Slide 1: Preliminary results for the year ended 31 December 2013
Hiscox Ltd Preliminary results for the year ended 31 December 2013
Slide 2: A very good year
A very good year • Premium growth of 8.5% • Profit before tax £244.5m (2012: £217.5m) • Combined ratio 83.0% (2012: 85.5%) • Return on equity 19.3% (2012: 17.1%) • Capital return of 50p including final dividend equivalent 1
Slide 3: Strategy working
Strategy working Total Group controlled income for 2013 100% = £1,924m Local casualty and commercial Reinsurance 20% 25% Tech and media 3% casualty Large property 6% 14% Art and Global casualty 2% private client 12% 6% Specialty – terrorism, contractors’ equipment FTC, 7% 5% Specialty – kidnap and r
Slide 4: Financial performance
HISCOX Financial performance
Slide 5: A very good year
A very good year Full year Full year 2012 2013 restated* £000 £000 Gross premiums written 1,699,478 1,565,819 Net premiums written 1,371,114 1,268,140 Net premiums earned 1,283,311 1,198,621 Investment return on financial assets 58,924 92,690 Foreign exchange losses (9,890) (20,173) • 1.9% Profit be
Slide 6: Segmental analysis
Segmental analysis 31 December 2013 31 December 2012 restated* London UK and Inter- Corporate London UK and Inter- Corporate Market Europe national Centre Total Market Europe national Centre Total £000 £000 £000 £000 £000 £000 £000 £000 £000 £000 Gross premiums written 668,240 559,089 472,149 ─ 1,69
Slide 7: Good investment performance
Good investment performance 31 December 2013 31 December 2012 Asset Annualised Return Asset Annualised Return allocation return allocation return % % £000 % % £000 Bonds £ 16.3 0.7 13.2 2.2 US$ 48.5 0.7 49.0 3.2 Other 9.9 0.6 9.6 2.2 Bonds total 74.7 0.7 17,105 71.8 2.8 62,579 Equities 7.1 18.3 39,2
Slide 8: High quality, conservative portfolio
High quality, conservative portfolio Investment portfolio: £3.129bn as at 31 December 2013 Asset allocation • Short duration Risk assets • High credit quality 7.1 Cash 18.2 • Risk assets over 7% Bond credit quality % 74.7 Bonds Bond currency split BB and below CAD 1.1 BBB EUR 2.0 7.1 12.2 A 13.7 AA
Slide 9: Portfolios - USD bond portfolios as at 31 December 2013
Portfolios - USD bond portfolios as at 31st December 2013 Portfolios: $2.6bn BB and AAA AA A BBB below Total Duration % % % % % % months • Modest increase in governments Government issued 1.9 33.7 0.6 0.1 0.1 36.4 20.1 Government supported* 0.7 7.0 0.4 0.1 8.2 20.5 Asset backed 13.5 0.2 13.7 10.1 •
Slide 10: Portfolios - GBP, EUR and CAD bond portfolios
Portfolios - GBP, EUR and CAD bond portfolios as at 31st December 2013 GBP portfolio: £510m AAA AA A BBB Other Total Duration % % % % % % months • Small exposure to Government issued 1.6 58.1 1.2 60.9 18.3 Spain and Italy Government supported* 8.9 0.4 0.2 9.5 7.4 • Governments favoured Asset backed
Slide 11: Projected capital requirement
2014 capital requirements £1.4bn available capital £1.2bn available capital (post return) Projected capital requirement Notes: 1. Rating agency requirements are in line with the latest 2014 requirements as defined by the agency capital models. 2. The Hiscox’s internal risk appetite reflects Hiscox's
Slide 12: Returning 50p per share of capital
Returning 50p per share of capital • 14p per share final dividend equivalent • Additional return of 36p per share with share consolidation • Issue of C or D shares (similar to last year’s B share) • Share consolidation: 89 new ordinary shares for 100 existing ordinary shares • Maintains TNAV per sha
Slide 13: Fascinating financial facts
Fascinating financial facts • Good claims experience – Low level catastrophe losses – Hiscox net £18.1m Aggregate industry losses £4.8bn (Oklahoma tornadoes, European floods, Calgary floods, UK storms) – Impact from large risk losses – Hiscox net £29.3m Aggregate industry losses £1.2bn (La Plata, Di
Slide 14: Underwriting
HISCOX Underwriting
Slide 15: An actively managed business
An actively managed business Total Group controlled premium 2013: £1,924m Year-on-year growth -7.7% in local currency £471m +18.3% £451m 2013 GWP Non-marine Professional liabilities +13.1% £347m Errors and omissions Kidnap and ransom +3.8% Contingency £265m Directors and Marine +23.9% officers’ liab
Slide 16: Mixed rating environment
Mixed rating environment Insurance Reinsurance 140 120 • Reinsurance under competition 100 • Insurance rates for Index level % 80 smaller specialty risks broadly flat to rising 60 • Larger insurance 40 risks including energy, large 20 property, aviation are softening 0 12 month rolling period ending
Slide 17: Planned change in catastrophe exposure for 2014
