Slide 1: Hiscox Ltd Preliminary results
Hiscox Ltd Preliminary results For the year ended 31 December 2021
Slide 2: A strong result in a challenging year for the industry
A strong result in a challenging year for the industry • Excellent underwriting and good risk selection in a year of elevated natural catastrophes • Renewed ambition under new leadership • Great opportunities ahead • Final dividend of 23.0 cents per share 1
Slide 3: Strategy, building on strong foundations
Strategy, building on strong foundations
Slide 4: Building on best-in-class assets and capabilities
Building on best-in-class assets and capabilities • Strong growth and capital generative business • Underwriting ecosystem excellence, from individual complex risks to algo-underwriting of simpler risks... • ...combining technology, data and analytics to drive faster and better decisions • Internati
Slide 5: Balanced strategy continues to evolve
Balanced strategy continues to evolve Retail Big ticket 2005 2010 2015 2021 GWP 33% NWP 67% 4
Slide 6: Hiscox is a unique business…
Hiscox is a unique business… 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 distribution and technology
Slide 7: ...supported by five core Group capabilities...
...supported by five core Group capabilities... People and culture Brand Underwriting Technology Capital 6
Slide 8: ...measured by four overarching performance metrics
...measured by four overarching performance metrics Non-financial performance metrics Financial performance metrics Customer Growth People and culture ROE Building a sustainable business 7
Slide 9: Retail digital: Growing fast
Retail digital Growing fast Large and attractive SME market Building scale at pace Total SME market Target addressable SME market today 520,000 customers USA GWP CAGR +35.3% (2016-2021) 32m in local currency 175,000 customers GWP CAGR +8.2% (2016-2021) in local currency 10m 87,000 customers GWP CAGR
Slide 10: Retail digital ecosystem
Retail digital ecosystem Technical excellence combined with technology – powerful competitive advantage 9
Slide 11: Retail traditional: Operating in attractive niches
Retail traditional Operating in attractive niches where we have expertise % of Broker GWP (2021)* % of Broker GWP (2021) % of Broker GWP (2021) Commercial liability Emerging Emerging 28% 25% 28% and property professions** professions** High-value home Crisis Household and 27% 23% 26% and fine art ma
Slide 12: London Market: Building a diversified, balanced portfolio
London Market Building a diversified, balanced portfolio London Market net earned premiums (% of total portfolio) Household Kidnap and ransom Commercial lines Terrorism Major property Personal accident Flood Product recall Crisis Property management 26% 22% COR 89.1% Marine, energy Casualty and spec
Slide 13: London Market: Combining underwriting excellence with digital innovation
London Market Combining underwriting excellence with digital innovation Hiscox FloodPlus 12
Slide 14: Re & ILS: Hybrid reinsurer with short-tail specialty focus
Re & ILS Hybrid reinsurer with short-tail specialty focus Property cat specialist Short-tail specialist Hybrid reinsurer Matching risk and capital for the benefit of reinsured and capital providers Traditional reinsurance Third-party capital Third-party capital Hiscox capital Quota share capital ILS
Slide 15: My executive team
My executive team Aligned in purpose, strategy and values Liz Breeze Amanda Brown Hanna Kam Joanne Musselle Interim Group Chief Chief Human Resources Group Chief Risk Officer Group Chief Underwriting Financial Officer Officer Joined Hiscox: February 2015 Officer Joined Hiscox: May 2012 Joined Hiscox
Slide 16: Building talent excellence
Building talent excellence People are our greatest asset Nurturing great internal capabilities... ...and attracting high-calibre experienced talent Hiscox London Market Hiscox RE & ILS 25% +43% Colin Buchanan Casualty Divisional Director Nisha Manaktala Technology Director, Re & ILS of workforce are
Slide 17: Our strategic priorities
Our strategic priorities Strong and profitable growth in Retail Delivering sustainable returns across all business segments Advanced data, analytics and technology underpinning underwriting and distribution Attracting and nurturing the best talent Building a sustainable business 16
