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Hiscox Ltd see retail profits up as it weathers a third consecutive year of storms

Hiscox Ltd (LON:HSX) today published full year results for the year ended 31st Dec 2019.

Gross premiums written$4,030.7m$3,778.3m
Net premiums earned$2,635.6m$2,573.6m
Profit before tax$53.1m$135.6m*
Earnings per share ($)17.2¢41.6¢*
Earnings per share (£)13.5p31.2p*
Total ordinary dividend per share for the year43.4¢41.9¢
Net asset value per share ($)768.2¢798.6¢*
Net asset value per share (£)580.1p627.0p*
Group combined ratio105.7%94.9%
Return on equity (annualised)2.2%5.3%*
Investment return (annualised)3.6%0.7%
Reserve releases$25.9m$326.5m


  • Gross premiums written up by 8.1% in constant currency, despite disciplined action to reduce $200 million in underperforming lines.
  • Group profits were impacted by large catastrophe events, with $165 million reserved for Hurricane Dorian and Typhoons Faxai and Hagibis, in addition to $25 million of reduced fees and profit commissions.
  • Hiscox Retail now a $2.2 billion business with profits increased by 22% to $178.4 million. Combined ratio of 98.7%, in line with guidance of between 97-99% for 2019.

‒ Hiscox UK and Hiscox Europe generated good profits, driven by a strong performance in small business insurance.

‒ Hiscox USA is profitable, with action taken to improve performance in D&O and media business progressing as planned.

‒ 180,000 Retail customers added in 2019, taking the total to 1.2 million globally – including more than 450,000 direct and partnerships customers. Growth in Retail expected to be in the middle of the 5-15% target range for 2020.

‒ Retail combined ratio to improve by 1-2% per annum and return to 90-95% target range in 2022.

  • Hiscox London Market impacted by catastrophes and property claims, but market conditions continue to improve. Hiscox Syndicate 33 increased its capacity by 19% to make the most of any opportunities for profitable growth in 2020 as rates rise for the third successive year, up in 14 out of 15 lines.
  • Hiscox Re & ILS impacted by natural catastrophes, market-wide adverse development on prior year catastrophes, as well as deterioration in some previously exited lines.
  • Strong investment return of $223.0 million (2018: $38.1 million).
  • Robust reserves 9.4% above actuarial estimate, with continued positive development in Retail. Reserve releases expected to be between 3-5% of opening net reserves in 2020.
  • Full year dividend up by 3.5% to 29.6 cents, in line with the Group’s progressive dividend policy.

Bronek Masojada, Chief Executive Officer, Hiscox Ltd, commented:

“Our strategy of balance, between big-ticket lines and our more steady retail earnings, provides resilience and opportunity. Our growing Retail profits and strong investment return has enabled us to weather a third consecutive year of storms. We are investing for growth as we look to capture the many opportunities we see ahead.”

*These figures have been restated to reflect previously announced tax provisions. See note 2.2 of the financial statements.

2020 events: Coronavirus and UK floods

It is too early to estimate the impact of the Coronavirus. The main areas of potential exposure for Hiscox are event cancellation, travel and personal accident cover and we have received notifications of small claims to date. Pandemic is only covered in a very small part of the portfolio where we have very controlled net exposure.

Some Hiscox UK household customers have unfortunately suffered flooding from the recent storms and our claims teams are working hard to get them back to normal. To date we have had 112 claims of which over 50% are reinsured with Flood Re, the Government-backed flood insurance programme. Net losses are well within our expected catastrophe loss budget for the quarter.

Chairman’s statement

I am able to report a profit before tax of $53.1 million (2018: $135.6 million*), with the investment income of $223.0 million (2018: $38.1 million) being a key contributor to the result. Our strategy has remained the same as we continue to build our retail businesses to balance the more volatile big-ticket risks and it is working.

