Hiscox Poised To Benefit From Rate Rises

November 7, 2011

Bermuda-based specialist insurance and reinsurance group Hiscox saw gross written premiums ease 3.0% year-on-year in the first nine months of the year, in line with expectations as the company becomes more picky about the risks it underwrites.

Hiscox announced today [Nov.7] that gross written premiums totalled £1,169.5 million from £1,205.3 million in the first nine months of 2010, but were down 0.9% once currency effects are stripped out.

On the London market, gross written premiums were down 4.1%, or 3.2% in local currency terms, at £475.3m from £495.8m the year before.

In the International business, gross written premiums were down 14.5% (local currency: -10.0%) in Bermuda, down 2.9% (+2.3%) in Guernsey and down 18.3% (-14.0) at Hiscox USA.

Hiscox UK’s gross written premiums rose 12.4% year-on-year (+13.4%), while Hiscox Europe’s numbers rose 2.2%, or 3.6% in local currency.

“Our strategy of balance and diversity gives us options in challenging times and the strength of our UK business is proof of this. Although the wider market is slow to turn, the cumulative effect of international catastrophes is pushing reinsurance rates upwards. As nearly a third of our income comes from reinsurance, we are ready to benefit at the January renewal season,” said Bronek Masojada, chief executive of Hiscox.

The company said at the half-year stage it had set aside £210 million for catastrophe claims, and this number has not changed a lot.

In the third quarter Hurricane Irene made landfall in the US and net claims are estimated to be less than £10 million. It is too early to report any estimates for the recent flooding in Thailand, the company said.

Low interest rates, severe market losses and the new catastrophe model Risk Management Solution v11.0 continue to put upward pressure on catastrophe exposed reinsurance and insurance rates, the company maintains.

It has seen average rises of between 5-10% in these areas so far this year, and expects further increases during the January renewal season.

Investment return to 30 September 2011 was up 0.5% year to date. The decline in the value of the portfolio since June reflects the impact of turbulent markets on risk assets.

Additionally, the contribution from the bond portfolio was affected by mark to market movements due to a widening of credit spreads. This partly offset the benefit of declining US and UK government bond yields. In particular, financial bonds have been an area of concern for investors.

“Our holdings — which equate to about 15% of the bond portfolio — are concentrated on the senior debt of strategically important banks and other financial services companies. Our ownership of subordinated bank debt is minimal,” Hiscox revealed.

Hiscox Ltd. is a Bermuda-incorporated insurance provider, listed on the London Stock Exchange.

An underwriter at Lloyd’s of London, the company largely specialises in niche areas of the market, offering property and casualty insurance aimed at companies and high net worth individuals, as well as cover against such risks as hacking, kidnapping and satellite damage.

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