Slide 1: Hiscox Ltd Interim results
Hiscox Ltd Interim results For the six months ended 30 June 2015
Slide 2: An excellent six months
An excellent six months • Premium growth of 12.0% (2014: -3.8%) • Profit before tax £135.1m (2014: £124.6m) • Combined ratio 82.5% (2014: 82.0%) • Return on equity 19.9% (2014: 18.9%) • Interim dividend of 8.0p (2014: 7.5p) 1
Slide 3: Financial performance
he HISCOX Financial performance
Slide 4: An excellent six months
An excellent six months June June Dec 2015 2014 2014 £000 £000 £000 Gross premiums written 1,096,299 978,932 1,756,260 Net premiums written 860,084 732,592 1,343,410 Net premiums earned 709,823 643,471 1,316,259 Investment return on financial assets 27,857 30,115 56,355 Foreign exchange (losses)/gai
Slide 5: Segmental analysis
Segmental analysis 30 June 2015 30 June 2014 Hiscox Hiscox Hiscox London Hiscox Corporate Hiscox London Hiscox Corporate Retail Market Re Centre Total Retail Market Re Centre Total £000 £000 £000 £000 £000 £000 £000 £000 £000 £000 Gross premiums written 502,140 306,408 287,751 ‒ 1,096,299 455,775 25
Slide 6: Solid investment performance
Solid investment performance 30 June 2015 30 June 2014 Asset Annualised Asset Annualised allocation return Return allocation return Return % % £000 % % £000 Bonds £ 15.4 0.9 16.2 1.1 US$ 53.2 1.6 50.0 2.0 Other 9.1 0.4 11.0 2.4 Bonds total 77.7 1.3 15,038 77.2 1.8 21,211 Equities 8.7 9.3 11,910 7.4
Slide 7: High quality, conservative portfolio
High quality, conservative portfolio Investment portfolio £3,032m* as at 30 June 2015 • AUM reduced by capital distribution Asset allocation Bond credit quality Bond currency split • Risk assets up to 8.7% Bonds Gvt. USD Cash AAA GBP • High credit quality Risk assets AA EUR maintained A CAD BBB BB a
Slide 8: Portfolios – USD bond portfolios as at 30 June 2015
Portfolios – USD bond portfolios as at 30 June 2015 Portfolios: $2.5bn BB and AAA AA A BBB below Total Duration • Favour corporates % % % % % % months • Credit provides positive Government issued 22.4 1.5 23.9 18.0 carry Government supported* 1.7 7.8 0.8 0.2 10.5 12.0 • Still cautious on duration As
Slide 9: Portfolios – GBP, EUR and CAD bond portfolios as at 30 June 2015
Portfolios – GBP, EUR and CAD bond portfolios as at 30 June 2015 GBP portfolios: BB and AAA AA A BBB below Total Duration • Governments favoured £439m for duration management % % % % % % months Government issued 44.0 44.0 26.2 • Corporates added for carry Government supported* 16.8 1.4 0.2 18.4 11.2
Slide 10: Growing demand for capital
Growing demand for capital • Significant capital return over the last three years has allowed us to grow into the capital base • Catastrophe exposure remaining steady • Good growth and business mix moving to longer-tail • Solvency II has increased capital requirements • Continuing to invest in growi
Slide 11: Growing demand for capital
Growing demand for capital 2014 capital requirements £1.41bn available capital (at 30/6/15) £1.26bn available capital (post return) Economic Regulatory A.M. Best Standard & Poor's Fitch ratings Group capital Group capital Bermuda solvency (catastrophe model (economic) model (regulatory) capital requ
Slide 12: Fascinating financial facts
Fascinating financial facts • Good overall claims experience. Moderate losses in London Market – Marine and energy (PEMEX and Chevron) net £12m – Reserves for Ukraine political risks net £20m • Reserve releases £123m (2014: £90m) • $875m Letter of Credit and bank facility – $529.5m drawn down (2014:
Slide 13: Underwriting
he HISCOX Underwriting
Slide 14: An actively managed business
An actively managed business Total Group controlled premium 2015: £1,230m Period-on-period in local currency 2015 GWP -5.3% £329m +15.2% Non-marine £295m Professional liabilities Marine +24.6% Errors and omissions £214m Kidnap and Directors and ransom officers’ liability +8.9% Aviation Contingency £
Slide 15: Mixed rating environment
Mixed rating environment Insurance Catastrophe reinsurance • Catastrophe reinsurance rates finding their floor 140% • Retail rates broadly flat • Some London Market lines 120% under pressure 100% Index level 100% 80% 60% 40% 20% 0% 12 month rolling period ending 14
Slide 16: Hiscox London Market rates
Hiscox London Market rates Percentage of London Market premium by rate band 50.0% 44.5% 45.0% 40.0% 35.0% % of total premium 30.0% 25.0% 20.0% 14.2% 15.0% 10.9% 10.0% 8.4% 8.0% 5.7% 5.1% 5.0% 1.5% 1.7% 0.0% < -20 -10 to -20 -5 to -10 0 to -5 Flat 0 to 5 5 to 10 10 to 20 > 20 Rate band 100% Jan-June
Slide 17: Business performance
he HISCOX Business performance
Slide 18: Managing the business
Managing the business Gross written premiums for the six months to 30 June 2015 2015 2014 Change Growth in local £000 £000 % currency % Hiscox Retail Hiscox UK and Europe Hiscox UK 223,639 212,593 5.2 5.8 Hiscox Europe 94,554 96,804 (2.3) 8.1 Hiscox International Hiscox Guernsey 36,262 33,976 6.7 1.
