Hiscox Ltd trading
statement
Hamilton, Bermuda (2 May 2024) - Hiscox Ltd (LSE:HSX), the international specialist insurer,
today issues its trading statement for the first three months of
the year to 31 March 2024.
Highlights:
· Group ICWP of $1,537.5 million (Q1 2023: $1,420.2 million)
grew 8.3% due to continued capital deployment in Re & ILS and
the acceleration of Retail growth since full year 2023.
· Hiscox Retail ICWP grew by 5.8% in constant currency as US DPD
growth accelerated to 11.3%, UK growth stepped up to 8.3% in
constant currency and Europe continued to perform strongly; this
was partially offset by continued headwinds within the US broker
business.
· Hiscox Re & ILS deployed additional capital and new quota
share capacity, with ICWP growing by 19.0% and net ICWP growing by
9.7%.
· Hiscox London Market ICWP contracted temporarily, following
the non-renewal of certain large binder
deals to instead write more open market business and also due to
the impact of one-off accounting reclassification items.
The first quarter contraction is expected to be
offset by growth over the course of the year.
· Large natural catastrophe losses were within expectations for
the first quarter.
· Investment income result of $66.9 million (Q1 2023: $98.1
million), as duration was extended to 1.8 years to position the
portfolio in anticipation of falling interest rates.
· Share buyback on track, with 4.7 million shares repurchased
for approximately $71.4 million.
Aki Hussain, Chief Executive Officer,
Hiscox Ltd, commented:
"A good start to 2024, with our
focus on profitable growth continuing to deliver. Retail momentum
has improved with growth accelerating in Hiscox UK and US DPD as
our initiatives achieve targeted outcomes, and solid sustained
growth in Hiscox Europe. In Hiscox London Market and Hiscox Re
& ILS we continue to deploy capital where we see attractive
opportunities. The outlook for the year remains
positive."
Hiscox Group
Hiscox continues to make solid
progress across the portfolio of businesses. In Retail we are
beginning to realise the benefits of initiatives implemented over
the last couple of years, focused on improving service to brokers,
reinvigorating our brand as well as launching new products to
service our customers' needs. These have resulted in broad based
growth across our retail franchise, although we continue to face
challenges in reversing the negative trends in our US broker
business. These challenges are not new and we are confident they
will be overcome as the year progresses and our initiatives bear
fruit - with profitable growth remaining the key
priority.
In our big-ticket businesses
we continue to maintain a thoughtful and
disciplined approach, growing the business where we have expertise
and see opportunity and moderating our position where this is not
the case. This is reflected in the fact that our flagship Lloyd's
Syndicate, Hiscox 33, has been ranked in the top two best
performing large syndicates in each of the last three
years1.
Overall, the market remains in equilibrium, where we are collecting
sufficient premium for the risks we are taking, and this seems
likely to continue for the rest of the year.
The external environment remains
unpredictable with an elevated level of risk given geo-political
events and macro-economic uncertainties. In this environment our
diverse and complementary portfolio of businesses positions us well
to serve our customers and effectively manage
uncertainty.
Insurance contract written premiums for the
period:
|
Insurance contract written
premiums
to 31 March
2024
|
Insurance
contract
written
premiums
to 31
March 20232
|
Growth in
USD
|
Growth in
constant currency
|
|
US$m
|
US$m
|
%
|
%
|
Hiscox Retail
|
$723.2
|
$669.0
|
8.1%
|
5.8%
|
Hiscox London Market
|
$316.9
|
$333.1
|
(4.9%)
|
(5.1%)
|
Hiscox Re & ILS
|
$497.4
|
$418.1
|
19.0%
|
17.5%
|
Total
|
$1,537.5
|
$1,420.2
|
8.3%
|
6.7%
|
Hiscox Retail
Hiscox Retail ICWP grew by 5.8% in
constant currency to $723.2 million (Q1 2023: $669.0
million)2, or 8.1% in US Dollars. In line with the
outlook provided with our full year results, Hiscox Retail growth
has returned to its medium-term growth target range, driven by a
step up in growth in the UK business, as well as robust growth in
US DPD and Europe. These positive drivers have been partly offset
by continued subdued momentum in our US
broker business.