Planned change in catastrophe exposure for 2014 Change in Change from June 2013 mean loss 50% 30% 10% (10%) JP EQ – Japanese earthquake (30%) US EQ – United States earthquake EU WS – European windstorm (50%) US WS – United States windstorm (70%) Industry loss return period and peril 5-10 year 10-25
Slide 18: Hiscox Re: adapting to a changing market
Hiscox Re: adapting to a changing market • Successful launch of Hiscox Re • Material gross line – $200m any one program • Building third-party quota share support – value of client relationships, brand, and record of outperformance • Developing ILS strategy – $110m assets under management – Ongoing
Slide 19: Hiscox London Market profitability
Hiscox London Market profitability insurance reinsurance Hurricane Sandy/ International Costa PI cat losses/ Concordia losses Financial Arab Spring crisis/ Chile/New Hurricane Hurricane Zealand Katrina Ike quake Four Profit hurricanes 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 *Note: 100
Slide 20: Business performance
HISCOX Business performance
Slide 21: Managing the business
Managing the business Gross written premiums for the year ended 31 December 2013 2013 2012 Change Growth £000 £000 % in local currency % Hiscox London Market – Reinsurance 199,653 229,595 (13.0) (13.9) – Insurance 468,587 410,447 14.2 9.1 Hiscox International – Hiscox Bermuda 211,850 200,708 5.6 4.5
Slide 22: Hiscox London Market Insurance: Good growth and profit
Hiscox London Market Insurance Good growth and profit • New leadership in place • Strong performance across all lines – Property: growing in small binding authority business – Aerospace: disciplined underwriting – Terrorism: maintained market share in competitive environment – Marine hull: improved
Slide 23: Hiscox Re: Top tier reinsurer
Hiscox Re Top tier reinsurer • Combined leadership of reinsurance teams in London, Paris and Bermuda • Remaining disciplined as rates at 1 January down by average 16% • Quota share partners providing good support • Good start to Kiskadee Re; building presence in ILS market 22
Slide 24: Hiscox UK: Record profit
Hiscox UK Record profit Full year Full year 2013 2012 • Overall benign claims experience, profits £m £m impacted by December floods Gross premiums written 412.4 375.2 • Excellent client retention and new business in Art and Private Client Marketing expenditure (12.5) (14.3) • Good growth and profits
Slide 25: UK storm and flood
UK storm and flood December 2013 January/February 2014* Incurred Estimated Incurred Estimated claims claim numbers claims claim numbers Flood £7.1m 100 Flood £1.9m 50 Storm £4.2m 650 Storm £3.2m 650 • 2013 storm and flood losses within normal annualised catastrophe expectations • Reinsurance deducti
Slide 26: Hiscox Europe: Outstanding performance
Hiscox Europe Outstanding performance Full year Full year 2013 2012 £m £m • Good claims experience despite summer Gross premiums written 146.7 132.3 floods Marketing expenditure (3.1) (3.0) • New business up by 14% in France and Germany driven by commercial lines Underwriting result 6.5 4.8 • New di
Slide 27: Hiscox International: Good growth and profit
Hiscox International Good growth and profit • Hiscox Guernsey – Excellent profit in competitive market • Hiscox USA – 31.1% GWP growth – Good underwriting, broker channel moves to profit – New distribution partners for Direct products – $24m of marketing investment • Hiscox Bermuda – Strong profit –
Slide 28: Steadily growing US direct
Policy units sold 1000 1200 200 400 600 800 0 Nov-10 Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 Jan-12 Feb-12 Mar-12 Apr-12 May-12 Policy unit sales per week – US direct Jun-12 Week Jul-12 Aug-12 Sep-12 Steadily growing US direct Oct-12 Nov-12 Dec-12 J
Slide 29: Summary and outlook
HISCOX Summary and outlook
Slide 30: Strategy working
Strategy working • All businesses performing well. Clear priorities for future – Discipline in reinsurance – Opportunities in insurance – Building Direct • Continue to invest in people and brand • Ongoing challenging investment environment • Second year of capital return – no promise of a third 29
Slide 31: Appendices
Appendices • Geographic reach • Strategic focus • A symbiotic relationship • Long-term growth • Business trends • Hiscox Ltd results • Boxplot and whisker diagram of Hiscox Ltd • Planned change in catastrophe exposure for 2014 • Realistic disaster scenarios • GWP geographical and currency split • Gr
Slide 32: Geographical reach
Geographical reach Bermuda Hamilton Europe UK Amsterdam Birmingham Bordeaux Colchester Brussels Glasgow Cologne Leeds Dublin London Hamburg Maidenhead Lisbon Manchester Lyon York Madrid Munich USA Paris Atlanta Chicago Guernsey Los Angeles St Peter Port New York City San Francisco Latin American Whi
