Slide 1: Hiscox Ltd Interim results
Hiscox Ltd Interim results For the six months ended 30 June 2018
Slide 2: A good start to the year
A good start to the year • GWP up by 21% to $2.2bn – Retail up 20% – London Market up 16% – Re & ILS up 29% • Combined ratio 87.9% • Profit before tax $164m, up 27% • Interim dividend 13.25¢, up 5% • On track to exceed one million retail customers in 2018 1
Slide 3: Financial performance
ae HISCOX Financial performance
Slide 4: Group performance
Group performance Strong underwriting and growth 30 June 2018 30 June 2017 Change • Strong GWP growth $m $m % in constant currency Growth of 16% Gross premiums written 2,228.8 1,836.2 21 • Underwriting profit up Net premiums written 1,399.3 1,275.0 10 38% to $168m • Varied claims experience Earnings
Slide 5: Hiscox Retail
Hiscox Retail Growth engine keeps delivering 30 June 2018 30 June 2017 • Strong GWP growth $m $m in constant currency of 13% Growth – Hiscox UK & Ireland: 7% – Hiscox Europe: 10% Gross premiums written 1,113.0 930.4 – Hiscox USA: 22% Net premiums written 982.2 857.6 • Hiscox USA percentage growth ex
Slide 6: The march towards one million retail customers
Hiscox Retail The march towards one million retail customers Retail customers (‘000s) • Evolution of retail Direct Broker leadership structure 1,000 • Marketing spend for 2018 $75m 900 • 945,000 retail customers 800 • Investment in infrastructure supports future growth 700 600 500 400 300 200 100 0
Slide 7: Hiscox London Market
Hiscox London Market Growing where the opportunity is greatest 30 June 2018 30 June 2017 • Growth of 13% in $m $m constant currency Growth • Out of the blocks quickly post-HIM, capitalising on rate improvement in: Gross premiums written 458.7 395.8 – major property Net premiums written 277.0 251.3 –
Slide 8: Hiscox Re & ILS
Hiscox Re & ILS Remaining focused and disciplined 30 June 2018 30 June 2017 • Growth of 25% in constant $m $m currency – expected to slow in second half Growth • Capitalising on rate improvements in Gross premiums written 655.6 510.0 catastrophe-exposed and excess of loss business Net premiums writt
Slide 9: Challenging investment environment
Challenging investment environment Investment return of $19.7m 30 June 2018 30 June 2017 • Yield to maturity of bond portfolio 2.1% Asset Annualised Asset Annualised at 30 June 2018 (1.6% allocation return Return allocation return Return at 31 December 2017) % % $000 % % $000 • Coupon income increas
Slide 10: Well capitalised
Well capitalised 30 June 2018 • All capital bases satisfactorily capitalised $2.59bn available capital • Key constraint remains $2.55bn available capital (post-interim dividend) rating agency capital Economic Regulatory A.M. Best S&P Fitch Hiscox Hiscox Bermuda integrated integrated enhanced capital
Slide 11: On-going investment in IT and digital
On-going investment in IT and digital Building a business for the future Cumulative annualised impact: +1% to +1.5% to expense ratio (three to five years) 10
Slide 12: Underwriting
ae HISCOX Underwriting
Slide 13: Opportunity across the portfolio as big-ticket rate momentum slows
Opportunity across the portfolio as big-ticket rate momentum slows Core London Market All retail Catastrophe reinsurance • Hiscox London Market 120 – Overall rates up 5% – Major property up 16% – US household and 100 commercial property binders up 10% • Hiscox Re & ILS 80 – Overall rates up 10% – No
Slide 14: An actively managed business
An actively managed business Total Group controlled premium 30 June 2018: $2,485 million Period-on-period in constant currency 2018 GWP +15% $771m +24% Professional $721m liabilities Errors and Non-marine omissions Private directors and officers’ liability Marine Cyber Aviation Commercial small +49%
Slide 15: Our hybrid reinsurance strategy