Slide 19: Hiscox UK and Europe: Record profits
Hiscox UK and Europe Record profits • Gross written premium £318.2m (2014: £309.4m) • Profit before tax £45.4m (2014: £26.3m) • Combined ratio 87.0% (2014: 92.9%) – UK 84.0% – Europe 87.5% in local currency • Commercial lines driving growth in UK and Europe • Cyber and data risks product small but g
Slide 20: Hiscox International: Good growth and profit
Hiscox International Good growth and profit • Gross written premium £183.9m (2014: £146.4m) • Profit before tax £13.9m (2014: £11.1m) • Combined ratio 92.9% (2014: 92.1%) • Marketing expenditure £8.4m (2014: £4.4m) 19
Slide 21: Hiscox International: Discipline and investment delivering
Hiscox International Discipline and investment delivering • Hiscox Guernsey – Expansion of Latin American gateway in Miami • Hiscox USA – Excellent growth of 28.2% (16.9% in local currency) driven by professions business – Profitable in broker and direct-to-consumer businesses – 100,000 direct-to-co
Slide 22: Hiscox London Market: Disruption creating opportunities
Hiscox London Market Disruption creating opportunities • Premium growth of 21.7% to £306.4m (2014: £251.7m) • Profit before tax £23.4m (2014: £24.8m) • Combined ratio 89.8% (2014: 87.2%) • Growing – Personal accident and casualty – Willis 360 facility – Auto physical damage and extended warranty • S
Slide 23: Hiscox Re: Good risk selection, low loss levels
Hiscox Re Good risk selection, low loss levels • Gross written premium £287.8m (2014: £271.5m) • Profit before tax £59.6m (2014: £75.6m) • Combined ratio 45.5% (2014: 41.8%) • Steady growth in healthcare and casualty reinsurance • New products drive $50m new business in 18 months • Continued quota s
Slide 24: Summary and outlook
he HISCOX Summary and outlook
Slide 25: Summary: An excellent start
Summary An excellent start • A Goldilocks start for Retail – Benign loss environment for UK and Europe – USA profitable in all channels • London Market benefiting from past recruitment and selective underwriting • Innovation-led strategy in product and capital working for Hiscox Re 24
Slide 26: Outlook: Strategy continues
Outlook Strategy continues • Interest rate increases getting closer • Big ticket rates continue to be eroded • Strategy will continue – Investment in Retail – New talent available – Innovation in product and distribution for bigger ticket business • Capital return vs. retaining capital reviewed at t
Slide 27: Appendices
Appendices • Geographical reach • Strategic focus • Strategy working • A symbiotic relationship • Diverse capital creates opportunities • Long-term growth • Business trends • Gradual change of business mix • Hiscox Ltd results • Boxplot and whisker diagram of Hiscox Ltd • Realistic disaster scenario
Slide 28: 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 Los Angeles gateway Lisbon New York City Miami Lyon Asia San Francisco Madr
Slide 29: Strategic focus
Strategic focus a HISCOX Total Group controlled income for 2014 100% =£1,983m Internationally traded lines Local specialty lines 21% Reinsurance 8% Large property Local casualty 21% and commercial Tech and media 4% casualty 3% Global casualty 12% Specialty - terrorism, contractors’ equipment FTC, po
Slide 30: Strategy working
a Strategy working HISCOX Total Group controlled net premiums written for 2014 100% =£1,494m 14.4% Hiscox Re HiscoxUK 28.5% 29.1% Hiscox London Market Hiscox Europe 9.8% Hiscox USA =. 113.7% DirectAsia 0.4% Hiscox Guemsey 41% 29
