Slide 1: Hiscox Ltd Interim results
Hiscox Ltd Interim results For the six months ended 30 June 2022
Slide 2: Strong underwriting result
Strong underwriting result • Strong underwriting result masked by investment performance • Increased dividend reflects confidence in strategy under Aki’s leadership • Build out of the executive team is complete 1
Slide 3: Strategy update
MN HISCOX Strategy update
Slide 4: H1 2022 highlights
H1 2022 highlights • Robust growth across the Group • Strong underwriting results in all divisions with excellent COR of 91.3% and underwriting result up 23.4% to $123.2m • Strong capital generation and well-funded balance sheet 3
Slide 5: Well positioned for high quality growth and earnings
Well positioned for high quality growth and earnings Balanced portfolio of large and complex risks SME and personal lines • Global risks through Lloyd’s platform • Small and micro businesses • Heritage of deep technical expertise • Digitally traded, with • Leading the market in applying low-cost dis
Slide 6: Retail growth accelerating
Retail growth accelerating 7.8%* 464.9 431.3 4.6%* 14.3%* 297.4 311.3 305.0 266.7 H1 2021 GWP ($) H1 2022 GWP ($) H1 2021 GWP (£) H1 2022 GWP (£) H1 2021 GWP (€) H1 2022 GWP (€) Go-forward Remediating • The largest growth opportunity for • Strong growth in commercial lines • All markets in Europe ar
Slide 7: US DPD opportunity large and attractive
US DPD opportunity large and attractive Growth to rebound in 2023 Large and attractive SME market in the USA • Growth expectation set to rebound Total SME market Hiscox current target market to above 15% in 2023 • In 2022, growth expected to be USA in the middle of 5% to 15% range 33m • Lower rate o
Slide 8: US DPD new technology brings competitive advantage
US DPD new technology brings competitive advantage Early indicators of operational improvements Key milestones achieved • All direct-to-customer live on new platform Provide a quote Referral to manual across all 50 states underwriting • Partner portals and APIs will transition in H2 2022 New system
Slide 9: Hiscox Germany's small commercial business
Hiscox Germany’s small commercial business The largest opportunity in Europe German small commercial opportunity Germany’s commercial business is growing Total SME market Hiscox current target market fast and profitably GWP (€m) Germany 3.4m 1.8m • Hiscox Germany GWP is c. €150m annualised, of which
Slide 10: Hiscox London Market: Selective growth driving profitability
Hiscox London Market Selective growth driving profitability Hiscox London Market gross written premiums (% of portfolio) Change since H1 2021 (%) Change since H1 2021 (%) Flood Personal accident Commercial lines Terrorism Crisis Major property management Product recall Property 17% 29% Kidnap and ra
Slide 11: Hiscox Re & ILS: Third-party capital strategy delivers
Hiscox Re & ILS Third-party capital strategy delivers Gross written premium (%) • Excellent GWP growth underpinned $822.7m by ILS gross inflows and attractive +37.1% market environment YoY • ILS AUM of $1.9bn as at 1 July 2022; $599.9m +6.1% YoY net inflows of over $550m • Capital-lite fee income is
Slide 12: Enhancing our employee brand and proposition
Enhancing our employee brand and proposition... ...to attract and retain the best talent 11
Slide 13: Group Executive Committee
Group Executive Committee Leadership team now complete Paul Cooper Joanne Musselle Nicola Grant Hanna Kam Stéphane Flaquet Group Chief Financial Officer Group Chief Underwriting Chief Human Resources Group Chief Risk Officer Group Chief Operating Officer Joined Hiscox: May 2022 Officer Officer Joine
Slide 14: Financial performance
MN HISCOX Financial performance
Slide 15: Group financial performance
Group financial performance Strong result despite volatile macro backdrop 30 June 2022 30 June 2021 • Growth of 11.4% in $m $m CCY with positive rate Growth momentum across Gross premiums written 2,649.8 2,426.2 the Group Net premiums written 1,609.3 1,565.4 • Excellent underwriting Net premiums ear
Slide 16: Hiscox Retail
Hiscox Retail Good progress towards delivering Retail COR guidance 30 June 2022 30 June 2021 • Retail COR of 95.5% $m $m shows excellent progress towards 90% to 95% target Growth • GWP up 1.5% or 5.9% in CCY. Completed US Gross premiums written 1,235.2 1,216.4 broker channel remediation – go-forward