Our hybrid reinsurance strategy More than a catastrophe bet Risk and specialist lines • Supported by Hiscox balance sheet $721m $233m • Partially protected by reinsurance Risk and • Hiscox economics specialist lines 28% driven by underwriting performance with some fees and commissions 60% Catastroph
Slide 16: Hiscox UK direct commercial
Hiscox UK direct commercial Human where it matters, digital where it counts 15
Slide 17: FloodPlus
FloodPlus Leading in data and distribution • New technology and APIs give FloodPlus platform quoting 1,200 risks per day coverholders direct access to market-leading private flood product • Real-time pricing and exposure management for Hiscox • Platform automatically underwrites risks • Advanced ana
Slide 18: Developing a service-led offering: Security Incident Response
Developing a service-led offering Security Incident Response Helping businesses respond to complex security and crisis issues • Builds on our market-leading K&R product • Covers a wide range of security issues including; criminal threats, workplace violence, corporate espionage, and cyber extortion
Slide 19: Developing a service-led offering: Cyber
Developing a service-led offering Cyber Helping SMEs reduce their risk • Market-leading risk prevention – Hiscox CyberClear Academy – only GCHQ accredited cyber training for SMEs – CyberMatics – physical internet security box blocks malicious traffic • Improves customer retention – Embedded within i
Slide 20: Business performance and outlook
Business performance and outlook
Slide 21: Managing the business
Managing the business Year to 30 June 2018 Constant currency GWP GWP change GWP change $m % % Hiscox Retail 1,113.0 19.6 12.9 Hiscox UK & Ireland 411.3 17.4 7.4 Hiscox USA 423.9 22.3 22.3 Hiscox Europe 198.7 24.0 10.2 Hiscox Special Risks 69.8 5.7 2.6 DirectAsia 9.3 30.5 23.3 Hiscox London Market 45
Slide 22: Adapting to change and building for the future
Adapting to change and building for the future Responding to Investing in Evolving our regulatory and infrastructure structure and political challenges leadership • Brexit – $15 million in 2018 • New capital model and new • Putting the right people behind HR system complete the right opportunities •
Slide 23: Outlook
Outlook Execute and seize opportunities • Deliver on regulatory projects • Respond to the markets with discipline • Invest in our strengths to grow – Brand and infrastructure to drive growth in Hiscox Retail – Innovation in core products using data and analytics 22
Slide 24: 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 25: 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 mainly through Hiscox Re & ILS and Hiscox London Market. We expand and shrink these lines according to market conditions. • Retail is smaller premium, less volatile
Slide 26: Geographical reach
Geographical reach 34 offices in 14 countries 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 Las Vegas Miami Lisbon Asia L
Slide 27: Strategic focus
, ay Strategic focus HISCOX Total Group controlled income for 2018 $100% = $2,485m Big-ticket business Retail business 29% Reinsurance Small commercial 26% Tech and media 5% casualty 8% Large property Art and private client 10% 4% Casualty 5% Specialty — terrorism, product recall Specialty — kidnap
Slide 28: A symbiotic relationship
A symbiotic relationship a HISCOX Big-ticket business Retail business + Larger premium, globally traded, catastrophe exposed business written mainly through Hiscox London Market and Hiscox Re & ILS ¢ Shrinks and expands according to pricing environment « Excess profits allow further investment in re
Slide 29: Long-term growth
Long-term growth Gross written premiums at 100% level ($m) Hiscox Re & ILS Hiscox UK Hiscox Special Risks DirectAsia Hiscox London Market Hiscox Europe Hiscox USA 4,000 Hiscox London Market 3,500 Gross written premiums ($m) Hiscox Re & ILS 3,000 2,500 2,000 1,500 Hiscox Retail 1,000 500 -0 The incre
Slide 30: An actively managed business
