REG - Hiscox Ltd - Q3 2024 Trading Statement

HiscoxAnnouncement

07/11/2024 07:00

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RNS Number : 2623L  Hiscox Ltd  07 November 2024

Hiscox Ltd trading statement

Hamilton, Bermuda (7 November 2024) - Hiscox Ltd (LSE:HSX), the international
specialist insurer, today issues its trading statement for the first nine
months of the year to 30 September 2024.

Highlights:

·      Group insurance contract written premiums (ICWP) increased by
$113.1 million or 3.0% to $3,872.5 million (Q3 2023: $3,759.4 million) due to
continued capital deployment in Re & ILS and solid Retail growth.

·      Large natural catastrophe losses and overall claims experience
were within expectations for the first nine months of the year, despite an
active loss environment.

·      The Group expects to reserve a net loss of $75 million for
Hurricane Milton in the fourth quarter.

·      Investment income of $346.6 million; a year to date return of
4.3%.

·      Any surplus capital will be returned to shareholders following
the Board's decision at year end.

 

Aki Hussain, Chief Executive Officer, Hiscox Ltd, commented:

 

"The Group continues to deliver a solid performance, with our combined focus
on building growth and earnings momentum. Our priorities of achieving high
quality growth in all markets in our Retail business, and selectively
deploying capital into attractive big-ticket lines, are unchanged and we
continue to make significant progress against the Group's strategy to deliver
sustainable, less volatile returns while growing the business."

Hiscox Group

The Group continues to make solid progress. Our diversified portfolio has
enabled the business to grow where opportunities remain attractive and manage
the cycle where conditions are evolving, while maintaining our customary focus
on combining growth and earnings momentum.

In Retail, consistent with our expectations, growth has been non-linear, with
year to date ICWP momentum slowing to 4.4% in constant currency. All three
retail businesses, however, continue to grow and the US broker headwinds have
continued to abate. Excluding the US broker business, Retail growth is 6.0% in
constant currency. Retail growth is expected to improve in the fourth quarter
as the momentum from a number of distribution initiatives previously
highlighted continues to build.

In big-ticket, we deployed capital into attractive market opportunities in
property and, despite an active wind season, the performance of our big-ticket
businesses remains robust.

We are continuing to innovate across our business, as demonstrated by the
launch of the first artificial intelligence (AI) enhanced lead underwriting
model in the Lloyd's market in August, the deployment of the UK AI new
business automation solution, and a pan-European partnership with a leading
digital MGA.

Insurance contract written premiums for the period:

 

                       Insurance      Insurance          Growth in USD  Growth in constant currency

contract
 contract

written

premiums to   written

                       30 September   premiums to

2024

                                      30  September

2023(1) (#_ftn1)
                       US$m           US$m               %              %
 Hiscox Retail         $1,922.6       $1,823.6           5.4%           4.4%
 Hiscox London Market  $932.3         $960.3             (2.9%)         (3.1%)
 Hiscox Re & ILS       $1,017.6       $975.5             4.3%           3.9%
 Total                 $3,872.5       $3,759.4           3.0%           2.4%

Hiscox Retail(1)

Hiscox Retail ICWP increased by $99.0 million, or 4.4% in constant currency,
to $1,922.6 million (Q3 2023: $1,823.6 million), consistent with our
expectations of non-linear growth. Rates in Retail increased 2% across the
markets, as inflation continued to moderate.

All three of the retail businesses are growing, with momentum continuing to
build in the UK and Europe, which achieved strong growth year to date but with
a temporary slow-down in the third quarter due to a strong prior year
comparator. In the US, the first-half trends have continued, with strong
growth in US direct, continued slower growth in digital partners and an
improving trajectory for US broker business. Excluding the US broker business,
Retail growth is 6.0% in constant currency.

Looking at the rest of the year, Retail growth is expected to improve in the
fourth quarter as the momentum from a number of distribution initiatives
previously highlighted continues to build.

Insurance contract written premiums for the period:

                      Insurance contract          Insurance contract                                                                  Growth in USD     Growth in constant currency

 written premiums to
  written premiums to                  30 September 2023(1)

  30 September 2024
                      £m/€m         US$m          £m/€m                                     US$m                                      %        %
 Hiscox Retail
 -   Hiscox UK        £504.2        $642.5        £482.5                                    $600.3                                    7.0%     4.5%
 -   Hiscox Europe    €485.4        $528.3        €455.3                                    $491.6                                    7.5%     6.7%
 -   Hiscox USA                     $705.2                                                  $687.3                                    2.6%     2.6%
 -   Hiscox Asia                    $46.6                                                   $44.4                                     5.0%     5.5%
 Hiscox Retail total                $1,922.6                                                $1,823.6                                  5.4%     4.4%

Hiscox UK

Hiscox UK ICWP increased by 4.5% in constant currency to $642.5 million (Q3
2023: $600.3 million). Positive momentum continued in the third quarter both
in terms of premium growth and customer numbers which are now in excess of
half a million.