Slide 17: Hiscox London Market
Hiscox London Market Good performance with focus on profitability 30 June 2022 30 June 2021 • Growing top line where $m $m opportunity is attractive • Property binder exposure Growth reduction impacted top-line growth by 5.3ppts Gross premiums written 591.9 609.9 • Strong COR of 86.1%, Net premiums
Slide 18: Hiscox Re & ILS
Hiscox Re & ILS Strong growth on the back of ILS inflows 30 June 2022 30 June 2021 • GWP up 37.1% driven $m $m by strong ILS inflows • Quality of portfolio on Growth an improving trend with increased margin and Gross premiums written 822.7 599.9 tightening of terms and conditions Net premiums writte
Slide 19: Investment performance impacted by mark-to-market movements
Investment performance impacted by mark-to-market movements Cash and bond income net of fees ($m) Gains/(losses)* on debt and fixed income • Investment result holdings ($m) loss of $214.1m, 48 46 return of (3.0)% YTD • Debt and fixed income losses are mostly unrealised -33 and non-economic in nature
Slide 20: Credit quality of the investment portfolio
Credit quality of the investment portfolio Short duration high quality portfolio Investment portfolio $7.1bn with duration of 1.7 years as at 30 June 2022 Asset allocation Debt and fixed income Debt and fixed income holdings credit quality holdings currency split Debt and fixed income holdings Gvt.*
Slide 21: Reserve resilience continues
Reserve resilience continues $77m positive reserve development Reserve releases as % of opening net reserves • Margin of $352m Margin above best estimate (H1 2021: $348m); 11.0% (H1 2021: 11.3%) above 6.0% 11.3% 12% actuarial estimate; 11.0% conservatively reserved to 5.3% 10.7% counter inflationary
Slide 22: Strong capital base
Strong capital base Robust capital generation provides flexibility Bermuda solvency capital requirement (BSCR) • Regulatory and ratings capital position robust; post-scenario position consistent with S&P -3% -5% +8% -2% -37% A rating 202% 200% • Organic capital generation covered payment of 2021 fin
Slide 23: Financial developments
Financial developments • Hiscox will adopt IFRS 17 from 1 January 2023 – No impact on business strategy and reserving philosophy – No impact on solvency and ability to pay claims/dividends to shareholders – Market education will commence in September • Hiscox will also adopt IFRS 9 from 1 January 20
Slide 24: Underwriting
MN HISCOX Underwriting
Slide 25: Underwriting portfolio: Improving quality, growing where it makes sense
Underwriting portfolio Improving quality, growing where it makes sense 2022 HY total Group gross/net written premium (100%, constant currency) • London Market GWP $2,946.2 million; NWP $1,790.3 million – Selective growth, balanced portfolios Hiscox London Market Hiscox Re & ILS Hiscox Retail deliver
Slide 26: An actively managed business
An actively managed business Continuing to benefit from strategy of balance Total Group controlled premium 30 June 2022: $2,946.2m Period-on-period in constant currency +5% 2022 GWP $938m +34% $901m Professional liability Property Errors and omissions Private directors and Marine officers’ liability
Slide 27: Underwriting considerations
Underwriting considerations Successfully navigating a complex environment Geopolitical Societal • Russia/Ukraine conflict – • Social inflation – robust reserves explicit loss ratio load • Heightened cyber risk – • Litigation – monitor and current experience favourable respond to trends Macroeconomic
Slide 28: Big-ticket response
Big-ticket response Rate and premium keeping pace with inflationary assumptions Rate momentum continues in 2022 Rates Re & ILS London Market • Rates ahead of plan 180 • London Market up 8%, +72% cumulative rise since 2017* 160 • Re & ILS up 13%, +52% cumulative rise since 2017* 140 • Early rises off
Slide 29: Retail response
Retail response Rate and premium keeping pace with inflationary assumptions Rate momentum accelerates through 2022 Rates US UK EU • Rates up 7% across retail 125 – USA up 6%, 22% cumulative since 2018* 120 – UK up 6%, 16% cumulative since 2018* 115 110 – Europe up 8%, 13% cumulative since 2018* 105
Slide 30: People at Hiscox are our greatest asset
