Higher rates boost Hiscox H1 results

Bermuda-based Hiscox has benefitted from rate increases in the first six months of 2018 but the specialist re/insurer warns that the momentum is slowing down.

“We started the year well, capitalising on the improved conditions in Hiscox London Market and Hiscox Re & ILS, as we led the way in achieving necessary rate increases,” said Hiscox chairman Robert Childs.

“We are seeing momentum behind rate increases begin to slow and we expect our rate of premium growth to decline correspondingly,” Childs added.

The group expanded gross premiums written to $2.23 billion in the first six months of 2018 from $1.84 billion in the same period a year ago.

The combined ratio improved to 87.9 percent in the first half of 2018 after 89.7 percent in the same period of 2017.

Hiscox London Market saw gross premiums written increase to $458.7 million in the first six months of 2018 from $395.8 million in 2017. The combined ratio in the segment improved to 88.6 percent from 94.6 percent over the period.

“In our London Market business, rate improvement has been most pronounced in catastrophe-exposed and loss-affected lines such as major property (up 16 percent in aggregate) and US household and commercial property binders which have seen increases of up to 10 percent,” Childs said.

Hiscox continues to see strong demand for its ILS funds and has now assets under management of $1.6 billion. The Hiscox Re & ILS segment which comprises the group’s reinsurance businesses in London, Paris and Bermuda and insurance linked security (ILS) activity grew gross written premiums by 28.5 percent year on year to $655.6 million in the first half of 2018. Growth in the segment was driven by risk and specialist lines, the additional catastrophe risk Hiscox took and the business it writes on behalf of our ILS and quota share partners.

“The good growth we saw at the start of the year has slowed during the second quarter, and we have focused on areas where rate improvement has been most significant such as US property catastrophe risk and risk excess,” Childs commented.

“Our strategy of sharing the most volatile catastrophe-exposed risks with our quota share and ILS partners, in line with their risk appetite, protects us in heavy catastrophe years such as 2017, where we significantly outperformed the market and delivered an underwriting profit in reinsurance,” he added.

Pre-tax profit in Hiscox Re & ILS grew to $57.1 million in the first six months from $48.0 million in the same period of 2017.

“After a number of benign years we have seen some one-off losses in our risk excess book, where we still see good opportunities for profitability and growth. We continue to develop our risk and specialist lines where the market is evolving, for example in cyber, with products such as a first-of-its-kind cyber industry loss warranty. In Hiscox Re ILS, our funds and vehicles have performed well relative to the market and in aggregate we continue to see positive reserve development,” Childs noted.

In Hiscox’s reinsurance business, rates were up on average 10 percent but have flattened during the year. “Despite this, conditions have improved year-on-year and currently rates are at levels where our own and third-party capital can be put to good use,” Childs noted.

Overall, the group’s pre-tax profit in the first half of 2018 increased to $163.6 million from $129.1 million in the same period a year ago.

“It has been a good start to the year,” said Hiscox CEO Bronek Masojada. “Our investment across the business is driving strong profitable growth in all segments. We are on track to exceed one million retail customers in 2018,” Masojada added.

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