Hiscox Updated Forecasts and Quarter 1 Trading Statement Update

Hiscox Syndicate has provided the following updated forecast for the 2021 year of Syndicate 33 and Special Purpose Arrangement 6104, and an initial forecast for the 2022 year of account, as follows:

Syndicate 33

Special Purpose Arrangement 6104

The 6104/2020YoA was left open at 36 months. Its previous forecast was (5.6%) to 4.4% [mid-point (0.6%)] and now has a range of (4.6%) to 5.5% [mid-point 0.5%].

Hiscox Q1 2023 Trading Statement Update

Hiscox has released its trading statement for the first quarter of 2023 with strong numbers and a positive message for the half-year. We have provided the key details below.

Headlines

• Premium increases experienced across Hiscox Retail, Hiscox London Market and Hiscox Re & Insurance Linked Securities (ILS) divisions.
• Positive Investment result of $98.1m.
• Group claims in line with expectations.
• Group remains well capitalised.

CEO Aki Hussein commented “We are seeing positive momentum across the Group. Hiscox London Market and Hiscox Re & ILS continue to thrive in very favourable market conditions…this combined with a much-improved investment result, means the outlook for the half-year is positive.”

Market commentary

The hard market continues into 2023 with increasing premium rates across most classes of business. Hiscox reported risk-adjusted rate increases of 41% in its Reinsurance and Insurance-linked Securities divisions in the first quarter, with the January renewals leading to the best market conditions in over a decade for its reinsurance business. Risk-adjusted rate increases were also achieved in Property (45%) and Specialty (26%), with rate improvement in all lines of business. The current market conditions have allowed Hiscox to refine the profile of its business; taking more exposure net but reducing exposure to those covers where more than one class of business is written and where the attritional loss experience has been poor. It remains optimistic about the reinsurance rate environment and expects the hard market conditions to continue throughout 2023 and into 2024.

The one business class where rates are softening is D&O where there has been a reduction in initial public offering (IPO) activity and increased capacity. Hiscox’s strategy is to continue to write this business, seeking profitable business and focussing on taking a lead position on the risk, whilst also looking at lower layers of excess of loss where premiums look attractive.

On claims, Hiscox has maintained its estimated ultimate loss (since year end 2022) from the Ukraine conflict at $48m net of reinsurance.

On investments, we know that most insurers will hold their short-dated bonds to maturity and whilst many reported mark-to-market losses for the 2022 year, yields have already improved to provide a very different position. Hiscox’s investment result of $98.1m for the first quarter is evidence of this, with assets under management remaining consistent from 2022 to 2023 at $7.3bn.

Looking at specific divisions within the business, Hiscox Retail insurance premiums grew by 6.5%, driven by double digit growth in the European division; slightly slower growth in the US where the focus for Hiscox is small businesses with less than 10 employees via their Direct and Partnership division (DPD); and in the UK where the company proactively took the decision to exit from non-core partnerships. The UK division went live in the first quarter with its e-trade platform, which is reported as being the first full-cycle digital trading extranet built by an insurer. Hiscox believes this will lead to more efficient and faster trading with brokers.

Hiscox Europe is the strongest growing business in the retail segment with insurance premiums growing by 13%, although it is relevant that 40% of the business renewed in the first quarter. In the US, insurance premiums grew by 4.3%, underpinned by double-digit growth in renewal business. The new technology platform which has been in place since June 2022 is now gaining positive traction and the expectation is this trend will continue following further investments in customer acquisition marketing. There was a two-year hiatus of adding new partners to the platform but now Hiscox has added 17 in the first quarter and has a healthy pipeline of further opportunities.

Hiscox London Market showed solid growth in the first quarter with insurance premiums growing by 8.6% – and double-digit top-line growth in major property, marine and terrorism books. In April Hiscox launched its ESG sub-syndicate named Syndicate 3033 ESG.

Hiscox Re & ILS delivered excellent net insurance written premiums growth of 37.6% in the first quarter, as the Group increased its appetite for catastrophe risk to take full advantage of the highly attractive rate and underwriting environment. The combination of scarcity of new capital in the ILS market and continuing uncertainty around when it will return in any meaningful way has contributed to an ongoing positive rating environment. The ILS asset class, and other similar vehicles, will remain a continuing feature of the market, and Hiscox is actively engaging with potential investors to ensure that when their capacity does return, they are well placed to support this renewed demand.