Hiscox Retail benefited from an
average rate increase of 3%.
The Group previously announced its
agreement to sell DirectAsia to Ignite Thailand Holdings Limited.
The transaction remains subject to customary conditions and
regulatory approvals.
Insurance contract written premiums for the
period:
|
Insurance contract written
premiums to 31 March
2024
|
Insurance
contract written premiums to 31
March 20232
|
Growth in
USD
|
Growth in
constant currency
|
|
|
|
|
|
|
£m/€m
|
US$m
|
£m/€m
|
US$m
|
%
|
%
|
Hiscox Retail
|
|
|
|
|
|
|
-
Hiscox UK
|
£159.3
|
$202.2
|
£147.2
|
$178.5
|
13.3%
|
8.3%
|
-
Hiscox Europe
|
€241.2
|
$263.3
|
€226.5
|
$242.4
|
8.6%
|
6.6%
|
-
Hiscox USA
|
|
$242.1
|
|
$235.0
|
3.1%
|
3.1%
|
-
Hiscox Asia
|
|
$15.6
|
|
$13.2
|
18.2%
|
18.2%
|
Hiscox Retail total
|
|
$723.2
|
|
$669.0
|
8.1%
|
5.8%
|
Hiscox UK
Hiscox UK has delivered growth of
8.3%, on a constant currency basis, taking ICWP to $202.2 million
(Q1 2023: $178.5 million). This step up in growth (FY 2023: 2.4%)
is driven by improving performance across all areas of the UK
business, including the activation of distribution deals signed in
2023 and ongoing investment in marketing.
For the first time in a number of
years all parts of the UK business are in growth mode, including
broker and direct distribution channels across commercial and
personal lines.
We continue to develop our new
broker e-trade offering, with a new high net-worth platform pilot
having gone live in April and a wider roll-out planned
thereafter.
The outlook for growth in our UK
business is positive for the year, however, the comparative will be
temporarily moderated in the second quarter due to some
non-recurring premium recognised in June 2023.
Hiscox
Europe
Hiscox Europe grew by 6.6% on a
constant currency basis, with ICWP of $263.3 million (Q1 2023:
$242.4 million). This is in line with our expectations due to
challenging first quarter comparatives. We expect the growth rate
to build as the year progresses, with the momentum further helped
as new products and partnerships come online over the course of
2024.
The roll-out of our new core
technology across our European business remains on track. In
Germany migration of our professional, specialty and commercial
(PSC) business is nearing completion, with the art and private
client (APC) roll-out to commence during the year. PSC deployment
has been completed in France and is proceeding as planned in
Benelux.
Hiscox USA
Hiscox USA
delivered improved growth of 3.1% with ICWP of $242.1 million (Q1
2023: $235.0 million)2, as US DPD momentum accelerated
further, partially offset by ongoing headwinds in US
broker.
US DPD grew ICWP by 11.3% in the
first quarter to $146.3 million (Q1 2023: $131.4 million), building
on 9.2% growth in the second half of 2023. US Direct continues to
deliver strong double-digit growth boosted by our investment in
marketing and strong retention. During the quarter we completed the
full digital launch of our workers' compensation partnership,
allowing customers to quote and buy a policy on our website,
underwritten by a third-party partner. By adding a workers'
compensation offering to our already broad line of products we are
taking another step towards meeting all the insurance needs of the
average small business insurance buyer.
US partnerships is now also growing
at a double-digit rate as the existing and new partners onboarded
in 2023 are ramping up production.
US broker ICWP had another quarter
of reduced premiums, continuing the 2023 trend. The business has
been impacted by challenging market conditions in cyber and has
taken longer than expected to pivot to growth after the book was
decisively re-underwritten, which has improved margin. Although we
are starting to see the results of our targeted growth campaign,
with good momentum in architects and engineers and entertainment,
we anticipate the US broker business will continue to shrink at
mid-year.