People at Hiscox are our greatest asset Investing in the underwriters of the future Award winning courses 29
Slide 31: Product innovation
Product innovation Moving business forward Hiscox London Market enhanced Hiscox UK launched a new health Hiscox ILS launched a special its offering for malicious attack, and well-being product on their opportunities portfolio at which is now available digitally digital platform mid-year renewals • E
Slide 32: Focus for H2 2022
Focus for H2 2022 Active portfolio Risks and opportunities Product and proposition management • Continue to manage the • Portfolios well positioned and • Pivot micro cyber complex environment, push priced across big-ticket and proposition to a more rate and premium ahead of retail, large scale remed
Slide 33: Closing remarks
MN HISCOX Closing remarks
Slide 34: Outlook
Outlook • A strong balance sheet, with capital to deploy as we see opportunities for growth • Rate momentum is expected to sustain through the rest of the year and into 2023. Outlook for margin is improving • Retail business remains on track to achieve a combined ratio in the 90% to 95% range in 202
Slide 35: Appendices
Appendices • Geographical reach • Hiscox investment case • Strategic focus • Long-term growth • An actively managed business • Hiscox ESG framework • Embedding sustainability in how we do business • Demonstrating capital resilience • Group performance • Segmental analysis • Hiscox Ltd results • Boxp
Slide 36: Geographical reach
Geographical reach 35 offices in 14 countries UK Guernsey Birmingham Europe Colchester St Peter Port Amsterdam Glasgow Berlin London Bordeaux Maidenhead USA Bermuda Brussels Manchester Atlanta Hamilton Cologne York Chesapeake Latin American Dublin Chicago gateway Frankfurt Dallas Miami Hamburg Asia
Slide 37: Hiscox investment case
Hiscox investment case Balanced portfolio of large and complex risks SME and personal lines Delivers profits and capital Significant structural generation for reinvestment growth opportunity Delivers underwriting profit Delivers stable profit and capital-lite fee income generation and growth Attract
Slide 38: Strategic focus
Strategic focus a HISCOX Total Group controlled income for 2021 100% = $4,795 million Big-ticket business Retail business 19% Reinsurance 10% Large property Small commercial 28% 8% Casualty Tech and media 7% casualty 6% Specialty — terrorism, product recall 6% Marine and energy Art and private clien
Slide 39: Long-term growth
Long-term growth Total Group controlled income ($) Hiscox Re & ILS Hiscox UK Hiscox Special Risks Hiscox Asia Hiscox London Market Hiscox Europe Hiscox USA 5,000 4,500 Hiscox London Market Gross written premiums ($m) Hiscox Re & ILS 4,000 3,500 3,000 2,500 2,000 Hiscox Retail 1,500 1,000 500 -0 2002
Slide 40: An actively managed business
An actively managed business Continuing to benefit from strategy of balance Total Group controlled premium 30 June 2022: $2,946.2m Period-on-period in constant currency +5% 2022 GWP $938m +34% $901m Professional liability Property Errors and omissions Private directors and Marine officers’ liability
Slide 41: Hiscox ESG framework
Hiscox ESG framework A pragmatic approach 40
Slide 42: Embedding sustainability in how we do business
Embedding sustainability in how we do business Investments Underwriting Operations • Eliminated our exposure within all • Defined categories to track risks • Embedding new net-zero by 2050 directly held bonds in line with ESG by ESG status, starting in Hiscox GHG targets exclusions policy London Mar
Slide 43: Capital resilience
Capital resilience Strongly capitalised across all bases 30 June 2022 • Strongly capitalised above all regulatory, economic, $2.4bn available capital and management bases • BMA’s Bermuda Solvency Capital Economic Regulatory Requirement (BSCR) is Solvency II equivalent • BSCR c200% (2021: 202%), equi
Slide 44: Group performance
Group performance Six months to 30 June 2022 Constant currency GWP GWP change GWP change $m % % Hiscox Retail 1,235.2 1.5 5.9 Hiscox UK 406.2 (1.2) 4.6 Hiscox Europe 338.4 4.8 14.3 Hiscox USA 464.9 1.2 1.2 Hiscox Asia 25.7 11.3 13.0 Hiscox London Market 591.9 (3.0) (3.1) Hiscox Re & ILS 822.7 37.1 3
Slide 45: Segmental analysis
