Last checked at 10 Nov 2008 07:00
Interim Management Statement
Hiscox seizes opportunities in improving market conditions
Hamilton, Bermuda (10 November 2008) -- Hiscox Ltd (LSE:HSX), the international specialist insurer, today issues its Interim Management Statement for the nine months to 30 September 2008.
Robert Hiscox, Chairman, commented:
"The tide has turned. Whereas we were depending on retail growth in UK and Europe to offset the fall in income from internationally traded business and reinsurance, rates have now switched from softening to hardening in some major areas such as Reinsurance, Offshore Energy and Large Property. Most importantly, market conditions and sentiment have changed and business opportunities abound for Hiscox. We have already announced an increase in capacity for our Lloyd's Syndicate and the formation of a new one. We have added new teams and senior individuals, mainly from AIG, who will strengthen various parts of our business in the USA. Meanwhile the UK and Europe continue to make good progress".
Gross Written Premiums for the period:
| Gross Written Premiums To 30 September 2008 £m | Gross Written Premiums To 30 September 2007 £m | Change % | |
| Hiscox Global Markets | 480.3 | 568.6 | (15.5) |
| Hiscox International | |||
| Hiscox Bermuda | 106.7 | 153.3 | (30.4) |
| Hiscox Guernsey | 41.1 | 38.2 | 7.6 |
| Hiscox USA | 22.9 | 14.0 | 63.6 |
| Hiscox UK | 196.3 | 171.8 | 14.3 |
| Hiscox Europe | 72.8 | 57.1 | 27.5 |
| Total | 920.1 | 1,003.0 | (8.3) |
Hiscox Global Markets
During the period we reduced our exposure to international and larger business where market conditions were challenging. Premium income during the period is down 16%, which is slightly better than forecast. Since our interim results in August 2008, we have seen rates harden. This hardening, together with an increased showing of business due to the credit and capital problems of some of our competitors, has greatly improved the outlook for 2009. As a result, we decided to increase the capacity of Hiscox Syndicate 33 to £750 million for 2009 rather than reduce it to £550 million.
In January 2009, we will launch Hiscox Syndicate 3624. Its capacity will start at £60 million with all capital supplied by us. It will primarily write technology and small business risks in the US market developed through the offices there.
We are continuing the development of our Global Markets' US presence with a new team in Construction and the strengthening of existing teams in Terrorism, Media and Technology E&O. These teams will be based in our existing offices in New York, Chicago and a new office in Kansas.
Hiscox International
Hiscox Bermuda was selective and reduced its income by 30% during the period as rates outside the obvious catastrophe areas were softening. Just as with Global Markets, rates are now hardening and business flows are increasing due to brokers spreading their business to wider markets, our recent A.M. Best rating upgrade to A, and general market conditions. We are forecasting strong growth in 2009. The specialist reinsurance group that was created earlier this year is now up and running and we expect it to contribute in 2009.
Our Guernsey operation continues to perform well and has introduced a new Marine Piracy policy to complement its existing portfolio. We are enhancing our service to the important Latin American market with a team joining us based in Miami.
Hiscox USA, with income up 64%, continues to develop in line with our long term plans and is now able to offer Hiscox admitted specialist commercial products as well as surplus lines products through our Lloyd's syndicates. We are strengthening our existing small ticket D&O and Equine businesses with additional teams and will be opening an office in Kentucky.
Hiscox UK and Hiscox Europe
In the UK our trading remains strong in both our household and commercial business with overall income up 14%. Our motor product, which was launched earlier this year, is significantly ahead of plan with claims at very low levels to date.
All countries in Europe experienced growth in the third quarter with premiums up 28%. The thrust to write commercial business (in addition to the existing personal lines business) is working well and the new products have been well received.
Hurricanes
We announced in our update on 27 October 2008 our current estimate of $25 million for Hurricane Gustav and $150 million for Hurricane Ike based on industry losses of $2.75 billion and $17.5 billion respectively. These are within our disaster scenarios for such losses.
Investments
As reported in our October update, the investment return for the first nine months of the year was -0.1%. The asset allocation remains comparable to previous periods with preservation of capital being the main aim. This has been achieved despite some severe mark to market valuations. Our assets increased to £2,047 million, up 5.9% from 30 June 2008, helped by the strength of the US dollar.
Balance sheet
The balance sheet remains strong with no significant changes since June 2008. We repaid all outstanding debt earlier in the year and since the end of June have bought a small amount of our shares to bring the total spent to £74.2 million for 32.7 million shares - an average of 226.7p per share. As previously announced, Hiscox refinanced its bank facilities with our existing syndicate of banks. We have a £150 million letter of credit facility and a five-year £200 million revolving credit facility with drawings priced at a 1% margin.
Outlook
Robert Hiscox said:
"The banking industry has done unparalleled harm to the world economy, but, as ever, disaster brings opportunity to the strong. The general insurance industry has behaved well during the last 15 years during which time it has been assaulted by man-made and natural disasters, and now by savage investment markets. It has not been seduced by the culture of leverage and speculation with balance sheets, but in general can be said to have acted with restraint and maturity. This is a period of opportunity for Hiscox where spirits are high and the balance sheet is strong. We are used to sailing to the sound of gunfire and profiting in times of adversity, as feast inevitably follows famine in the insurance business. This time it is not an insurance famine but a famine of capital due to a worldwide financial crisis. We have sound capital and the opportunity to use it extremely well".
For further information:
| Hiscox Ltd |
| Robin Mehta, Company Secretary +1 441 278 8300 |
| Jennifer Crowl, Director of Communications +44 (0) 207 448 6494 |
| Maitland +44 (0) 207 379 5151 |
| Suzanne Bartch |
| Richard Farnsworth |
Notes to editors
About Hiscox
Hiscox, headquartered in Bermuda, is an international specialist insurance group listed on the London Stock Exchange (LSE:HSX). There are three main underwriting parts of the Group - Hiscox Global Markets, Hiscox UK and Europe and Hiscox International. Hiscox Global Markets underwrites mainly internationally traded business in the London Market - generally large or complex business which needs to be shared with other insurers or needs the international licences of Lloyd's. Hiscox UK and Hiscox Europe offer a range of specialist insurance for professionals and business customers, as well as high net worth individuals. Hiscox International includes operations in Bermuda, Guernsey and USA. Hiscox Insurance Company Limited, Hiscox Underwriting Limited and Hiscox Syndicates Ltd are regulated by the Financial Services Authority. For further information, visit www.hiscox.com.