In 2019, the Retail businesses accounted for 54% of our overall gross premiums written and 73% of our net premiums written. As I have said before, the growth in the Retail arm demonstrates the power of compounding, each year we aim for between 5% and 15% growth. In 2019, Retail growth moderated to 7% (2018: 11.3%) in constant currency, in line with our expectations, given the result of action taken over the last 18 months to reduce in underperforming lines, and the impact of bedding in new IT systems and ways of working in the UK. Our US business accelerated growth as the year progressed, in the UK we are seeing momentum improve and our European business had another excellent year. The combined ratio for Hiscox Retail is 98.7%, outside of our target range of between 90%-95%, but still profitable, and it’s needed to be as our big-ticket lines took a battering from a series of catastrophes in Japan and an active claims year in the London Market. Paying claims and restoring businesses is the raison d’etre of an insurance company. We have fulfilled our promise to pay this year, having paid out $1.2 billion in claims across the Group. The London Market has responded well, with increased prices across the board; the reinsurance market is a little slower to adjust and we will shrink accordingly.

Our balanced strategy means that we are still able to grow the dividend, despite a large loss year. As such, the Board is pleased to announce a final dividend of 29.6 cents, which is an increase of 3.5% in line with prior year dividend. The record date for the dividend will be 15 May 2020 and the payment date will be 10 June 2020.

Hiscox is a specialist insurer. We are not a generalist and aim to be very good at some things and leave other classes to the competition. The breadth of the reach of the Company, however, is increasingly impressive. In the big-ticket arena we participate as a significant participant in the ILS market and stretch all the way across into the retail business to offering personal and commercial customers online coverage. This innovative activity emanates from our restless culture of always trying to find a better way of doing insurance and reinsurance. I derive joy from seeing my colleagues creating new opportunities and making Hiscox such a stimulating environment and interesting place to work. New people are attracted by these qualities and the challenging careers we offer and I’m proud that we have been named in the top five of Glassdoor’s Best Places to Work in 2020. This ability to attract talented and driven workers gives me confidence for the future.

The market

The retail market in the USA is hardening in casualty lines, where we are seeing rate rises up to 13% in response to adverse claims trends. The action taken over the last 18 months to refocus our private company D&O and our media accounts is working. We are seeing increased competition in the UK direct-to-consumer commercial business and expect some impact following the IR35 legislation†, but we also see plenty of opportunity for profitable growth.

The reinsurance market has yet to show the same level of discipline as we have seen in our big-ticket insurance lines. It is felt that the very large reinsurers are happy to hold prices at last year’s levels in order to squeeze some smaller players who are reliant on increasingly expensive retrocession. It was ever thus, and the dance will no doubt continue. It is very unlikely that the investment contribution will be so high in 2020 and hopefully reinsurance underwriting discipline will return. In the meantime, we will reduce our exposure, waiting for sense to prevail.

The big-ticket insurance business is getting interesting at last. In 2019, Hiscox London Market saw rate rises in 14 out of 15 classes, overall up by 11% and continuing to rise. The direction is good. We don’t need to be greedy and drive huge volatility in pricing, but we need to be persistent in getting reasonable increases year-on-year to repair the damage done by a long decline. We have to be able to cover claims inflation, which has been equally persistent, driven by genuine increased costs but also by the ingenuity of lawyers to meet their budgets at the cost of ours.

Climate change

I have spent my working life wrestling with the impact of climate volatility on our business. The year-to-year nature of underwriting risk gives us a front row seat to climate variability. Investment in natural catastrophe research and modelling has always been important to us, and our market-leading catastrophe research team develops not just what we call ‘the Hiscox view of risk’, but now ‘the Hiscox view of climate risk’. We will strengthen our expertise this year with two additional climate change researchers.