Slide 33: Strategic focus
Strategic focus Total Group controlled income for 2013 100% = £1,924m Local casualty and commercial Reinsurance 20% 25% Tech and media 3% casualty Large property 6% 14% Art and Global casualty 2% private client 12% 6% Specialty – terrorism, contractors’ equipment FTC, 7% 5% Specialty – kidnap and ra
Slide 34: A symbiotic relationship
A symbiotic relationship Internationally Local specialty traded lines lines • Larger • Premium growth premium, catastrophe between 5-15% exposed per annum • Shrinks and expands • Pays dividends according to rates Profit Value • Brand builds generator creator strong market • Excess profits allow inve
Slide 35: Long-term growth
Long-term growth Bermuda Hiscox London Market - Retail Hiscox London Market - Volatile Hiscox UK Hiscox Europe Hiscox Guernsey Hiscox USA 2000 1800 1600 Internationally Gross written premiums (£m) 1400 traded lines 1200 1000 800 Local 600 specialty 400 lines 200 0 1988* 1989* 1990* 1991* 1992* 1993
Slide 36: Business trends
Business trends Total Group controlled premium 2013: £1,924m Year-on-year growth -7.7% in local currency £471m +18.3% £451m 2013 GWP Non-marine Professional liabilities +13.1% £347m Errors and omissions Kidnap and ransom +3.8% Contingency £265m Directors and Marine +23.9% officers’ liability Terrori
Slide 37: Hiscox Ltd results
Hiscox Ltd results £000 2013 2012 2011 2010 2009 2008 restated** Gross premiums written 1,699,478 1,565,819 1,449,219 1,432,674 1,435,401 1,147,364 Net premiums written 1,371,114 1,268,140 1,174,011 1,131,627 1,157,023 898,394 Net premiums earned 1,283,311 1,198,621 1,145,007 1,131,158 1,098,102 928
Slide 38: Boxplot and whisker diagram of Hiscox Ltd
95% range period and peril Industry loss return Lower 5%- upper EU WS – European windstorm Modelled mean loss JP EQ – Japanese earthquake Mean industry loss $bn Hiscox Ltd loss ($m) US WS – United States windstorm US EQ – United States earthquake 01 02 05 5-10 year Superstorm Sandy - $20bn market 18
Slide 39: Planned change in catastrophe exposure for 2014
Planned change in catastrophe exposure for 2014 Change in Change from June 2013 mean loss 50% 30% 10% (10%) JP EQ – Japanese earthquake (30%) US EQ – United States earthquake EU WS – European windstorm (50%) US WS – United States windstorm (70%) Industry loss return period and peril 5-10 year 10-25
Slide 40: Realistic disaster scenarios
Realistic disaster scenarios Hiscox Group - losses shown as percentage of 2013 gross and net written premium Industry loss return period Japanese earthquake $50bn 1 in 240 year Gulf of Mexico windstorm $107bn 1 in 80 year Florida $125bn 1 in 100 year windstorm European windstorm $30bn 1 in 200 year
Slide 41: GWP geographical and currency split
GWP geographical and currency split 2013 geographical split 2013 currency split CAD and other 4.0% UK EUR 18.7% 12.6% 39.8% North America Worldwide 18.3% 26.3% GBP 57.1% USD 11.2% 12.0% Western Europe Other (excl. UK) 40
Slide 42: Group reinsurance security
Group reinsurance security Receivables at 31/12/13 of £458.8m 2013 reinsurance protections* First loss exposure by rating AAA Collateralised Other 2.7% 10% 6.0% AA A 54% A 32.6% 58.7% AA 36% *Reinsurance placements in force at 1 January 2013. 41
Slide 43: Reinsurance
0 10 20 30 27.3 2004 13.7 26.0 2005 20.9 2006 13.4 2007 18.7 2008 21.7* 2009 19.4 Reinsurance as a % of GWP 2010 21.0 2011 19.0 Reinsurance 2012 19.0 2013 19.3 *Amended due to reclassification of reinsurance commissions. 0 10 20 30 2004 10.8 2005 17.0 2006 10.0 of total assets 2007 7.7 2008 13.4* 20
Slide 44: Government and bank exposure analysis
Government and bank exposure analysis Bank debt Government Government Country issued Supported Senior Subordinated Total £000 £000 £000 £000 £000 Australia 1,976 16,488 16,488 Austria 1,420 Belgium 2,333 Canada 1,236 41,473 29,186 208 29,394 Denmark 265 720 720 Finland 10,170 France 941 2,232 19,422
Slide 45: Glossary of terms
Glossary of terms Annual venture The system used for running a Lloyd’s syndicate under which each ‘year of account’ is treated separately. Members own capacity on a syndicate for a ‘year of account’ and the results are declared when the year is closed by the RITC mechanism, usually after three years
Slide 46: Glossary of terms
Glossary of terms Net premiums earned Premiums received after the cost of reinsurance and adjustment for unearned premium. Unearned premium covers the future period of risk of an insurance policy. Net premiums written Premiums contracted for after deduction of reinsurance. Open year A year of accoun