Slide 1: Hiscox Ltd Interim results
Hiscox Ltd Interim results For the six months ended 30 June 2017
Slide 2: A good result with FX headwinds
A good result with FX headwinds • Gross written premiums up by 13% • Profit before tax excluding FX £133m (2016: £119m) • Combined ratio excluding FX 89.9% (2016: 88.4%) • Interim dividend increased to 9.5p (2016: 8.5p) 1
Slide 3: Financial performance
he HISCOX Financial performance
Slide 4: A strong underwriting performance
A strong underwriting performance 30 June 2017 30 June 2016 Change • Growth in constant £m £m % currency of 4.8% Growth • FX headwind of (£31m) Gross premiums written 1,459.6 1,288.5 13.3 Net premiums written 1,013.5 889.1 14.0 • Economies of scale emerging in Retail Net premiums earned 936.6 767.5
Slide 5: Hiscox Retail: Excellent growth
Hiscox Retail Excellent growth 30 June 2017 30 June 2016 • Retail drives nearly 60% of £m £m Group underwriting profits Gross premiums written 739.6 581.1 • UK and Ireland good growth of 12.9% in constant currency Net premiums written 681.7 528.2 • Europe growth of 12.2% Net premiums earned 602.4 47
Slide 6: Hiscox London Market: Reducing in challenging markets
Hiscox London Market Reducing in challenging markets 30 June 2017 30 June 2016 • Shrinking as £m £m planned by 16.9% in constant currency Gross premiums written 314.6 342.7 • Taking decisive action in challenged lines Net premiums written 199.8 216.2 • Investing in opportunities Net premiums earned
Slide 7: Hiscox Re & ILS: Good underwriting and opportunities
Hiscox Re & ILS Good underwriting and opportunities 30 June 2017 30 June 2016 • Growth of 4.3% in £m £m constant currency, driven by ILS Gross premiums written 405.4 364.7 • Reducing net position by 18.7% Net premiums written 132.1 144.7 • More normal Net premiums earned 104.1 99.0 loss experience U
Slide 8: Strong investment performance
Strong investment performance Investment return of £49m 30 June 2017 30 June 2016 Asset Annualised Asset Annualised allocation return Return allocation return Return % % £000 % % £000 Bonds £ 14.0 0.9 14.4 3.9 US$ 52.1 2.0 52.3 3.2 Other 8.8 (0.5) 8.8 2.2 Bonds total 74.9 1.5 25,480 75.5 3.2 43,581
Slide 9: Portfolio – asset mix
Portfolio – asset mix High quality, conservative portfolio Investment portfolio £4,415m as at 30 June 2017 • Allocation to risk assets at 7.4% Asset allocation Bond credit quality Bond currency split • High credit quality Bonds Gvt. USD maintained Cash AAA GBP Risk assets AA EUR • Yield to maturity
Slide 10: Capital requirement
Capital requirement 30 June 2017 • All capital bases £2.00bn available capital satisfactorily capitalised £1.97bn available capital (post interim dividend) • Key constraint remains rating agency capital • S&P reduce risk Economic Regulatory classification from high to moderate • New A.M. Best model
Slide 11: Retail providing bottom line stability
Retail providing bottom line stability Balance of insurance profits Underwriting profits Hiscox Retail Big-ticket (Hiscox London Market, Hiscox Re and ILS) 100% 90% 80% 43% 44% 46% 70% 64% 71% 60% 82% 91% 50% 40% 30% 57% 56% 54% 20% 36% 29% 10% 18% 9% 0% 2012 2013 2014 2015 2016 HY 2016 HY 2017 10
Slide 12: Investing for growth
Investing for growth Building a business to last Driving growth Maintenance Regulatory obligations • UK and US IT • Group-wide finance • New European subsidiary system replacement transformation project – • New York Cybersecurity coming off end-of-life • New unified internal and GDPR technologies ca
Slide 13: Underwriting
he HISCOX Underwriting
Slide 14: Rate pressure continues in big-ticket lines, more stable in retail
Rate pressure continues in big-ticket lines, more stable in retail Core London Market All retail Catastrophe reinsurance • Retail stable • Growing where margins 120 are healthy • London Market rating pressure in most lines, 100 most severe in: – marine and energy 80 – aviation – big-ticket property
Slide 15: An actively managed business
An actively managed business Total Group controlled premium 30 June 2017: £1,623m Period-on-period in constant currency +25.8% 2017 GWP £507m Professional +0.5% liabilities £448m Errors and Non-marine omissions Private directors and officers’ liability Marine Cyber -22.0% Aviation £209m Commercial s
Slide 16: Hiscox London Market business mix