Slide 31: 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 32: Diverse capital creates options
Diverse capital creates options 31
Slide 33: Long-term growth
Long-term growth Hiscox Reinsurance Hiscox London Market - Retail Hiscox Europe Hiscox USA Hiscox London Market - Volatile Hiscox UK Hiscox Guernsey DirectAsia 2000 1800 Gross written premiums (£m) Internationally 1600 traded lines 1400 1200 1000 800 Local 600 specialty lines 400 200 0 32
Slide 34: Business trends
Business trends Total Group controlled premium 2015: £1,230m Period-on-period in local currency 2015 GWP -5.3% £329m +15.2% Non-marine £295m Professional liabilities Marine +24.6% Errors and omissions £214m Kidnap and Directors and ransom officers’ liability +8.9% Aviation Contingency £152m -9.3% Co
Slide 35: Gradual change of business mix
Gradual change of business mix Hiscox Ltd casualty/property premium split casualty property 100% 90% 80% 70% % of total premium 60% 50% 40% 30% 20% 10% 0% 2009 2010 2011 2012 2013 2014 2015 B 34
Slide 36: Hiscox Ltd results
Hiscox Ltd results £000 2014 2013 2012 2011 2010 2009 Gross premiums written 1,756,260 1,699,478 1,565,819 1,449,219 1,432,674 1,435,401 Net premiums written 1,343,410 1,371,114 1,268,140 1,174,011 1,131,627 1,157,023 Net premiums earned 1,316,259 1,283,311 1,198,621 1,145,007 1,131,158 1,098,102 In
Slide 37: Boxplot and whisker diagram of modeled Hiscox Ltd net loss
Boxplot and whisker diagram of modeled Hiscox Ltd net loss ($m) June 2015 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 mar
Slide 38: Realistic disaster scenarios
Realistic disaster scenarios Hiscox Group – losses shown as percentage of 2014 gross and net written premium Gross loss Industry loss Net loss return period Japanese earthquake 5% $50bn 1 in 240 year 21% Gulf of Mexico windstorm 6% $107bn 1 in 80 year 34% Florida windstorm 8% $125bn 1 in 100 year 24
Slide 39: GWP geographical and currency split
GWP geographical and currency split 2014 geographical split – controlled income 2015 currency split – controlled income North America GBP Other USD Westerm Europe (excl. UK) CAD and other Worldwide EUR UK 12.2% 16.8% 5.1% 25.1% 40.6% 19.5% 11.7% 57.6% 11.4% 38
Slide 40: Group reinsurance security
Group reinsurance security Receivables at 30/06/15 of £577.3m 2015 reinsurance protections* First loss exposure by rating AAA and collateralised A AA AA A AAA Other 5.4% 13% 14.6% 50% 29.2% 50.8% 37% *Reinsurance placements in force at 1 July 2015. 39
Slide 41: Reinsurance
Reinsurance Ceded as a percentage of GWP Reinsurance receivables as a percentage of total assets 30 25 25 20 25.2 23.5 21.7 20 21.5 21.0 20.9 17.0 15 19.4 19.3 19.0 19.0 18.7 15 13.4 12.3 11.7 11.6 11.4 10 11.3 13.4 11.0 10.6 10.3 10.0 10 7.7 5 5 0 0 40
Slide 42: Glossary of terms
Glossary of terms Annual venture Group controlled The system used for running a Lloyd’s syndicate under which The total gross written premium controlled by the Group each ‘year of account’ is treated separately. Members own including the 27% of the Syndicate capacity not owned by capacity on a syndi
Slide 43: Glossary of terms
Glossary of terms Net premiums earned Run-off account Premiums received after the cost of reinsurance and At Lloyd’s, a year of account which is kept open after the date adjustment for unearned premium. Unearned premium on which it would normally have been closed. covers the future period of risk of