Slide 1: Hiscox Ltd Preliminary results
Hiscox Ltd Preliminary results For the six months ended 30 June 2016
Slide 2: A good first half flattered by FX
A good first half flattered by FX Excluding FX June June 2016 2016 Premium growth 17.5% 13.0% (2015: 12.0%) (2015: 7.2%) Profit before tax £206.0m £118.7m (2015: £135.1m) (2015: £150.8m) Combined ratio 80.7% 88.4% (2015: 82.5%) (2015: 80.3%) • Higher catastrophe losses £19.0m (2015: £nil) and contin
Slide 3: Financial performance
he HISCOX Financial performance
Slide 4: A good performance
A good performance June June Dec 2016 2015† 2015 £m £m £m Gross premiums written 1,288.5 1,096.3 1,944.2 Net premiums written 889.1 860.1 1,571.8 Investment return on financial assets 42.0 27.9 33.7 Foreign exchange gains/(losses) 87.3 (15.7) 15.2 • Reflects FX volatility Profit before tax 206.0 135
Slide 5: Segmental analysis
Segmental analysis 30 June 2016 30 June 2015* Hiscox Hiscox Hiscox London Hiscox Corporate Hiscox London Hiscox Corporate Retail Market Re Centre Total Retail Market Re Centre Total £m £m £m £m £m £m £m £m £m £m Gross premiums written 581.1 342.7 364.7 ‒ 1,288.5 510.5 298.1 287.8 ‒ 1,096.3 Net premi
Slide 6: Solid investment performance
Solid investment performance 30 June 2016 30 June 2015 Asset Annualised Asset Annualised allocation return Return allocation return Return % % £000 % % £000 Bonds £ 14.4 3.9 15.4 0.9 US$ 52.3 3.2 53.2 1.6 Other 8.8 2.2 9.1 0.4 Bonds total 75.5 3.2 43,581 77.7 1.3 15,038 Equities 6.9 (2.0) (2,737) 8.
Slide 7: Portfolio – asset mix
Portfolio – asset mix High-quality, conservative portfolio Investment portfolio £3,946m as at 30 June 2016 • AUM increased as a result of Sterling weakness Asset allocation Bond credit quality Bond currency split • Cash reduced following Bonds Gvt. USD investment of bond Cash AAA GBP proceeds in Q2
Slide 8: Capital requirements
Capital requirements £1.94bn available capital £1.92bn available capital (post interim dividend) Economic Regulatory A.M. Best Standard & Poor's Fitch ratings Group capital Group capital Bermuda solvency (catastrophe model (economic) model (regulatory) capital requirement stressed) Rating agency ass
Slide 9: Financial facts
Financial facts • Reserve releases of £96m (2015: £123m) • Net catastrophe and market loss claims impact for Hiscox Ltd – Catastrophe: £19.0m (2015: £nil) – includes Alberta wildfires, Houston floods, Japan and Ecuador earthquakes, UK and European storms – Market losses: £25.2m (2015: £25.8m) – incl
Slide 10: Underwriting
he HISCOX Underwriting
Slide 11: Rates under pressure
Rates under pressure Core London Market (excluding White Oak) All Retail Catastrophe reinsurance • Rates weighted by premium 120 • Continued reductions in core London Market lines 100 – Marine and energy Rate on line indexed to January 2010 – Aviation 80 – Big ticket property • Slowing decline in ca
Slide 12: An actively managed business
An actively managed business Total Group controlled premium 30 June 2016: £1,441m Period-on-period in local currency +16.1% 2016 GWP £400m +21.6% £372m Professional Non-marine liabilities Errors and omissions Marine +8.1% Private directors and £242m officers’ liability Kidnap and ransom Aviation Cyb
Slide 13: Managing net catastrophe exposure
Hiscox Re Managing net catastrophe exposure Hiscox Re GWP and NWP (US$ Group controlled) • Gross catastrophe premium increased Gross catastrophe Gross other Net catastrophe Net other to facilitate growth 700 in Kiskadee • Net catastrophe premium has reduced 600 as rates have reduced • Growing in div
Slide 14: Business performance
he HISCOX Business performance
Slide 15: Brexit: Structural not strategic
Brexit Structural not strategic • FX impact translational: no impact on economic capital requirements • Impacts £260m of business – Hiscox Europe, overseas holiday homes, pan-European risks, political risks • Preparing for Brexit Lite and Brexit Heavy • Expect to create a new EU-based carrier • Well
Slide 16: Managing the business
Managing the business Six months to 30 June 2016 Local currency GWP NWP GWP change NWP change GWP change NWP change £m £m % % % % Hiscox Retail Hiscox UK and Europe Hiscox UK 244.4 211.7 9.3 (0.9) 8.7 (1.7) Hiscox Europe 101.2 98.0 9.2 9.8 7.5 7.7 Hiscox International Hiscox Special Risks 44.9 38.8