Slide 18: Financial performance
MN HISCOX Financial performance
Slide 19: Group financial performance
Group financial performance Strong result despite impact of natural catastrophes 31 December 2021 31 December 2020 • Growth across the Group $m $m underpinned by continued positive rate momentum Growth and strong customer Gross premiums written 4,269.2 4,033.1 growth in Retail Net premiums written 2
Slide 20: Hiscox Retail: Good progress towards delivering Retail COR guidance
Hiscox Retail Good progress towards delivering Retail COR guidance 31 December 2021 31 December 2020* • GWP up 5.0% or 1.5% $m $m in CCY Growth • Exited over $100m of US broker business; Gross premiums written 2,290.0 2,180.0 underlying portfolio** up 6.8% in CCY Net premiums written 1,969.3 1,907.8
Slide 21: Hiscox London Market: Strong performance with focus on profitability
Hiscox London Market Strong performance with focus on profitability 31 December 2021 31 December 2020* • Growing top line where $m $m opportunity is attractive Growth • NWP up 9.5%, almost double the GWP growth Gross premiums written 1,171.4 1,109.7 rate, as we retained more in a hard market Net pre
Slide 22: Hiscox Re & ILS: Outstanding result in a heavy natural catastrophe year
Hiscox Re & ILS Outstanding result in a heavy natural catastrophe year 31 December 2021 31 December 2020 • GWP up 8.7% and NWP $m $m up 42.3%, as we deployed own capital in improved Growth rate environment Gross premiums written 807.8 743.4 • Strong non-catastrophe loss experience as the Net premium
Slide 23: Investment performance
Investment performance Cash and bond income net of fees ($m) Mark-to-market on bonds ($m) • Investment result $51.2m 48 51 (2020: $197.5m), return 116 of 0.7% (2020: 2.8%) 97 102 82 • Mark-to-market losses incurred in bonds as yields increased -31 • Contribution from equity and hedge funds more -97
Slide 24: Reserve resilience continues
Reserve resilience continues $149m positive reserve development Loss development* by accident year • Margin of $372m (2020: $348m); 11.7% (2020: 9.8%) above actuarial estimate • Positive reserve development of $149m (2020: $32m) • Reserve releases 3.7% of opening balance • LPTs limiting potential fo
Slide 25: Strong capital base
Strong capital base Robust capital generation provides strategic flexibility Bermuda solvency capital requirement (BSCR) • Regulatory and ratings capital position robust; post-scenario position 17% -11% 200% consistent with S&P -6% 187% +13% A rating -31% 169% • Key changes during the year: – Two LP
Slide 26: Upcoming changes
Upcoming changes S&P model IFRS 17 OECD base updates erosion and profit shifting (BEPS) 25
Slide 27: Underwriting
MN HISCOX Underwriting
Slide 28: Managing our net exposure: Growing where there is opportunity
Managing our net exposure Growing where there is opportunity 2021 Total Group gross/net written premium (100%) • London Market GWP $4,795 million; NWP $3,279 million – Portfolio balance and more premium net in Hiscox London Market Hiscox Re & ILS Hiscox Retail an improving market 2,500 GWP NWP GWP N
Slide 29: Global market hardening
Global market hardening Rate momentum continues in big-ticket London Market Core London Market Catastrophe reinsurance • Rates up 13% in 2021 • 60% cumulative rise since 2017 170 – Early rises offsetting increased risk 160 – Now significant margin improvement 150 • Rate adequacy remains solid 140 Re
Slide 30: Retail market hardening
Retail market hardening Rate momentum in all business units USA UK EU Retail • Rates up 5% with accelerated momentum during 2021 120 • More nuanced by segment – US up 6%, 15% 115 cumulative since 2018 – UK up 7%, 9% cumulative since 2018 110 – Europe up 4%, 5% cumulative with 105 increased momentum
Slide 31: Claims inflation management
Claims inflation management Consideration in planning, pricing, capital and reserving Economic e.g. costs and wages • Property – index linking sums insured • Casualty – accurate exposures e.g. turnover • Attachment, SIRs* and deductibles Climate e.g. physical risk and litigation • Property – investm