Hiscox London Market
In the first quarter Hiscox London
Market net ICWP decreased by 6.3% to $204.8 million (Q1 2023:
$218.5 million)2, while ICWP decreased by 4.9% to $316.9
million (Q1 2023: $333.1 million)2. Top line
deceleration is mostly timing due to our non-renewal of certain
large binder deals to instead write more open market business, in
line with our strategy to lead more of the business we write. ICWP
growth was also impacted by one-off accounting reclassification
items, adjusting for which Hiscox London Market gross premiums were
broadly flat year-on-year. The first quarter contraction is
expected to be offset by growth over the course of the
year.
Hiscox London Market achieved an
average rate increase of 3% in the first quarter, ahead of our
expectations, with cumulative rate increases of 76% since
2018.
Property net ICWP continued to grow
at a double digit rate, with particularly strong growth in property
binders and flood, as rates increased by 12% and 13% respectively.
The transition to the green economy and national energy security
concerns continue to present significant opportunities. We continue
to enhance our capabilities in this sector and have taken the
decision not to renew a large binder agreement in order to
underwrite this business directly ourselves instead. While this
decision will present a short-term impact on growth, we expect
momentum to recover through the course of the year.
As expected, cyber and D&O
continue to experience rate decreases, down 9% and 6% respectively,
although rate reductions are now moderating. We continue to manage
the cycle proactively in these lines of business to maintain the
quality of the portfolio.
Our ESG sub-syndicate, launched a
year ago, has had a positive start to 2024 with casualty risks now
also written under its umbrella. This continues to be well received
by brokers and we are excited about the opportunities ahead,
proactively pursuing new business across multiple lines of
business.
Our collaboration with Google Cloud
continues in 2024. After the 2023 proof of
concept successfully demonstrated that we could reduce the
time taken to quote a terrorism risk from three days to three
minutes, we are now implementing this into the live environment. In
parallel, we are extending the core proof of concept
capabilities to major property, a more complex class,
where we are also aiming to reduce the time to quote.
Over time, we aim to roll out AI capabilities to all
relevant lines of business, which will free up time for our
underwriters to focus on higher-value tasks.
Hiscox Re & ILS
Hiscox Re & ILS ICWP grew by
19.0% to $497.4 million (Q1 2023: $418.1 million) as the business
continued to seize attractive market opportunities deploying
additional capital and new quota share capacity. Net ICWP increased
by 9.7% to $203.6 million (Q1 2023: $185.6 million).
January renewals were orderly, as
the market remained disciplined with a broad standardisation of
terms and conditions and attachment points largely holding.
Following the significant improvements in rate during 2023, rates
increased marginally by 2% in the first quarter, bringing
cumulative rate increases since 2018 to 94%.
Rates fell slightly in Japan
renewals but remain adequate following the increases after the 2018
and 2019 typhoons. Looking forward to the mid-year renewals, the
demand for US catastrophe risk is likely to increase driven by
ongoing inflationary pressures. This is expected to be met by
increased capacity in the market, moderating pressure on rates.
Positive market conditions are anticipated to persist throughout
2024, and we will continue to deploy capital where we see
attractive opportunities. Nonetheless, ICWP growth is expected to
moderate as the year progresses due to the planned outflow from the
ILS funds; by the end of 2024, net ICWP growth is likely to exceed
moderated top line growth.
Due to the seasonal nature of the
risks underwritten by Hiscox Re & ILS, the majority of premium
is earned in the second half of the year.
Hiscox ILS assets under management
were $1.7 billion as at 31 March 2024 (31 December 2023: $1.8
billion). These decreased to $1.5 billion on 1 April 2024 after a
planned capital return of $180 million, which was partially offset
by new capital through our side car and the ILS fund raising
efforts. We also received additional quota share support ensuring
the Group continues to benefit from capital-light fee
income.
Claims
Claims experience in the first
quarter of 2024 has been well within expectations for
natural catastrophe losses.
