Hiscox group results for 2022
Hiscox has today released its 2022 results for the group.
Their Press Release to the LSE is available here. Key financial data extracts as follows:
- Gross premiums written +3.6% at $4,424.9m vs 2021: $4,269.2m;
- Underwriting profit +25% on 2021 and "the highest since 2015" at $269.5m vs 2021 $215.6m;
- Profit before tax $44.7m vs 2021 $190.8m
- Group combined ratio 90.6% vs 2021 93.2%
- Investment return (2.6)% vs 2021 0.7%
- Positive prior year development $239.1m vs 2021 $148.9m
Some extracts from the release relevant to Syndicates 33 and 6104:-
Losses
No material change to previously announced Group net losses from Hurricane Ian ($135 million) based upon an industry loss estimate of US$55bn - Low exposure to Ian thanks to pulling out of under-priced Florida business previously.
Russia/Ukraine conflict ($48 million) mostly IBNR. Hiscox London Market exited the aviation hull insurance business in 2018 and political risk/trade credit business in 2017.
Reserves
Conservatively reserved with a 8.9% margin above actuarial best estimate (2021: 11.7%).
Investment returns (losses)
Investment result loss of $187.3 million (2021: profit of $51.2 million), primarily due to unrealised mark-to-market losses in our bond portfolio which are expected to unwind as the bonds mature
Market conditions
In Hiscox London Market, [Syndicate 33 business] our focus continues to be on disciplined growth and building balanced portfolios at attractive returns. Gross premiums written declined 4.8% to $1,114.9 million (2021: $1,171.4 million), mainly due to the underwriting actions taken on the property binder portfolio. The attractive rating environment means London Market is expected to grow gross premiums written in 2023.
A strong combined ratio of 84.8% (2021: 89.1%) represents a 4.3 percentage points improvement on the prior year, after absorbing net losses from Hurricane Ian ($40 million) and Ukraine ($34 million). The business is building a strong track record of profitability with a third consecutive year of delivering a combined ratio in the 80% range.
In 2022, Hiscox London Market benefitted from an average rate increase of 6%, which was ahead of our expectations. Since 2017, this business has achieved cumulative rate increases of 70%. Rate growth remained positive for all classes of business except D&O, which is already very attractively priced, having achieved cumulative rate increases of over 240% since the end of 2017. Overall the rate outlook for 2023 is positive, underpinned by the macro-economic environment and reinsurance costs, with the strongest growth expected in terrorism and property lines.
In Hiscox Re & ILS [the reinsurance division of Hiscox Group] strong top-line growth is underpinned by ILS inflows in H1 2022 and an improving underwriting and rating environment. Gross premiums written up 28.5% to $1,037.9 million, crossing the $1 billion milestone for the first time (2021: $807.8 million). Combined ratio of 81.6% (2021: 68.0%) after absorbing Hurricane Ian ($90 million) net losses. As a result of deploying organic capital at 1/1 2023 renewals, Re & ILS’s January 2023 net premiums written were up 49% year-on-year.
Hiscox Re & ILS benefitted from an average risk adjusted rate increase of 13% in the period, above our expectations. This is driven primarily by North American property and retrocession, with rates up 14% and 16% respectively, with Florida exhibiting particularly hard market conditions. Specialty lines also experienced double-digit increases, driven by cyber and terrorism, with rates up 42% and 26% respectively. Since 2017, this business has achieved cumulative rate increases of over 50% across the portfolio.
Hard market in reinsurance and best market conditions for over a decade
The reinsurance marketplace is undergoing a seismic shift, with 2022 rates above the 2012 level, and we anticipate material improvement across nearly all lines for 2023. Hurricane Ian served as a catalyst, among other factors, following many years of losses across the sector, leading to significant improvement in the rating environment. Capacity continued to reduce during 2022 both in the traditional arena and the ILS space, as a result of another year of industry losses and volatility in the investment markets. This is leading to a true hard market for catastrophe-exposed risks. We are witnessing the best market conditions in over a decade and have deployed additional capital at January renewals, achieving risk-adjusted rate increases of 45% in property and 26% in specialty.
Other
Robert Childs is stepping down as Chairman after 37 years at Hiscox.
Comment
An underwriting profit despite the headwinds of investment losses and losses such as Ukraine and Ian. Disciplined underwriting as demonstrated with the 50% reduction in the property binder book since 2018 has helped improve their results. We have not received the syndicates' 2020 Account results yet or the updated forecasts for 2021 Account - we expect these shortly. Hiscox are very optimistic about the outlook with the best underwriting conditions in reinsurance for over a decade. Current bond reinvestment yields of +5.2% should provide a tailwind in future results. The Group results published today caused an uplift in their share price.