As debate around dealing with climate change and, more specifically, Environment Social and Governance (ESG) issues, accelerate, so too do our efforts. We developed the Hiscox ESG framework during the year, which guides our efforts, with central themes that can be locally tailored and executed. We also publicly pledged our support for the Financial Stability Board’s Task Force on Climate-related Financial Disclosures (TCFD), and completed ESG disclosures for FTSE4Good, CDP, Dow Jones Sustainability Index and ClimateWise. Hiscox has been carbon neutral through offsetting since 2014. There is more to do, of course, and we are focused on the opportunity as well as the challenge that this brings.

The Board

We have a strong Board and Executive team. Our Non Executive Directors have a wealth of experience in insurance, reinsurance, marketing and banking, gained in all corners of the world. They have diverse backgrounds and come from a number of different countries which is very important to us as we continue to build a global business. One test I always apply to a new Non Executive is that in some way, they have already been where we are going.

We enjoy having an Executive team that has had a long service with the Company, and a balance of experience and fresh thinking. This year, Richard Watson retired as Executive Director and Group Chief Underwriting Officer after 33 years with Hiscox. He has made a massive contribution to the business in that time in a variety of leadership roles and I thank him for everything he has done. He stays on with us as Non Executive Chairman of Hiscox Re & ILS and also as a Director of our London Market subsidiary. Both are roles he is admirably suited to, and qualified to do, and I am pleased we will continue to benefit from his expertise in this way.

Joanne Musselle replaces Richard as our new Chief Underwriting Officer for the Group and Executive Director. This was an internal appointment after an extensive search both inside and outside of Hiscox. Joanne has been with Hiscox since 2002 and has some very valuable experience under her belt, gained in claims management, as Chief Underwriting Officer for Hiscox UK & Ireland, and latterly as Chief Underwriting Officer of all our retail operations. I am delighted we will benefit from her experience on the main Board.

Following nine years of service, at which point the UK Corporate Governance Code deems him not independent, Robert McMillan, stepped down from the Board in May. Bob’s vast experience in building retail businesses has been invaluable and I am pleased that we will continue to benefit from his advice as he remains a Non Executive Director on our Hiscox USA Board.

It is with great sadness that I report the death of Dr James King during 2019, who served on the main Board from 2006 to 2015 and was a valued counsellor. His sound common sense and incisive mind were very important to me. As a Bermudian, he was an able pilot helping us to navigate our arrival on Bermuda in 2006.

Culture and values

We periodically review our culture to make sure as a Group we have the right set of values to guide us.

We have recently finished a year-long initiative, which involved canvassing hundreds of employees from across the Group asking: what makes them proud to be a part of Hiscox, what values resonate with them and what values they see being lived. I am glad to say that this has resulted in some fine-tuning of our values to guarantee that they are fit for purpose for the future.

As a result of our values re-fresh we’ve adopted ‘connected’ as the theme of this year’s Annual Report. It captures our sense of togetherness and our long-term commitment to building a sustainable business of which everyone can be proud. Part of that connectedness is also about looking out for each other, knowing the people we work with and creating networks beyond teams. I am proud of the WeMind initiative created in the UK by our employees; a mental health and well being network that introduced mental health first aiders and oversees activities including a ‘walk and talk club’ to bring people together to discuss what’s on their mind and delivered mental health training for over 100 people managers. It was gratifying for the team behind this initiative to receive the Outstanding Employee Network of the Year award at the European Diversity Awards 2019 and shows how our values are being lived by the people who work here. I thank them all for their hard work during the year.


We aim to balance Hiscox Retail with the higher-volatility big-ticket businesses. Looking forward, we expect our retail business to get back on track, with better growth this year than last and an improved combined ratio. We will trim the reinsurance business to suit conditions. The London Market is seeing improvements in rates and conditions. In the past these improvements have made it straight through to much better returns. We have the brand, talent and diversity of product and geography to make the most of the opportunities ahead.

Robert Childs
2 March 2020

*These figures have been restated to reflect previously announced tax provisions. See note 2.2 to the financial statements.

†The new IR35 legislation that comes into effect from April 2020 will change the way in which contractor status is determined when working with medium and large organisations in the private sector.

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