Slide 32: London Market: More premium, less risk
London Market More premium, less risk – taking control ahead of the cycle Open market line size ($m) Open market exposure Property binder exposure ($bn) Exposure ($bn) GWP ($m) 5.4 140 800 140 700 5.2 120 600 120 5.0 -11% 500 -39% 100 400 100 4.8 300 80 200 80 4.6 100 4.4 60 0 60 2019 2020 2021 2019
Slide 33: Re & ILS: Re-focused, driving rate
Re & ILS Re-focused, driving rate – positioned well for the future Re-focus away from loss drivers Drive rate Core Long tail Remedial action Small lines Cumulative rate (2017 – 2021) 100% Cat +26% % of gross GWP 90% Retro +57% Agg +38% 80% Risk +40% 70% Specialty +102% 60% Other +16% 50% 2017 2018 2
Slide 34: Retail: Automated underwriting driving consistent results
Retail Automated underwriting driving consistent results Retail commercial – % policy count by revenue band Nano <250k Micro <1m XS <5m Small <25m Medium <100m Large <1bn Mega >1bn 100 Accelerate to small business in commercial 1,600 90 -25% • 90% of the portfolio has a turnover of < $£€1m 1,200 ̶ T
Slide 35: Underwriting 2022 outlook
Underwriting 2022 outlook Portfolios well positioned to capture growth Hiscox 2022 course correction lines Hiscox Re & ILS* • USA: complete small business acceleration 1% • Cyber: significant rate increases in all countries • Continued rate momentum • Short-tail reinsurance specialist • Reinsurance
Slide 36: Closing remarks
MN HISCOX Closing remarks
Slide 37: Outlook
Outlook • Outlook is strong for 2022 and beyond • London Market and Re & ILS – more balanced, more controlled and better rated. Positioned well to realise strong profits and take advantage of cyclical growth opportunities • Retail return to strong growth, towards middle of 5% to 15% range in 2022 an
Slide 38: Appendices
Appendices • Geographical reach • Hiscox investment case • Strategic focus • Long-term growth • An actively managed business • Hiscox ESG framework • ESG progress update • Demonstrating capital resilience • Group performance • Segmental analysis • Hiscox Ltd results • Boxplot and whisker diagram of
Slide 39: 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 40: 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-light fee income generation and growth Attrac
Slide 41: Strategic focus
Strategic focus a HISCOX Total Group controlled income for 2021 100% = $4,795 million Big-ticket business Retail business 19% Reinsurance 10% Large property Small commercial 28% 8% Casualty Tech and media 7% casualty 6% Specialty — terrorism, product recall 6% Marine and energy Art and private clien
Slide 42: Long-term growth
Long-term growth Total Group controlled income ($) 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 43: An actively managed business
An actively managed business Strategy of balance continues Total Group controlled premium 31 December 2021: $4,795m Period-on-period in constant currency +2%* 2021 GWP $1,707m Professional liability Errors and omissions Private directors and officers’ liability +8% $917m Cyber Commercial Property sm
Slide 44: Hiscox ESG framework
Hiscox ESG framework A pragmatic approach 43
Slide 45: Environmental, social and governance
Environmental, social and governance Good progress in areas material to the business • Underwriting and investment • Paid out $1.25bn in claims • 45% female representation currently exclusion policy came into force • Customer tools to help manage risks, at Board level, and 60% within the at 1/1/22 e
Slide 46: Demonstrating capital resilience
Demonstrating capital resilience 31 December 2021 • Strongly capitalised above all regulatory, economic, $2.60bn available capital and management bases $2.52bn available capital (post-final dividend) • BMA’s Bermuda Solvency Capital Economic Regulatory Requirement (BSCR) is Solvency II equivalent •
Slide 47: Group performance
Group performance Year to 31 December 2021 Constant currency GWP GWP change GWP change $m % % Hiscox Retail 2,290.0 5.0 1.5 Hiscox UK 831.1 9.9 2.9 Hiscox Europe 532.0 15.4 9.8 Hiscox USA 879.2 (3.9) (3.9) Hiscox Asia 47.7 (1.0) (0.2) Hiscox London Market 1,171.4 5.6 4.1 Hiscox Re & ILS 807.8 8.7 7.