Hiscox London Market business mix Reducing where rates are under most pressure Grow Hold Reduce • Grow in new lines where we 100% see opportunities – e.g. cyber, flood, 90% product recall, general liability 80% • Hold areas of strength 70% and margin 60% – e.g. household and commercial property NWP
Slide 17: Hiscox Re & ILS cat bet, net position stable
Hiscox Re & ILS cat bet, net position stable Third-party capital allows us to manage growth Hiscox Re & ILS – catastrophe exposed GWP • Efficient use of capital NWP GWP • Fees and profit 700 commissions are a material source of income • Increased line size and 600 innovation keep us relevant and top
Slide 18: Hiscox UK on-going investment in infrastructure
Hiscox UK on-going investment in infrastructure Delivering flexibility and profitable growth UK Direct Commercial UK Direct Home Benefiting from new underwriting • Shifting focus to higher net worth customers system and investment in • Growing opportunity in attractive areas Customer Experience Cent
Slide 19: Business performance and outlook
Business performance and outlook
Slide 20: Managing the business
Managing the business Six months to 30 June 2017 Constant currency GWP NWP GWP change NWP change GWP change NWP change £m £m % % % % Hiscox Retail 739.6 681.6 27.3 29.1 18.4 18.9 Hiscox UK and Ireland 278.4 251.5 13.9 18.8 12.9 17.3 Hiscox Europe 127.4 119.4 25.8 21.9 12.2 8.2 Hiscox Special Risks 5
Slide 21: Hiscox Re & ILS: Flexible deployment of own and others’ capital
Hiscox Re & ILS Flexible deployment of own and others’ capital Brokers and cedants • Property • Casualty • Marine • Retro • Specialty underwriting teams ILS funds Hiscox balance sheet Quota share partners $1.35bn $1.5bn $5bn • Kiskadee Diversified • Syndicate 33 and 3624 • 14 insurance partners • Ki
Slide 22: Hiscox London Market: Disciplined and not relying on market-turning event
Hiscox London Market Disciplined and not relying on market-turning event Ambition: most profitable top ten London Market insurer Product Distribution Capacity Efficiency • Marine trades • Hiscox MGA • Quota share partners • London Market Underwriting Centre • Aviation product recall • E-trading • Co
Slide 23: Long-term investment in Retail delivers opportunities
Long-term investment in Retail delivers opportunities • Retail customer numbers exceed 750,000 • £175m invested in marketing over the last five years, £50m in 2017 • USA – Expanding appetite and product reboots – Quote and buy portal for partners • UK and Ireland – Portfolio acquisitions from broker
Slide 24: Outlook: Managing the cycle and driving Retail growth
Outlook Managing the cycle and driving Retail growth • Strategy consistent; disciplined and relentless – Ongoing pressure in Hiscox London Market, shrinking where required and investing for the future – Hiscox Re and ILS to remain a material player – Continued growth in Hiscox Retail driven by inves
Slide 25: Appendices
Appendices • Big-ticket and retail business • Geographical reach • Strategic focus • A symbiotic relationship • Long-term growth • An actively managed business • Segmental analysis • Hiscox Ltd results • Boxplot and whisker diagram of Hiscox Ltd • Realistic disaster scenarios • Casualty extreme loss
Slide 26: What do we mean by big-ticket and retail business?
What do we mean by big-ticket and retail business? • We characterise big-ticket as larger premium, catastrophe-exposed business written through Hiscox Re and ILS and Hiscox London Market. We expand and shrink these lines according to market conditions. • Retail is smaller premium, less volatile busi
Slide 27: Geographical reach
Geographical reach UK Guernsey Birmingham Europe Colchester St Peter Port Amsterdam Glasgow Bordeaux London Brussels Maidenhead USA Bermuda Cologne Manchester Atlanta Hamilton Dublin York Chicago Latin American Frankfurt Dallas gateway Hamburg Los Angeles Miami Lisbon Asia New York City Lyon Bangkok
Slide 28: Strategic focus
a Strategic focus HISCOX Total Group controlled income for 2016 £100% = £2,673m Big-ticket business Retail business 20% Reinsurance Small commercial 22% Tech and media 6% 7% Large property casualty 5% Casualty Art and private client 11% 14% Specialty — terrorism, contractors’ equipment FTC, politica
Slide 29: A symbiotic relationship
