Hiscox Limited has released a trading statement and updated forecasts for Syndicates 33 and 6104

The forecasts for the syndicates are as follows:

2015 account

Syndicate

Capacity

Forecast as at

30 Sep 2017

Forecast as at

30 June 2017

Change at

midpoint

33

£999m

5% to 15% profit

5% to 15% profit

unchanged

6104

£65m

30% to 40% profit

30% to 40% profit

unchanged

2016 account

Syndicate

Capacity

Forecast as at

30 Sep 2017

Forecast as at

30 June 2017

Change at

midpoint

33

£998m

7½% loss to 2½% profit 

5% loss to 5% profit

2.5 points worse

6104

£55m

20% to 30% profit

10% to 20% profit

10 points better

All forecasts are reported as a percentage of allocated capacity and are after all standard personal expenses other than members’ agents’ fees and charges.

The 2016 account of Syndicate 33 has deteriorated as the year has picked up some of the exposure to the three severe hurricanes that hit the Caribbean and the Gulf coast of the USA in August and September this year. Hiscox reports today that it estimates total losses for the group arising out of Hurricanes Harvey, Irma and Maria at US$225m. This represents an improvement on the previous position when losses for Harvey and Irma were put at $225m without an allowance for Hurricane Maria. The group’s position reflects the 73% share that it owns of Syndicate 33, losses to the wholly aligned Syndicate 3624 and losses to the non-Lloyd’s parts of the group, most notably Hiscox Re. The figure of $225m cannot therefore be translated to a total cost to the syndicates. Hiscox also says that it does not expect material claims to the group arising out of the earthquakes in Mexico or the wildfires in California. 

The bulk of loss arising out of this year’s hurricanes will fall to the 2017 account. There is no formal forecast for this year of account at this stage, with the first forecast required by Lloyd’s after 15 months and communicated to members in May 2018. Hiscox normally releases a provisional forecast for the open years after twelve months (although there is no requirement for it to do so). We expect this as part of the year-end reporting process, with Hiscox due to report results to the end of December at the end of February.

Exposures for the reinsurance account written by Syndicate 6104 are more closely matched with the calendar year and there is no material exposure to the hurricane events of 2017 to the 2016 year of account. Hiscox is therefore reporting an improvement in the 2016 account of this syndicate at the 21 month stage. The 2017 account will be reported on the same timetable as that for Syndicate 33 above.

The interim management statement includes neither a profit and loss account nor an overall balance sheet. The full statement can be found here. Alongside the revised expectations for the losses arising out of the hurricanes, Hiscox  states that it is seeing signs of a hardening market with price corrections in loss affected and loss exposed US property lines of 10% to 50%. In the reinsurance arena, momentum is building ahead of the renewal season with the group expecting double digit rate increases for US catastrophe exposed business and more on loss affected accounts and retro (reinsurance of reinsurance) accounts.

The group is growing premium volumes in all business areas with the exception of the London market, where volumes are down 17% at constant currency, and the small DirectAsia account where the Hong Kong part of the business was sold in August 2016. The largest growth is in the retail division, which is up 16% at constant currency, with Hiscox USA, which is up by 29% on that basis, now representing almost 40% of the retail book and 20% of the entire group. Syndicate 33, which writes principally London market and reinsurance business, has increased capacity by 39% for 2018 in anticipation of an improving market.

Hiscox also announced an intention to change the functional and reporting currency of the group to US dollars from the beginning of 2018.

Lloyd's will release updated forecasts for all third party syndicates' 2015 and 2016 accounts on 15 November.