 

In commercial lines, both our direct and broker businesses have delivered
growth during the year. The direct business is benefitting from our
award-winning brand campaign. In our broker-intermediated business, growth
momentum is underpinned by new distribution deals, with six of them now live
and a strong pipeline of further opportunities ahead of us.

 

Our art and private client (APC) business delivered double-digit growth. Its
performance is particularly strong in the broker channel, with customer
numbers up nearly 20% year-on-year and the business being recognised by the
broker community, winning the award for Personal Lines Insurer of the Year at
the 2024 UK Broker Awards.

 

In September, Hiscox UK deployed an artificial intelligence (AI) new business
automation solution in APC lines. The tool processes new business submissions
according to Hiscox's business rules and prioritises business that is within
our risk appetite and that Hiscox is likely to win. This has reduced the time
taken for priority submissions to be reviewed from 2.5 days to 2.5 hours. This
tool is now in development for the UK broker commercial business.

Hiscox Europe

Hiscox Europe ICWP increased by 6.7% in constant currency to $528.3 million
(Q3 2023: $491.6 million), with broad-based growth across markets and in both
APC and commercial lines.

 

In October, we launched a European partnership with a leading digital MGA to
underwrite small business insurance. This exciting partnership sees two of the
insurance industry's technology innovators join forces to serve the growing
and evolving needs of the European SME market, providing a seamless digital
customer experience and access to specialist underwriting. This is expected to
contribute to growth momentum in 2025.

 

The delivery of the single core policy administration system remains on track,
with Germany now live, France well progressed, and work underway in Benelux,
Iberia and Ireland. The broker portal that wraps around the core system is now
live in France in the broker commercial business. This portal digitalises
customer and broker interactions which will support sustained and scalable
growth.

Hiscox USA(1)

Hiscox USA's ICWP increased by 2.6% to $705.2 million (Q3 2023: $687.3
million) with sustained strong growth in US digital direct, continued lower
flows in certain US digital partnerships, and an improving trend in US
broker.

 

US DPD grew ICWP by 7.6% to $418.0 million (Q3 2023: $388.5 million) as our US
digital direct business maintained double-digit premium growth, with a good
rate of customer acquisition and strong retention. US partnerships continues
to grow, albeit at a lower rate, as the slower production momentum from some
established partners highlighted in the second quarter has persisted through
the third quarter and is likely to continue for the rest of the year. The
majority of partners are growing their premium placement with Hiscox, and the
partner additions are continuing at a steady rate, with 55 new partners added
over the last 21 months.

 

We continue to leverage incentive programmes and marketing to accelerate
partner production. We also continue to diversify our partner distribution
network, pursuing new partner relationships and new partner types in niche
markets such as aggregators and a direct-to-consumer platform with a large
retail traded partner.

 

US broker ICWP decreased by 3.9% to $287.2 million (Q3 2023: $298.8 million).
The business is gradually rotating back to growth, nearing the end of its
premium contraction period triggered by our deliberate action to reposition
the book that was completed in 2022. We have now rebased relationships with
brokers aligned on our redefined risk appetite focused on smaller ticket
risks. The business is rebuilding momentum, as growth trends are emerging in
an increasing number of lines.

Hiscox London Market(1)

Hiscox London Market ICWP of $932.3 million (Q3 2023: $960.3 million) declined
by 2.9% year-on-year, broadly in line with the first half trend. Overall,
Hiscox London Market has achieved rate increases of 3% year to date, with
cumulative rate increases of 75% since 2018 and returns remaining attractive
across many lines.

 

Top line momentum continues to reflect our proactive management of the
underwriting cycle, growing where we see attractive opportunities, including
property and a number of classes of business in our crisis management
division, while at the same time reducing our position in D&O and cyber
where pricing trends remain negative. In addition, the underlying growth
momentum was tempered by our decision to non-renew certain large binder deals
and to stop writing space business.