A symbiotic relationship a HISCOX Big-ticket business ¢ Larger premium, globally-traded, catastrophe-exposed ¢ Shrinks and expands according to rates * Excess profits allow investment in retail development Profit generator Value creator Retail business ¢ Smaller premium, locally-traded, less volatil
Slide 30: Long-term growth
Long-term growth Hiscox Re and ILS Hiscox UK Hiscox Special Risks DirectAsia Hiscox London Market Hiscox Europe Hiscox USA 2,800 2,400 Hiscox London Market Hiscox Re and ILS Gross written premiums (£m) 2,000 1,600 1,200 Hiscox Retail 800 400 -0 29
Slide 31: An actively managed business
An actively managed business Total Group controlled premium 30 June 2017: £1,623m Period-on-period in constant currency +25.8% 2017 GWP £507m Professional +0.5% liabilities £448m Errors and Non-marine omissions Private directors and officers’ liability Marine Cyber -22.0% Aviation £209m Commercial s
Slide 32: Segmental analysis
Segmental analysis 30 June 2017 30 June 2016 Hiscox Hiscox Hiscox London Hiscox Re Corporate Hiscox London Hiscox Re Corporate Retail Market and ILS Centre Total Retail Market and ILS Centre Total £m £m £m £m £m £m £m £m £m £m Gross premiums written 739.6 314.6 405.4 – 1,459.6 581.1 342.7 364.7 – 1,
Slide 33: Hiscox Ltd results
Hiscox Ltd results £m 2016 2015 2014 2013 2012 2011 Gross premiums written 2,402.6 1,944.2 1,756.3 1,699.5 1,565.8 1,449.2 Net premiums written 1,787.9 1,571.8 1,343.4 1,371.1 1,268.1 1,174.0 Net premiums earned 1,675.0 1,435.0 1,316.3 1,283.3 1,198.6 1,145.0 Investment return† 74.8 33.7 56.4 58.9 9
Slide 34: Boxplot and whisker diagram of modeled Hiscox Ltd net loss
Boxplot and whisker diagram of modeled Hiscox Ltd net loss ($m) April 2017 Lower 5%- upper Loma Prieta Quake $6bn market loss Northridge Quake $24bn market loss Hurricane Andrew $56bn market loss Hurricane Katrina $50bn market loss 2011 Tohoku Quake $25bn market Superstorm Sandy - $20bn market 95% r
Slide 35: Realistic disaster scenarios
Realistic disaster scenarios Hiscox Group – losses shown as percentage of 2016 gross and net written premium Gross loss Industry loss Net loss return period Japanese earthquake 5% $50bn 1 in 240 year 29% Gulf of Mexico windstorm 8% $107bn 1 in 80 year 51% Florida windstorm 8% $125bn 1 in 100 year 36
Slide 36: 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 £125m-£375m could be suffered in the following extreme scenarios: Event E
Slide 37: GWP geographical and currency split
GWP geographical and currency split 2017 geographical split – controlled income 2017 currency split – controlled income North America GBP Other USD Westerm Europe (excl. UK) CAD and other Worldwide EUR UK 12.5% 16.5% 22.6% 4.2% 13.1% 50.8% 11.9% 60.7% 7.7% 36
Slide 38: Group reinsurance security
Group reinsurance security Receivables at 30 June 2017 of £925.4m 2017 reinsurance protections* First loss exposure by rating A A AA AA AAA and collateralised AAA Other 1.7% 5% 21.5% 34% 53.9% 61% 22.9% *Reinsurance placements in force at 24 July 2017. 37
Slide 39: Reinsurance
Reinsurance Ceded as a percentage of GWP Reinsurance receivables as a percentage of total assets 35 25 30 31.0 30.6 20 25 25.6 23.5 15 21.7 20 21.0 19.4 19.3 19.2 19.0 19.0 13.4 18.7 13.3 12.7 12.3 12.1 15 11.7 11.6 10 11.0 10.6 10.3 10.2 10.0 13.4 10 7.7 5 5 0 0 38
Slide 40: Portfolio – USD bond portfolios as at 30 June 2017
Portfolio – USD bond portfolios as at 30 June 2017 Portfolios: $2.9bn BB and AAA AA A BBB below Total Duration % % % % % % months Government issued 34.5 0.1 34.6 20.3 Government supported* 0.5 4.1 0.8 5.4 18.1 Asset backed 3.7 3.7 5.8 Mortgage backed agency 6.3 6.3 38.3 Non agency 0.3 0.2 0.1 1.2 1.
Slide 41: Portfolio – GBP, EUR and CAD bond portfolios as at 30 June 2017
Portfolio – GBP, EUR and CAD bond portfolios as at 30 June 2017 GBP portfolios: £611m BB and AAA AA A BBB below Total Duration % % % % % % months Government issued 25.1 25.1 35.4 Government supported* 17.1 1.2 1.6 0.1 20.0 14.6 Asset backed 4.8 0.1 0.8 5.7 21.0 Corporates 6.1 7.9 13.0 18.8 45.8 29.1
Slide 42: Business segments
Business segments Hiscox Retail Hiscox Re and ILS Hiscox Retail brings together the results of the UK and Hiscox Re is the reinsurance division of the Group, Europe, and Hiscox International being the US, Special Risks combining the underwriting platforms in Bermuda, London and Asia retail business