Slide 17: Hiscox London Market and Hiscox Re
Hiscox London Market and Hiscox Re Disciplined in tough markets Hiscox London Market Hiscox Re • Growth of 9.7% in local currency • Good growth in casualty and specialty ‒ Core London Market 1.2% • Careful risk selection mitigating industry losses ‒ New classes of business 5.3% • Less aggressive rat
Slide 18: Hiscox Special Risks and DirectAsia
Hiscox Special Risks and DirectAsia Navigating challenging markets Hiscox Special Risks DirectAsia • Good profit despite ongoing intense competition • Sale of Hong Kong awaiting regulatory approval • Contraction in oil and mining, and consolidation in other • Focus on brand-building in Thailand is d
Slide 19: Hiscox UK and Hiscox Europe
Hiscox UK and Hiscox Europe Delivering good growth and profit Hiscox UK and Ireland Hiscox Europe • Combined ratio 80.8% • Combined ratio 92.8% in local currency • Finding efficiencies through updated IT infrastructure • Storm Elvira €5m impact • New home renovation and extension product for APC • N
Slide 20: Hiscox USA: Achieving scale and profitable
Hiscox USA Achieving scale and profitable • Customer numbers Broker Direct and partnerships – Direct over 110,000 500 – Broker over 40,000 • Compound growth over five years of 26.0% 400 • Attractive loss ratios • Seven offices in operation: – Atlanta 300 $US GWP – Chicago – Dallas – Los Angeles 200
Slide 21: Hiscox USA: Product – a focused approach
Hiscox USA Product – a focused approach Specialist products that resonate Total GWP 30 June 2016: $270m • Deep expertise in a limited number of niche lines • Focus on thought leadership and Direct and value-added services partnerships 17% • Value proposition segmented by industry and size Media and
Slide 22: Hiscox USA: Distribution – a focused approach
Hiscox USA Distribution – a focused approach Efficient distribution that scales Direct and partnerships Traditional brokers • Online in 49 states • First and second tier wholesalers • Other insurers with complementary • Major retailers with specialist centres appetites and large sales forces of exce
Slide 23: Hiscox USA: An appetite to keep investing
Hiscox USA An appetite to keep investing People Systems and infrastructure Brand Attracting the talented and ambitious Future proofing the business The gift that keeps on giving • Working to become an employer • Selection of new IT infrastructure • Already spending $25m per year of choice in the US
Slide 24: Summary and outlook
he HISCOX Summary and outlook
Slide 25: Summary and outlook
Summary and outlook Strategy of balance working • Hiscox Retail biggest contributor to profit and continues to grow • More pressure ahead for Hiscox London Market and Hiscox Re • Kiskadee assets under management now over $1bn • Economic capital requirements unchanged by FX volatility 24
Slide 26: Appendices
Appendices • Geographical reach • Strategic focus • A symbiotic relationship • Long-term growth • An actively managed business • Hiscox Ltd results • Boxplot and whisker diagram of Hiscox Ltd • Realistic disaster scenarios • Casualty extreme loss scenarios • GWP geographical and currency split • Gro
Slide 27: Geographical reach
Geographical reach UK Guernsey Birmingham Europe Colchester St Peter Port Amsterdam Glasgow Bordeaux Leeds Brussels London USA Bermuda Cologne Maidenhead Atlanta Hamilton Dublin Manchester Chicago Latin American Hamburg York Dallas gateway Lisbon Los Angeles Miami Lyon Asia New York City Madrid Bang
Slide 28: Strategic focus
a Strategic focus HISCOX Total Group controlled income for 2015 100% = £2,165m Internationally traded lines Local specialty lines 20% Reinsurance Local casualty 21% and commercial Tech and media 6% casualty T% Large property 4% Global casualty Art and private 13% client 13% Specialty — terrorism, co
Slide 29: A symbiotic relationship
A symbiotic relationship a HISCOX Internationally traded lines ¢ Larger premium, catastrophe exposed ¢ Shrinks and expands according to rates ¢ Excess profits allow investment in retail development Profit generator Value creator Local specialty lines Premium growth between 5-15% per annum Pays divid
Slide 30: Long-term growth: Gross written premiums
