Hiscox in both our direct and broker
channels. The creative thread running through the work is 'Your
story ... underwritten by Hiscox', a concept focused on recognising
the people and stories behind every policy.
Trading on our e-trade platform is also progressing well since
its launch at the end of March. Broker feedback remains extremely
positive, and we continue to further enhance the platform's
capabilities.
Hiscox Europe
Hiscox Europe continues to be the strongest growing business in
the Retail segment, with ICWP of $491.6 million (Q3 2022: $445.5
million) and growth of 11.1% in constant currency. All markets are
enjoying strong momentum and we are pleased with the sustainability
we see in our European business's multi-year growth trend.
The roll-out of new core technology is on track. Germany is
driving a significant ramp-up of migration, with plans to have
around three quarters of our professional, specialty and commercial
business on the new core technology in time for the January
renewals. Core system migration has also commenced in France. The
phased nature of the migration means we do not anticipate any
material impact on premium or policy count growth in the
region.
Hiscox is also undertaking a number of front office technology
initiatives in Europe. A new broker portal in France is planned to
go live in the fourth quarter and work has commenced on new
direct-to-consumer portals in Iberia and Germany.
Hiscox USA
Hiscox USA ICWP grew 1.0% to $700.1 million (Q3 2022: $693.0
million). The trend from half year continues, with ongoing positive
and accelerating momentum in the digital business and further
deceleration of growth in the broker channel.
US DPD ICWP increased 8.3% in the first nine months of the year
to $388.5 million (Q3 2022: $358.8 million). The growth trajectory
continues to improve quarter-by-quarter, with 9.2% growth in the
third quarter compared to 8.9% and 6.8% in the prior two quarters.
This is the direct result of our proactive actions taken over the
last 12 months.
Direct business has been live on the new technology since June
2022 and is showing excellent progress, delivering new business
growth in excess of 50% and double-digit growth overall in the
third quarter. The recovery of our digital partnerships business
from its low point in the first quarter is continuing as existing
partners and newly onboarded partners increased production.
As previously announced, to further expand our target
addressable SME market, US DPD launched the first phase of its
exciting new workers compensation partnership with a well-known US
domestic insurer in June. The positive momentum in the soft launch
phase reported in August has continued into the third quarter. A
full digital launch is expected in 2024, which will help accelerate
growth as the direct customer journey improves.
US broker ICWP growth continued to be impacted by a deliberate
decision to focus on profitable growth. As highlighted at the half
year, we saw material softening in the cyber rating environment
persist. To mitigate some of these headwinds, we executed a growth
campaign focused on our most profitable classes in US broker. This
has increased submissions and we expect the adverse impact of cyber
will start to moderate in the fourth quarter.
Following the repositioning of our US broker book, our team has
been focusing on service and relationships. Pleasingly, these
efforts have been recognised, as the team became the "Insurance
Business America 5-Star Professional Liability 2023" winner, which
recognises carriers, brokers and MGAs who have excelled in broker
relations, claims handling, underwriting expertise and product
quality.
Hiscox Asia
During the quarter, the Group announced that it has entered into
an agreement to sell DirectAsia, its business operations in
Singapore and Thailand predominantly providing motor insurance, to
Ignite Thailand Holdings Limited, the parent of the Roojai group of
companies. The transaction is subject to customary conditions and
regulatory approvals and is expected to complete by the end of
2023.
Hiscox's decision to divest follows the Group's previously
announced strategic review of the business as part of its continued
active portfolio management and disciplined focus on key markets
where it sees the greatest opportunities to maximise value for
shareholders.
DirectAsia ICWP increased by 17.5% in constant currency to $44.4
million (Q3 2022: $37.2 million).
Hiscox London Market
Hiscox London Market continued to deliver strong growth in the
third quarter, with ICWP increasing by 12.2% to $947.5 million (Q3
2022: $844.2 million), an acceleration from the 10.6% reported at
half year. Net ICWP was up 18.1% to $676.7 million (Q3 2022: $572.9
million) as we retained more risk in the attractive market
conditions.
Hiscox London Market benefited from an average rate increase of
8%, ahead of our expectations, although various lines of business
are at different stages of the cycle. Overall, since 2018, Hiscox
London Market has achieved cumulative rate increases of 72%.
Property and terrorism are seeing the strongest rating environment,
with property binders and major property rates up 26% and 23%
year-on-year respectively, and rate in terrorism is also growing
double-digit. Following a material re-rating over a number of
years, casualty lines are now facing rate decreases, notably in
cyber (down 14%) and D&O (down 12%), where the supply of
capital is not abating. As the cycle develops, we continue to focus
on quality, profitable growth and are maintaining underwriting
discipline in these lines. General liability continues to perform
well, driven by good levels of new business in trucking and
construction.
Marine, energy and specialty was the fastest growing segment of
London Market with ICWP up in excess of 40%. Power and renewables
has been the primary beneficiary from the large volume of
construction taking place in the energy sector, as economies across
the globe work towards their net zero commitments and strive to
achieve energy security amidst the uncertainties of the current
geo-political environment. Since the ESG sub-syndicate went live
earlier in the year, we are ahead of our expectations for business
written and we continue to explore further opportunities to ensure
we make the most of the market opportunities in front of us.
We remain confident that our strategy of targeting profitable
growth through effective cycle management positions us well to
deliver strong returns in 2023.
Hiscox Re & ILS
Hiscox Re & ILS net ICWP delivered strong growth of 23.6%,
increasing to $438.3 million (Q3 2022: $354.7 million) in the third
quarter, as the business seized the opportunities in the hard
market. ICWP grew a more modest 2.7% to $975.5 million (Q3 2022:
$949.8 million), in line with the trend highlighted throughout the
year.