On 26 March, the M.V. Dali container
ship crashed into the Francis Scott Key Bridge as it left the Port
of Baltimore in the USA, causing most of the bridge to collapse and
a number of casualties. This is a complex claim given the likely
challenges of wreck removal and clean up, the rebuilding of the
bridge, potential business interruption claims, and the tragic loss
of life. Hiscox has no direct exposure to the business interruption
policy of the port or the property policy covering the bridge,
although Hiscox London Market participates on the reinsurance for
the International Group of P&I Clubs. No associated reserves
were booked in the first quarter, as it remains an emerging event,
however we expect the net loss to be moderate for the Group due to
the reinsurance arrangements in place.
Economic inflation continues to
trend down. Hiscox has a conservative reserving philosophy and
maintains robust reserves with a high probability of favourable
run-off. The front book has achieved exposure indexation and rate
increases, mitigating inflationary pressures.
Investments
The investment income result for the
first quarter of 2024 is $66.9 million (Q1 2023: $98.1 million), or
a return of 0.8% year to date (Q1 2023: 1.3%) impacted by upwards
pressure on bond yields as rate cut expectations moved out in the
period. Assets under management at 31 March 2024 were $8.0 billion
(FY 2023: $8.0 billion).
The overall duration of the bond
portfolio increased to 1.8 years by the end of the quarter as the
asset duration was brought more into line with that of the
liabilities, and to position the portfolio to benefit from any
reductions in rates later in the year. Although a marginal headwind
to returns in the first quarter, it leaves the bond portfolio well
positioned going forward. The yield to maturity rose slightly to
5.2% at the end of March, up from 5.1% at year end.
The cash returns on both the bond
returns and the cash and cash equivalents allocation continue to
rise, dampening the impact of the mark-to-market
volatility.
Equity markets returns were positive
in the quarter.
Overall, the Group maintains modest
exposure to selected risk assets. We continue to look to
incrementally improve long-term risk and capital adjusted outcomes
through further diversification.
Capital management
The Group remains well capitalised
on both a regulatory and rating agencies basis, with high levels of
liquidity, and strong capital generation. Capital generation is
weighted towards the second half of the year due to the earnings
profile of catastrophe exposed business.
We have the flexibility to deploy
capital into each of our business units where we see attractive
growth opportunities, while maintaining balance sheet strength and
financial flexibility in line with our strategy.
As at 30 April 2024, the Group has
repurchased 4.7 million shares for total consideration of
approximately $71.4 million as part of the $150 million share
buyback programme announced on 5 March 2024.
ENDS
A conference call for investors and
analysts will be held at 10:00 BST on Thursday, 2 May
2024.
Participant dial-in numbers:
United Kingdom (Local): +44 20 3936
2999
United States: +1 646 787 9455
All other locations: +44 20 3936 2999
Participant Access Code: 263576
Investors and analysts
Yana O'Sullivan, Director of
Investor Relations, London +44 (0)20 3321 5598
Marc Wetherhill, Group Company
Secretary, Bermuda +1 441 278 8300
Media
Eleanor Orebi Gann, Group Director
of Communications, London +44 (0)20 7081
4815
Simone Selzer, Brunswick +44 (0)20
7404 5959
Tom Burns, Brunswick +44 (0)20 7404
5959
Notes to
editors
About The Hiscox Group
Hiscox is a global specialist
insurer, headquartered in Bermuda and listed on the
London Stock Exchange (LSE:HSX). Our ambition is to be a respected
specialist insurer with a diverse portfolio by product and
geography. We believe that building balance between
catastrophe-exposed business and less volatile local specialty
business gives us opportunities for profitable growth throughout
the insurance cycle.
The Hiscox Group employs over 3,000
people in 14 countries, and has customers worldwide. Through the
retail businesses in the USA, UK, Europe and Asia, we offer a range
of specialist insurance products in commercial and personal lines.
Internationally-traded, bigger-ticket business and reinsurance is
underwritten through Hiscox London Market and Hiscox Re &
ILS.
Our values define our business, with
a focus on people, courage, ownership and integrity. We pride
ourselves on being true to our word and our award-winning claims
service is testament to that. For more
information, visit www.hiscoxgroup.com.