An actively managed business Total Group controlled premium 30 June 2018: $2,485 million Period-on-period in constant currency 2018 GWP +15% $771m +24% Professional $721m liabilities Errors and Non-marine omissions Private directors and officers’ liability Marine Cyber Aviation Commercial small +49%
Slide 31: Segmental analysis
Segmental analysis 30 June 2018 30 June 2017 Hiscox Hiscox Hiscox London Hiscox Corporate Hiscox London Hiscox Corporate Retail Market Re & ILS Centre Total Retail Market Re & ILS Centre Total $000 $000 $000 $000 $000 $000 $000 $000 $000 $000 Gross premiums written 1,113,036 458,692 655,575 1,518 2,
Slide 32: Hiscox Ltd results
Hiscox Ltd results $m 2017 2016 2015 2014 2013 2012 Gross premiums written 3,286.0 3,257.9 2,972.7 2,894.3 2,656.3 2,481.4 Net premiums written 2,403.0 2,424.5 2,403.3 2,213.9 2,143.0 2,009.6 Net premiums earned 2,416.2 2,271.3 2,194.1 2,169.2 2,005.8 1,899.5 Investment return* 104.8 95.8 47.6 85.7
Slide 33: Boxplot and whisker diagram of modeled Hiscox Ltd net loss
Boxplot and whisker diagram of modeled Hiscox Ltd net loss ($m) April 2018 Lower 5%- upper Superstorm Sandy ‒ US$20bn market Loma Prieta Quake US$6bn market Hurricane Andrew US$56bn market Northridge Quake US$24bn market Hurricane Katrina US$50bn market 95% range market loss, 45-year return period 8
Slide 34: Realistic disaster scenarios
Realistic disaster scenarios Hiscox Group – losses shown as percentage of 2017 gross and net written premium Gross loss Industry loss Net loss return period Japanese earthquake 5% $50bn 1 in 240 year 27% Gulf of Mexico windstorm 8% $107bn 1 in 80 year 49% Florida windstorm 8% $125bn 1 in 100 year 39
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 $200m-$550m could be suffered in the following extreme scenarios: Event E
Slide 36: GWP geographical and currency split
GWP geographical and currency split 2018 geographical split – controlled income 2018 currency split – controlled income North America GBP Other USD Westerm Europe (excl. UK) CAD and other Worldwide EUR UK 12.9% 16.2% 19.9% 4.3% 13.6% 49.7% 12.2% 62.9% 8.3% 35
Slide 37: Group reinsurance security
Group reinsurance security Receivables at 30 June 2018 of $2,149 million 2018 reinsurance protections* First loss exposure by rating A A AA AA AAA and collateralised AAA Other 0.5% 5% 29.0% 39% 51.9% 56% 18.6% *Reinsurance placements in force at 23 July 2018. 36
Slide 38: Reinsurance
Reinsurance Ceded as a percentage of GWP Reinsurance receivables as a percentage of total assets 40 25 35 34.7* 20 30 19.5 30.6 18.8 25 26.9 15 25.6 23.5 20 21.7 13.4 13.3 21.0 12.3 19.4 12.1 19.3 19.2 19.0 19.0 11.7 18.7 11.6 10 11.0 10.6 15 10.3 10.2 10.0 13.4 7.7 10 5 5 0 0 *Excluding run-off cas
Slide 39: Portfolio – asset mix
Portfolio – asset mix High quality, conservative portfolio Investment portfolio $6,460 million as at 30 June 2018 Asset allocation Bond credit quality Bond currency split Bonds Gvt. USD Cash AAA GBP AA Risk assets EUR A BBB CAD and other BB and below 1.1 3.3 6.7 13.5 10.1 34.3 24.8 17.3 22.3 68.5 69
Slide 40: Portfolio – USD bond portfolios
Portfolio – USD bond portfolios as at 30 June 2018 Portfolios: $3.1 billion BB and AAA AA A BBB below Total Duration % % % % % % years Government issued 41.2 41.2 1.7 Government supported* 1.3 3.6 1.4 0.1 6.4 1.5 Asset backed 2.6 2.6 0.2 Mortgage backed agency 4.8 4.8 3.9 Non agency 0.2 0.8 1.0 1.7
Slide 41: Portfolio – GBP, EUR and CAD bond portfolios
Portfolio – GBP, EUR and CAD bond portfolios as at 30 June 2018 GBP portfolios: BB and $761 million AAA AA A BBB below Total Duration % % % % % % years Government issued 21.0 21.0 1.9 Government supported* 18.9 4.7 2.3 25.9 1.3 Asset backed 5.0 0.5 0.4 5.9 2.1 Corporates 11.6 2.4 14.7 18.5 47.2 2.1
Slide 42: Business segments
Business segments Hiscox Retail Hiscox Re & ILS Hiscox Retail brings together the results of the UK and Hiscox Re & ILS 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 busin