Slide 48: Segmental analysis
Segmental analysis 31 December 2021 31 December 2020* 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 2,290.0 1,171.4 807.8 ‒
Slide 49: Hiscox Ltd results
Hiscox Ltd results $m 2021 2020 2019 2018 2017 Gross premiums written 4,269.2 4,033.1 4,030.7 3,778.3 3,286.0 Net premiums written 2,955.0 2,750.4 2,678.8 2,581.5 2,403.0 Net premiums earned 2,919.9 2,752.2 2,635.6 2,573.6 2,416.2 Investment return 51.2 197.5 223.0 38.1 104.8 Profit/(loss) before ta
Slide 50: Boxplot and whisker diagram of modelled Hiscox Ltd net loss
Boxplot and whisker diagram of modelled Hiscox Ltd net loss ($m) January 2022 Lower 5%- upper 700 2011 Tohoku Quake – $25bn market 95% range Superstorm Sandy – $20bn market Loma Prieta Quake – $6bn market Hurricane Andrew – $56bn market Northridge Quake – $24bn market Hurricane Katrina – $50bn marke
Slide 51: Realistic disaster scenarios
Realistic disaster scenarios January 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 8% Japanese earthquake 6% 22% $50bn 1 in 150 year Gulf of Mexico windstorm 6% 44% $111bn 1 in
Slide 52: 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 53: GWP geographical and currency split
GWP geographical and currency split 2021 geographical split – controlled income 2021 currency split – controlled income North America GBP Other USD Western Europe (excl. UK) CAD and other Worldwide EUR UK 13.8% 19.4% 21.0% 4.2% 8.0% 49.5% 14.0% 61.0% 9.1% 52
Slide 54: Group reinsurance security
Group reinsurance security Receivables at 31 December 2021 of $3,908.0m 2021 reinsurance protections First loss exposure by rating AAA and collateralised Collateralised AA AA A A Other ILS 0.3% 4.0% 24.6% 24.5% 27.6% 45.1% 26.4% 47.5% 53
Slide 55: Reinsurance
0 5 10 15 20 25 30 35 40 13.4 18.7 21.7 19.4 21.0 Reinsurance 19.0 19.0 19.3 Ceded as a percentage of GWP 23.5 19.2 25.6 26.9 31.7 33.5 31.8 30.8 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 Reinsurance receivables as a percentage 18.8 22.6 27.0 26.3 28.2
Slide 56: Investment result
Investment result Return of $51.2m (2020: $197.5m) 31 December 2021 30 December 2020 Asset Annualised Asset Annualised allocation return Return allocation return Return % % $m % % $m Bonds £ 13.1 13.0 $ 53.6 51.0 Other 9.2 9.2 Bonds total 75.9 (0.2) (11.4) 73.2 3.0 154.6 Equities 6.3 11.6 66.2 6.1 1
Slide 57: Portfolio – asset mix
Portfolio – asset mix High quality, conservative portfolio Investment portfolio $7,290 million as at 31 December 2021 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
Slide 58: Portfolio – USD debt and fixed income holdings
Portfolio – USD debt and fixed income holdings as at 31 December 2021 Portfolios: $3.9 billion BB and AAA AA A BBB below and Total Duration % % % % unrated % years % Government issued 18.0 1.4 19.4 1.4 Government supported* 1.6 0.4 0.2 0.4 2.6 1.6 Asset backed 2.9 0.1 3.0 1.6 Mortgage backed agency
Slide 59: Portfolio – GBP and other currencies debt and fixed income holdings
Portfolio – GBP and other currencies debt and fixed income holdings as at 31 December 2021 GBP portfolios: BB and $958 million AAA AA A BBB below and Total Duration % % % % unrated % years % Government issued 10.1 10.1 0.7 Government supported* 7.6 0.5 8.1 1.9 Corporates 18.5 2.3 28.7 32.3 81.8 2.0
Slide 60: Business segments
Business segments Hiscox Retail and casualty reinsurance contracts written in the Bermuda Hiscox Retail brings together the results of the Group’s hub on Syndicate capacity are also included. The segment retail business divisions in the UK, Europe, USA and Asia. also includes the performance and fee