AM Best Affirms Credit Ratings Of Hiscox
AM Best has affirmed the Financial Strength Rating of A [Excellent] and the Long-Term Issuer Credit Ratings of “a+” of Hiscox Insurance Company [Bermuda] Limited and a number of their related entities.
At the same time, AM Best has affirmed the Long-Term ICR of “bbb+” of Hiscox Ltd [Hiscox] [Bermuda], the ultimate non-operating holding company of the Hiscox group of companies. The outlook of these Credit Ratings [ratings] remains stable.
The ratings agency said, “The ratings of Hiscox reflect the group’s balance sheet strength, which AM Best categorises as very strong, as well as its strong operating performance, neutral business profile and appropriate enterprise risk management [ERM]. The ratings of HIB, HICL, HIG and HICI reflect their strategic importance to Hiscox, as well as their strong integration within the group.
“The ratings of Syndicate 33 reflect the balance sheet strength of the Lloyd’s market, which AM Best categorises as very strong, as well as the market’s strong operating performance, favourable business profile and appropriate ERM. The Lloyd’s market rating is the floor for all syndicate ratings, reflecting the Lloyd’s chain of security and, in particular, the role of the Central Fund, which partially mutualises capital at the market level.
“Hiscox group is an international insurer and reinsurer with good brand strength and a diversified book of business. The group has a strong presence in the Lloyd’s market, primarily through Syndicate 33, which is one of the largest Lloyd’s syndicates based on 2019 gross written premiums [GWP]. For the 2020 year of account, the syndicate’s capacity increased to GBP 1.8 billion [2019: GBP 1.4 billion], in response to market opportunities arising from a hardening market. Capacity is expected to stay at a similar level in the medium term.
“Hiscox’s balance sheet strength is underpinned by consolidated risk-adjusted capitalisation at the strongest level, as measured by Best’s Capital Adequacy Ratio [BCAR]. The balance sheet strength assessment also considers the group’s good financial flexibility, which was demonstrated by a GBP 375 million capital raise during 2020, its strong liquidity profile and prudent reserving strategy.
“The group has a track record of strong earnings, demonstrated by five-year [2015-2019] and 10-year [2010-2019] weighted average combined ratios of 96% and 92% and five-year [2015-2019] and 10-year [2010-2019] weighted average returns on equity of 8% and 10%. The group’s 2019 performance was weak compared with historical trends, with a combined ratio of 107%. This was driven by strengthening of 2018 catastrophe and run-off healthcare reserves, adverse experience in certain U.S. casualty lines and catastrophe losses from Typhoons Faxai and Hagibis and Hurricane Dorian.
“AM Best expects the group to produce a loss in 2020, as a result of COVID-19 related claims. Excluding COVID-19 losses, AM Best expects the group’s underlying performance to improve compared with 2019. AM Best expects performance to demonstrate an improving trend in the short to medium term, as a result of portfolio re-balancing and hardening rates in key lines in Hiscox’s London market and reinsurance portfolios. Despite the unfavourable economic conditions caused by the COVID-19 pandemic, the group reported GWP growth of 2% in the first nine months of 2020.”