Long-term growth Hiscox Reinsurance Hiscox London Market - Retail Hiscox Europe Hiscox USA Hiscox London Market - Volatile Hiscox UK Hiscox Guernsey DirectAsia 2200 2000 1800 Gross written premiums (£m) Internationally traded lines 1600 1400 1200 1000 800 Local specialty 600 lines 400 200 0 29
Slide 31: An actively managed business
An actively managed business Total Group controlled premium 30 June 2016: £1,441m Period-on-period in local currency +16.1% 2016 GWP £400m +21.6% £372m Professional Non-marine liabilities Errors and omissions Marine +8.1% Private directors and £242m officers’ liability Kidnap and ransom Aviation Cyb
Slide 32: Hiscox Ltd results
Hiscox Ltd results £m 2015 2014 2013 2012 2011 2010 Gross premiums written 1,944.2 1,756.3 1,699.5 1,565.8 1,449.2 1,432.7 Net premiums written 1,571.8 1,343.4 1,371.1 1,268.1 1,174.0 1,131.6 Net premiums earned 1,435.0 1,316.3 1,283.3 1,198.6 1,145.0 1,131.2 Investment return† 33.7 56.4 58.9 92.7 2
Slide 33: Boxplot and whisker diagram of modeled Hiscox Ltd net loss
Boxplot and whisker diagram of modeled Hiscox Ltd net loss ($m) April 2016 Lower 5%- upper Loma Prieta Quake $6bn market loss Northridge Quake $24bn market loss Hurricane Andrew $56bn market loss Hurricane Katrina $50bn market loss 95% range 2011 Tohoku Quake $25bn market Superstorm Sandy - $20bn ma
Slide 34: Realistic disaster scenarios
Realistic disaster scenarios Hiscox Group – losses shown as percentage of 2015 gross and net written premium Gross loss Industry loss Net loss return period Japanese earthquake 5% $50bn 1 in 240 year 28% Gulf of Mexico windstorm 9% $107bn 1 in 80 year 46% Florida windstorm 8% $125bn 1 in 100 year 30
Slide 35: Casualty extreme loss scenarios
Casualty 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 • Losses in the region of £75m-£300m could be suffered in the following extreme scenarios: Event Es
Slide 36: GWP geographical and currency split
GWP geographical and currency split 2016 geographical split – controlled income 2016 currency split – controlled income North America GBP Other USD Westerm Europe (excl. UK) CAD and other Worldwide EUR UK 12.1% 14.7% 5.0% 24.7% 42.2% 23.3% 58.2% 9.5% 10.3% 35
Slide 37: Group reinsurance security
Group reinsurance security Receivables at 30/06/16 of £793.6m 2016 reinsurance protections* First loss exposure by S&P rating A A AA AA AAA and collateralised AAA Other 4.5% 8% 24.7% 25% 51.1% 67% 19.7% *Reinsurance placements in force at 21 July 2016. 36
Slide 38: Reinsurance
Reinsurance Ceded as a percentage of GWP Reinsurance receivables as a percentage of total assets 35 25 30 31.0 20 25 23.5 15 20 21.7 21.5 21.0 19.4 19.3 19.2 19.0 19.0 13.4 18.7 12.7 12.3 15 11.7 11.6 10 11.3 11.0 10.6 10.3 10.2 10.0 13.4 10 7.7 5 5 0 0 37
Slide 39: Portfolio – USD bond portfolios
Portfolio – USD bond portfolios as at 30 June 2016 Portfolios: $2.7bn BB and AAA AA A BBB below Total Duration • Liquid portfolio % % % % % % months • Short duration Government issued 27.6 27.6 18.0 • Short dated corporates Government supported* 0.8 6.9 0.1 0.2 8.0 17.6 still favoured Asset backed 8
Slide 40: Portfolio – GBP, EUR and CAD bond portfolios
Portfolio – GBP, EUR and CAD bond portfolios as at 30 June 2016 GBP portfolios: BB and AAA AA A BBB below Total Duration • Governments favoured £561m for duration management % % % % % % months Government issued 27.0 27.0 18.2 • Corporates for yield Government supported* 15.7 1.8 0.1 17.6 17.3 • No e
Slide 41: Business segments
Business segments Hiscox Retail Hiscox Re Hiscox Retail brings together the results of the UK and Hiscox Re is the reinsurance division of the Group, combining Europe, and Hiscox International being the US, Special Risks the underwriting platforms in Bermuda, London and Paris. and Asia retail busine
Slide 42: Glossary of terms
Glossary of terms Binding authority Group controlled An agreement between a Lloyd’s managing agent and a The total gross written premium controlled by the Group coverholder under which the managing agent delegates its including the 27.5% of the Syndicate capacity not owned by authority to enter into
Slide 43: Glossary of terms
Glossary of terms MGA Reinsurance to close – RITC Managing General Agency. An individual or business entity The reinsurance to close comprises a premium payable by appointed by an insurer to solicit applications from agents for the closing year to the members on the next open year of insurance contr