TIDMHSX
RNS Number : 4788S
Hiscox Ltd
17 March 2021
Hiscox Ltd
(the 'Company')
2020 Annual Report
Hamilton, Bermuda - in accordance with Listing Rule 9.6.1 a copy
of the Company's Annual Report and Accounts for the year ended 31
December 2020 has been submitted to the National Storage Mechanism
and will shortly be available for inspection at
https://data.fca.org.uk/#/nsm/nationalstoragemechanism
A copy can be viewed on the Company's web site:
www.hiscoxgroup.com/investors
Information required under Disclosure Guidance and Transparency
Rule 6.3.5 - Extracts from the 2020 Annual Report
This announcement should be read in conjunction with the
Company's preliminary results announcement on 3 March 2021.
Together, these announcements constitute the information required
by DTR 6.3.5 to be communicated to the media in full unedited text
through a Regulatory Information Service. This information is not a
substitute for reading the Company's 2020 Annual Report.
Directors' responsibilities statement
The Board is responsible for ensuring the maintenance of proper
accounting records which disclose with reasonable accuracy the
financial position of the Group. It is required to ensure that the
financial statements present a fair view for each financial period.
The Directors explain in the Annual Report their responsibility for
preparing the Annual Report and Accounts. We confirm that to the
best of our knowledge:
-- the financial statements, prepared in accordance with the
International Financial Reporting Standards (IFRS) as adopted by
the European Union, give a true and fair view, in all material
respects, the assets, liabilities, financial position and profit or
loss of the Company and the undertakings included in the
consolidation taken as a whole; and
-- the management report includes a fair review of the
development and performance of the business and the position of the
Company and the undertakings included in the consolidation taken as
a whole, together with a description of the principal risks and
uncertainties that they face.
The Directors responsible for authorising the responsibility
statement on behalf of the Board are the Chairman, Robert Childs,
and the Chief Financial Officer, Hamayou Akbar Hussain. The
statements were approved for issue on 3 March 2021.
Principal risks and uncertainties
Key risks
As an insurance group, specific risks related to our business
include:
Strategic risk
The possibility of adverse outcomes resulting from ineffective
business plans and strategies,
decision-making, resource allocation or adaptation to changes in
the business environment. The Group's continuing success depends on
how well we understand our clients, markets and the various
internal and external factors affecting our business, and having
a strategy in place to address risks and
opportunities arising out of this. Not having the right strategy
could have a detrimental impact on
profitability, capital position, market share and
reputation.
Underwriting risk
The risk that insurance premiums prove insufficient to cover
future insurance claims and associated
expenses. Likely causes include failing to price policies
adequately for the risk exposed, making poor risk selection
decisions, allowing insurance exposures to accumulate to an
unacceptable level, or accepting underwriting risks outside of
agreed underwriting parameters. This includes people, process and
system risks directly related to underwriting, such as human error
in paying invalid claims or misquoting premium prices.
Reserving risk
The Group makes financial provisions for unpaid claims, defence
costs and related expenses to cover liabilities both from reported
claims and from 'incurred but not reported' (IBNR) claims.
Reserving risk relates to the possibility of unsuitable case
reserves and/or insufficient outstanding reserves being in place to
meet incurred losses and associated expenses, which could affect
the Group's future earnings and capital.
Credit risk
The risk of a reinsurance counterparty being subject to a
default or downgrade, or that for any other reason they may renege
on a reinsurance contract or alter the terms of an agreement. The
Group buys reinsurance as a protection, but if our reinsurers do
not meet their obligations to us, this could put a strain on our
earnings and capital and harm our financial condition and cash
flows. Similarly, if a broker were to default, causing them to fail
to pass premiums to us or pass the claims payment to a
policyholder, this could result in Hiscox losing money.
Market risk
The threat of unfavourable or unexpected movements in the value
of the Group's assets or the income expected from them. It includes
risks related to investments - for example, losses within a given
investment strategy, exposure to inappropriate assets or asset
classes, or investments that fall outside of authorised strategic
asset allocation or tactical asset allocation limits.
Liquidity risk
This relates to the risk of the Group being unable to meet cash
requirements from available resources within the appropriate or
required timescales, such as being unable to pay liabilities to
customers or
other creditors when they fall due. It could result in high
costs in selling assets or raising money quickly in order to meet
our obligations, with the potential to have a material adverse
effect on the Group's financial condition and cash flows.
Operational risk
The risk of direct or indirect loss resulting from internal
processes, people or systems, or from external
events. This includes cyber security risk, which is the threat
posed by the higher maturity of attack tools and methods and the
increased motivation of cyber attackers, in conjunction with a
failure to implement or maintain the systems and processes
necessary to protect the confidentiality, integrity or availability
of information and data. Operational risk also covers the potential
for financial losses, information and cyber security risks which
have implications from a legal, regulatory, reputational or
customer perspective, for example, major IT, systems or service
failures.
Regulatory, legal and tax governance
This relates to the business failing to act in accordance with
its applicable regulatory requirements in all its applicable
jurisdictions, or a deterioration in the quality of our
relationship with one or more of our regulators. Legal risk is the
risk of acting contrary to the relevant legal requirements in any
of the jurisdictions in which we operate, while tax governance risk
covers the consequences of any failure to act in accordance with
relevant taxation laws or adapt to changes in taxation.
Related party transactions
Details of the remuneration of the Group's key personnel,
presented in Sterling, are shown in the annual report on
remuneration 2020 on pages 80 to 87. A number of the Group's key
personnel hold insurance contracts with the Group, all of which are
on normal commercial terms and are not material in nature.
The following transactions were conducted with related parties
during the year.
(a) Syndicate 33 at Lloyd's
Related-party balances between Group companies and Syndicate 33
reflect the 27.4% interest (2019: 27.4%) that the Group does not
own, and are as follows.
Transactions in the Balances outstanding
income (payable) at
statement for the
year ended
-------------------------------------- -------------------------- --------------------------
31 December 31 December 31 December 31 December
2020 2019 2020 2019
$m $m $m $m
-------------------------------------- ------------ ------------ ------------ ------------
Hiscox Syndicates Limited 5.1 3.3 1.2 0.5
Hiscox Group insurance carriers 15.6 (34.6) (114.8 (130.5)
Hiscox Group insurance intermediaries (1.5) 5.8 (14.4) (6.7)
Other Hiscox Group companies 32.8 31.1 22.6 0.4
-------------------------------------- ------------ ------------ ------------ ------------
52.0 5.6 (105.4) (136.3)
-------------------------------------- ------------ ------------ ------------ ------------
(b) Transactions with associates
Certain companies within the Group conduct insurance and other
business with associates. These transactions arise in the normal
course of obtaining insurance business through brokerages, and are
based on arm's length arrangements.
2020 2019
$m $m
------------------------------------------------- ----- -----
Gross premium income achieved through associates 12.1 13.7
------------------------------------------------- ----- -----
Commission expense charged by associates 3.0 3.6
------------------------------------------------- ----- -----
Amounts payable to associates at 31 December -- --
------------------------------------------------- ----- -----
Amounts receivable through associates at 31
December 55.4 51.5
------------------------------------------------- ----- -----
Details of the Group's associates are given in note 14.
(c) Internal reinsurance arrangements
During the current and prior year, there were a number of
reinsurance arrangements entered into in the normal course of trade
between various Group companies. The related results of these
transactions have been eliminated on consolidation.
Marc Wetherhill
Company Secretary
Hiscox Ltd
17 March 2021
+1 441 278 8300
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