Hiscox Limited has today released the following Interim Management Statement covering the period to the end of September. Unlike the annual and half yearly reports, this does not include a profit and loss statement, but gives a useful summary of market conditions and recent developments.

INTERIM MANAGEMENT STATEMENT

Hamilton, Bermuda (4 November 2013) -- Hiscox Ltd (LSE:HSX), the international specialist insurer, today issues its Interim Management Statement for the first nine months of the year to 30 September 2013.

Hiscox's gross written premiums increased year-on-year by 10.1% to £1,370.5 million (2012: £1,244.4 million) driven by good growth in insurance business. The Group has also benefited from a low level of catastrophe and attritional losses. Increased competition and a benign claims environment continue to put pressure on rates in reinsurance.  As stated previously, in response to these pressures the Group will continue to reduce exposure appropriately, and develop new opportunities in the ILS space.

Bronek Masojada, Chief Executive, commented: "I am very pleased with the Group's performance. Our insurance business has seen good growth at both the top and bottom line, and we continue to underwrite reinsurance at the right price. We have diversity by product and geography and see good opportunities for 2014 and beyond." 

Gross Written Premiums for the period:

 

 

Gross Written Premiums

to 30 September 2013

US$/€m                   £m

Gross Written Premiums

to 30 September 2012

US$/€m                    £m

Growth in local Currency

%

Growth in Sterling

%

Hiscox London Market

-   Insurance

-   Reinsurance

 

£549.3

£352.2

£197.1

 

£499.3

£292.2

£207.1

 

 

10.0%

20.5%

-4.9%

Hiscox International

-   Hiscox Bermuda

-   Hiscox Guernsey

-   Hiscox USA

 

US$300.0

US$84.4

US$220.3

 

£194.2

£54.6

£142.2

 

US$299.5

US$87.3

US$172.5

 

£189.9

£55.3

£109.3

 

0.2%

-3.3%

27.7%

 

2.3%

-1.3%

30.1%

Hiscox UK

Hiscox Europe

 

€140.7

£312.8

£117.4

 

€129.3

£283.0

£107.6

 

8.8%

10.5%

9.1%

Total

 

£1,370.5

 

£1,244.4

8.7%

10.1%

Rates

Rates in reinsurance were down at both the 1 June Florida renewals and 1 July renewals with significant declines in Florida. Year-on-year we have seen a 10% decrease across the reinsurance book, however we continue to underwrite reinsurance lines profitably. We anticipate further reductions at the 1 January renewals.   

Rates in insurance lines across the Group are steady to rising with increases of up to 5% year-on-year in US property, marine liability and US casualty.  The exceptions are marginal falls in aviation and upstream energy.

Investments

The investment return to 30 September 2013 was +1.3% year to date (+1.8% annualised). Verbal commitments by central banks to keep short term rates low for an extended period and the Federal Reserve's decision in September not to start tapering their bond purchases have boosted asset prices recently. Our bond portfolios therefore delivered a more meaningful return during the third quarter with another useful contribution from equities. For the year to date our allocation to equities continues to provide the majority of the overall return. Invested assets at the end of September totalled approximately £3.1 billion and asset allocation remains largely unchanged from the end of June.

Many investment markets are still supported by liquidity which at some stage will be withdrawn. Uncertainty over how and when this is achieved will create volatility. As a result we still see risk in longer duration fixed income securities and prefer to stay short and safe in the bond portfolios. A further period of low returns from them is therefore forecast. Equities remain relatively attractive but their valuation is less compelling now and we will continue to manage our exposure actively.

Capital

In line with our standard practice, we will review our position on capital when the result for the year is clear.

Hiscox London Market Insurance

Hiscox London Market increased premium income by 20.5% to £352.2 million (2012: £292.2 million). We are growing in well rated areas, mainly in US property insurance and our fire, theft, collision and extended warranty business. In preparation for an improving market, the casualty division continues to invest in new hires with the addition of a number of high profile D&O underwriters.  

Our exposure to Costa Concordia remains unchanged at US$19 million. 

We are currently in discussions with Willis regarding their Global 360 facility. Business in the London Market has always been placed either on a stand-alone, risk-by-risk basis, or grouped together to facilitate placement. We have a lot of experience with such facilities and recently the market has seen an increase in their number and size. We believe they can be beneficial, but we will always stick to our underwriting tenets that we can select individual risks and retain the right of veto. The growing number of such facilities already form part of our premium expectations for next year. 

Hiscox Re

The newly launched Hiscox Re combines the Group's reinsurance operations in Hiscox London Market and Hiscox Bermuda. Hiscox Re is actively marketing for business incepting on 1 January 2014. 

Reinsurance premium income from Hiscox London Market reduced by 4.9% to £197.1 million (2012: £207.1 million). Gross written premiums for Hiscox Bermuda remained constant at $300.0 million (2012: $299.5 million).

Excess capital and a benign claims environment has put pressure on reinsurance lines. The business remains disciplined and is benefiting from careful risk selection, having low exposure to some of the larger losses in the market including European floods and Calgary storms. Despite the competition, we have retained good business as customers value the quality of our underwriting and brand.

Third party capital partners are very important to the Group. We continue to have good support from quota share partners and Syndicate names. Hiscox is also expecting to launch a number of collateralised reinsurance funds next year and based on current calculations we will aim to deploy over $250 million of both our own and external capital at 1 January 2014. 

Hiscox Guernsey

Hiscox Guernsey reduced premium income by 3.3% to US$84.4 million (2012: US$87.3 million). This business has maintained market share despite increased competition and a softening market. Reduced income was also due to business that was previously signed in three-year deals to take advantage of good terms, prices and conditions. These will earn through in line with projections until 2014. 

Hiscox USA

Hiscox USA increased premium income by 27.7% to US$220.3 million (2012: US$172.5 million). Hiscox USA continues to grow in every area with professional and management liability lines doing particularly well. The business is nearing break-even earlier than planned. 

The direct-to-consumer small business insurance offering continues its accelerated growth through marketing and partnerships and now has more than 35,000 live policies.   

Hiscox UK

The retail business in the UK increased gross written premiums by 10.5% to £312.8 million (2012: £283.0 million). Excellent retention of existing business in all areas, pricing improvements and new schemes business have all contributed to this. Distinctive marketing and improvements made to the online small business journey, have resulted in good growth for the direct-to-consumer business.

We have had a small number of claims resulting from the St. Jude's day storm, mainly due to low level wind damage, in aggregate we not expect this to be a material loss for the Group.  Our focus has been to provide excellent service when our clients need it most.     

Hiscox Europe

Hiscox Europe increased gross written premiums by 8.8% to €140.7 million (2012: €129.3 million) with strong growth in Germany, Iberia and France.  Across Europe, professions and specialty commercial lines benefited from strong retention and grew by 14%. The summer storms and floods had minimal impact on claims for Hiscox Europe.