As a reminder, due to the seasonal nature of the risks
underwritten by Hiscox Re & ILS, the majority of the premium
will be earned in the second half of the year.
Year to date, Hiscox Re & ILS benefitted from an average
rate increase of 32% on a risk adjusted basis and the cumulative
rate increases now stand at 91% since 2018. In North American
property reinsurance, demand for limit increased in July, as those
who held off from purchasing earlier in the year, given the
disruption seen at January renewals, returned to the market to top
up their natural catastrophe programmes.
Overall, the market was more orderly during the mid-year
renewals. We grew gross shares with several core clients in
property catastrophe, while at the same time improving our
portfolio and materially increasing our attachment profile. We
continued to significantly reduce property aggregate excess of loss
business and moved capacity towards the occurrence programmes given
the attractive market conditions.
Hiscox ILS funds have delivered a record performance, generating
an increasing amount of fee income for the Group. Hiscox ILS assets
under management of $1.7 billion as at 30 September 2023, are
unchanged from the half year position. This includes net capital
outflows of $294 million in the third quarter, largely offset by
record returns generated by the ILS funds.
With the majority of Hiscox Re & ILS's business now written
for 2023, we turn our attention to the January 2024 renewals. We
anticipate that the market will remain disciplined and will
continue to be very attractive.
Claims
It was an active third quarter with a number of natural
catastrophe events occurring during the period, including wildfires
in Hawaii and Canada, floods in Vermont, an earthquake in Morocco
and Hurricanes Hilary in California and Idalia in Florida. Our
inwards reinsurance portfolios have been repositioned to higher
attachment points, so a larger share of the net natural catastrophe
losses to date is in Hiscox London Market. In addition, Hiscox
London Market has exposure to some man-made large losses in the
marine, energy and specialty division.
Almost two years since the start of the war, the Russia/Ukraine
conflict remains ongoing. Hiscox's estimated ultimate net loss from
all risks remains largely unchanged, with a significant portion of
the reserves held still remaining as incurred but not reported
(IBNR) losses. October saw another tragic geo-political conflict
escalation between Israel and Palestine, resulting in significant
loss of life and destruction. Hiscox has limited net exposure,
which is well protected by reinsurance.
Despite the number and nature of events, Group natural
catastrophe losses during the first nine months of the year are
within the Group's budget.
Hiscox has a conservative reserving philosophy, demonstrated by
consistent positive reserve development over many years. Through a
combination of prudent reserving and opportunistic legacy
reinsurance transactions, we aim to reduce unexpected volatility.
In the third quarter, Hiscox London Market entered into a further
small legacy portfolio transaction, securing coverage for potential
adverse development on historical liabilities relating to some
run-off general liability, cyber and alternative risks portfolios.
Following this and other legacy reinsurance transactions executed
in the last few years, 28% of Group gross reserves and 41% of
casualty gross reserves for 2019 and prior years of accounts are
protected by the legacy reinsurance transactions.
As we look forward, economic inflation remains a persistent
feature, however, through a combination of rate increases and
premium indexation, premium income is keeping pace with our view of
expected inflation.
Investments
The investment result for the nine months ending 30 September
2023 was a gain of $201.7 million (Q3 2022: loss of $293.9
million), or a return of 2.8% year to date (Q3 2022: negative
return of 4.2%). Assets under management at 30 September 2023 were
$7.7 billion (Q3 2022: $7.2 billion).
Bond coupons and cash income, which more than doubled
year-on-year, contributed the majority of return, and continued to
increase as bond yields and interest rates moved higher.
Inflation has been trending lower but remains well above the
levels targeted by policymakers. Central banks continued to tighten
policy and pushed out the expected peak in the rate cycle into
2024. As a result, bond yields rose, particularly at the long end
of the curve. Meanwhile, rate fluctuations in the short end of the
curve held back the expected mark-to-market gains in our bond
portfolio. The yield to maturity on the fixed income portfolio rose
to 5.7%, up from 5.6% on 30 June 2023 and 5.1% at the end of 2022.
Credit spreads were relatively benign and had modest impact on bond
price movements in the quarter.
The prospect of rates being "higher for longer" weighed on
growth expectations and equity markets sold off in the third
quarter. We reduced our allocation to equity during the period,
thus limiting the impact on portfolio returns. Overall, the Group
maintains modest exposure to selected risk assets and we continue
to look to incrementally improve long-term risk and capital
adjusted outcomes through further diversification.
Capital management
Hiscox continues to see strong capital generation and retains a
high level of liquidity, which creates the flexibility to pursue
growth in the persisting favourable market conditions. We will
continue to invest in our business to drive profitable growth
whilst ensuring we remain adequately capitalised from a regulatory
and ratings perspective.
ENDS
A conference call for investors and analysts will be held at
09:00 GMT on Wednesday, 8 November 2023.
Participant dial-in numbers:
United Kingdom (Local): +44 (0) 207 098 0702
United States of America: +1 (1) 631 570 5612
All other locations: +41 (0)58 810 7000
Passcode: 6729352
Conference Call Access:
https://services3.choruscall.ch/DiamondPassRegistration/register?confirmationNumber=6048405&linkSecurityString=953513a36
Please register at this link to obtain your personal conference
pin and call details.
For further information
Investors and analysts
Yana O'Sullivan, Director of Investor Relations, London +44
(0)20 3321 5598
Marc Wetherhill, Group Company Secretary, Bermuda +1 441 278
8300
Media
Eleanor Orebi Gann, Director of Communications, London +44 (0)20
7081 4815
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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END
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