 

Crisis management delivered strong growth, with premiums up 18% in the third
quarter, driven by both kidnap and ransom and terrorism. In September, we
launched a new Personal Security Plus product to complement our existing suite
of kidnap and ransom products. This innovative product offers coverage for 22
different perils while also providing access to specialist global risk
consultancy, Control Risks. This innovation has been well received by our
clients, as it seeks to address their emerging needs regarding employee
protection.

 

In August, we wrote our first terrorism renewal using the first AI enhanced
lead underwriting solution in the Lloyd's market. Since then over 70% of
in-scope risks have been processed through this solution which provides our
underwriters with more time to focus on business development and on more
complex risks. We remain focused on extending our AI capabilities to the rest
of our business over time.

 

Property remains attractive, notwithstanding the cancellation of a flood
binder, as we continue to achieve growth in major property and household
binders.

 

We have taken the decision to stop writing space business due to the evolving
nature of the risk and economics. Our space book is a small component of the
overall London Market portfolio. Space has materially reduced in size in the
year to date as there were fewer risks coming to the market and we took a
decision to reduce line size due to recent elevated loss activity.

Hiscox Re & ILS

Hiscox Re & ILS grew net ICWP by 12.0% to $491.0 million (Q3 2023: $438.3
million) as the business deployed additional capital into the attractive
underwriting conditions. Net premiums have more than doubled since 2020, as
retained premium growth followed improving market conditions. ICWP grew by
4.3% to $1,017.6 million (Q3 2023: $975.5 million), with the majority of
growth achieved during the January renewals when market conditions were most
attractive.

 

The market has remained disciplined throughout the year, with rates flat on
average across our portfolio for the first nine months of the year. The market
remains attractive following cumulative rate increases of 90% since 2018.
Attachment points and terms and conditions have broadly held firm during the
year. We continue to see strong and growing demand from cedants, which has
been met by supply, but at an appropriate price. As anticipated, at the
mid-year renewals there were some rate reductions in the upper layers of
structures and on higher quality business, however these were from
generationally high levels. The positive outlook for the January 2025 renewal
rates is likely to be reinforced following the impacts of Hurricanes Helene
and Milton.

 

Hiscox ILS assets under management were $1.5 billion as at 30 September 2024
(1 July 2024: $1.4 billion). The pipeline of potential investors ahead of the
January renewals is robust.

Claims

The third quarter saw a number of US hurricanes make landfall including
Hurricanes Beryl, Debby, Francine and Helene. There has also been flooding in
Europe and a series of events in Canada. While the period was active and we
are focused on supporting our customers affected by these tragic events, our
natural catastrophe and overall claims experience in the first nine months of
2024 was within expectations.

 

On 9 October, Hurricane Milton made landfall in Florida as a category 3
hurricane. The Group expects to reserve a net loss of $75 million, based on an
industry insured loss of $40 billion, which is split broadly equally between
our London Market and Re & ILS businesses. We remain within our full year
catastrophe loss expectations.

Investments

The investment result for the first nine months of 2024 is $346.6 million (Q3
2023: $201.7 million), or a year to date return of 4.3% (Q3 2023:
2.8%), driven by a combination of strong interest and coupon income and
favourable mark-to-market movements on bonds. Group invested assets as at 30
September were $8.4 billion (30 June 2024: $8.0 billion).

 

With inflation rates at, or nearing, policy targets and economic growth
slowing, central banks started to cut interest rates during the quarter with
both the US Federal Reserve and the Bank of England reducing rates for the
first time since 2020. Bond markets reacted by pricing in further cuts, with
changes in risk-free rates resulting in a fall in bond yields. The
reinvestment yield on the bond portfolio reduced from 5.2% at the end of June
2024 to 4.4% at 30 September 2024, with the duration of 1.9 years.

Capital management

The Group remains well capitalised on both a regulatory and rating agencies
basis, with high levels of liquidity and strong capital generation.

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. Any surplus
capital will be returned to shareholders following the Board's decision at
year end.

 

ENDS

A conference call for investors and analysts will be held at 09:00 GMT on
Thursday, 7 November 2024.

Participant dial-in numbers:

United Kingdom (Local):            +44 20 3936 2999

All other locations: +44 20 3936 2999

Participant Access Code: 330998

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 (http://www.hiscoxgroup.com) .

 

 

(#_ftnref1) (1) K&R business written through Syndicate 33 has been
transferred from Hiscox USA to Hiscox London Market. 2023 financials have been
restated to report on a consistent basis.

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