Segmental analysis 30 June 2022 30 June 2021 Hiscox Hiscox Hiscox London Hiscox Corporate Group Hiscox London Hiscox Corporate Group Retail Market Re & ILS Centre Total Retail Market Re & ILS Centre Total $m $m $m $m $m $000 $000 $000 $000 $000 Gross premiums written 1,235.2 591.9 822.7 ‒ 2,649.8 1,
Slide 46: Hiscox Ltd results
Hiscox Ltd results $m 2021 2020 2019 2018 2017 Gross premiums written 4,269.2 4,033.1 4,030.7 3,778.3 3,286.0 Net premiums written 2,955.0 2,750.4 2,678.8 2,581.5 2,403.0 Net premiums earned 2,919.9 2,752.2 2,635.6 2,573.6 2,416.2 Investment return 51.2 197.5 223.0 38.1 104.8 Profit/(loss) before ta
Slide 47: Boxplot and whisker diagram of modelled Hiscox Ltd net loss
Boxplot and whisker diagram of modelled Hiscox Ltd net loss ($m) April 2022 Lower 5%- upper 2011 Tohoku Quake – $25bn market 95% range Superstorm Sandy – $20bn market 700 Loma Prieta Quake – $6bn market Hurricane Andrew – $56bn market Northridge Quake – $24bn market Hurricane Katrina – $50bn market
Slide 48: Realistic disaster scenarios
Realistic disaster scenarios April 2022 Hiscox Group – losses shown as percentage of gross and net written premium Gross loss Net loss Industry loss return period Japanese windstorm 3% $15bn 1 in 30 year 9% Japanese earthquake 6% 23% $50bn 1 in 150 year Gulf of Mexico windstorm 8% 43% $111bn 1 in 50
Slide 49: Non-natural catastrophe extreme loss scenarios
Non-natural catastrophe extreme loss scenarios Changing portfolios, changing risk • As our casualty businesses continue to grow, we develop extreme loss scenarios to better understand and manage the associated risks • We have included more loss scenarios to illustrate other non-natural catastrophe e
Slide 50: GWP geographical and currency split
GWP geographical and currency split 2022 geographical split – controlled income 2022 currency split – controlled income North America GBP Other USD Western Europe (excl. UK) CAD and other Worldwide EUR UK 10.3% 15.8% 19.7% 3.9% 15.3% 48.3% 16.5% 9.6% 60.6% 49
Slide 51: Group reinsurance security
Group reinsurance security Reinsurance assets at 30 June 2022 of $4,069.0m 2022 reinsurance protections* First loss exposure by rating AAA and collateralised Collateralised AA AA range A A range** Other ILS 0.3% 0.9% 24.8% 28.0% 29.5% 38.2% 45.4% 32.9% *Reinsurance placements in force at 9 June 2022
Slide 52: Reinsurance
0 5 10 15 20 25 30 35 40 45 13.4 18.7 21.7 19.4 21.0 19.0 Reinsurance 19.0 19.3 23.5 Ceded as a percentage of GWP 19.2 25.6 26.9 31.7 33.5 31.8 30.8 35.5 39.3 0 5 10 15 20 25 30 10.0 7.7 13.4 of total assets 11.0 11.6 11.7 12.3 10.3 10.6 10.2 12.1 18.8 22.6 Reinsurance receivables as a percentage 27
Slide 53: Investment result
Investment result Return of -$214.1m (2021: $61.9m) 30 June 2022 30 June 2021 Asset Asset allocation Return Return allocation Return Return % % $m % % $m Debt and fixed income holdings £ 12.0 11.3 $ 53.7 51.0 Other 8.7 9.5 Total 74.4 (3.2) (170.8) 71.8 0.2 10.6 Equity and investment funds 5.5 (10.4)
Slide 54: Portfolio – asset mix
Portfolio – asset mix Short duration high quality portfolio Investment portfolio $7.1bn as at 30 June 2022 Asset allocation Debt and fixed income Debt and fixed income holdings credit quality holdings currency split Debt and fixed income holdings Gvt.* USD Cash and cash equivalents AAA GBP Equity an
Slide 55: Portfolio – USD debt and fixed income holdings
Portfolio – USD debt and fixed income holdings as at 30 June 2022 Portfolios: $3.8 billion BB and AAA AA A BBB below and Total Duration % % % % unrated % years % Government issued 0.1 20.9 0.1 0.1 1.0 22.2 1.4 Government supported* 0.1 1.2 0.3 0.2 0.3 2.1 1.8 Asset backed 4.0 0.1 4.1 1.5 Mortgage ba
Slide 56: Portfolio – GBP and other currencies debt and fixed income holdings
Portfolio – GBP and other currencies debt and fixed income holdings as at 30 June 2022 GBP portfolios: BB and $844 million AAA AA A BBB below and Total Duration % % % % unrated % years % Government issued 10.4 10.4 0.4 Government supported* 2.7 0.8 1.0 4.5 2.6 Corporates 7.1 4.2 37.1 36.7 85.1 2.3 T
Slide 57: Business segments
Business segments Hiscox Retail Corporate Centre Hiscox Retail brings together the results of the Group’s Corporate Centre comprises finance costs and administrative retail business divisions in the UK, Europe, USA and Asia. costs associated with Group management activities and Hiscox UK and Hiscox