Hiscox issues its Interim Management Statement for the first three months of the year to 31 March 2012.
Hiscox’s gross written premiums remained broadly stable at £450.7 million (2011: £453.5 million) as the Group withheld some reinsurance capacity in the first quarter anticipating better rates and terms later in the year. After two busy years of claims activity, it has been a relatively benign quarter for most areas of the business.
Bronek Masojada, Chief Executive, commented: “The year has started well with good growth in retail lines, a strong investment return and the reinsurance renewals in April beating our expectations.”
Gross Written Premiums for the period:
Rates
Rates in reinsurance and catastrophe exposed lines, such as US property, continue to improve. For example, rates for Japanese earthquake catastrophe excess of loss have doubled since the Tohoku earthquake and tsunami of March 2011. At the April renewals, our reinsurance businesses more than doubled their budgeted premium income in this area.
Rates in other product lines are either broadly stable or improving gently. The only exception is commercial lines in UK and Europe which remain under pressure.
Investments
The investment result to 31 March 2012 was 1.3% for the quarter on a non-annualised basis. This reflects a strong quarter for our risk assets and a narrowing of corporate spreads in our bond portfolios as a degree of confidence returned to investment markets. Government bonds mostly declined in value during the period. Invested assets totalled approximately £2.9 billion at the end of March and asset allocation remained largely unchanged since the end of 2011.
Despite a good start we expect investment returns for the balance of the year to remain relatively depressed, with the Federal Reserve and the Bank of England continuing to hold down yields available from cash and short dated government bonds. We still see value in corporate bonds and equities but they are likely to be prone to bouts of volatility as political and economic issues, particularly in Europe, create uncertainty.
Hiscox London Market
Hiscox London Market reduced premium income slightly by 0.9% to £180.7 million (2011: £182.4 million). Reductions are largely due to some US reinsurance clients purchasing less cover than in previous years, light claims activity leading to lower inwards reinstatement premiums and reinsurance underwriters holding back US catastrophe capacity in anticipation of better conditions later in the year. The property division is benefiting from more favourable US rates and sees good opportunities in this area.
Hiscox Bermuda
Gross written premiums for Hiscox Bermuda reduced by 15.7% to $117.2 million (2011:$139.0 million). This decrease is mainly due to the non-renewal of a pro rata treaty on a large US account as profit margins did not warrant the risk. Following the April renewal season Hiscox Bermuda’s premium income is growing year on year.
Hiscox Guernsey
Hiscox Guernsey reduced premium income by 10.7% to $26.8 million (2011: $30.0 million) as it maintains a disciplined approach to writing business in the piracy market. Hiscox Guernsey also benefited from a benign claims environment in the quarter.
Hiscox USA
Hiscox USA grew premium income by 21.6% to $47.8 million (2011: $39.3 million). This good growth is coming mainly from our management liability, construction, and terrorism product areas. The direct-to-consumer business is also performing well, benefiting from new distribution partnerships with several leading domestic insurers and agents. Q2 marketing projects to drive growth include a new advertising campaign, the season two launch of Hiscox’s series Leap Year and rolling out similar products to real estate and non-medical health care professionals.
As previously announced, after three years leading the US business to good growth and improved performance, Richard Watson will be returning to the UK to take up the role of Deputy Chief Underwriting Officer for the Group. Ben Walter has taken over as CEO of Hiscox USA, where previously he was COO.
Hiscox UK
Gross written premiums for Hiscox UK rose by 3.4% to £89.1 million (2011: £86.2 million). Strong growth and good retention offset the cancellation of a poor performing partnership (announced at the year end) and the cancellation of an agency agreement during 2011. The business is also benefitting from strong growth in specialty commercial lines and good retention in the art and private client business. The business plans to launch a TV advertising campaign in Q2 and Q3 building on an already strong Hiscox brand in the UK.
Hiscox Europe
Hiscox Europe increased gross written premiums by 7.9% to €69.4 million (2011: €64.3 million). This good growth is driven by the profitable speciality commercial, technology and media lines of business and the strong retention rates across all lines. The direct-to-consumer business in France launched a TV ad campaign during January and February resulting in good new business.
