Hiscox has released a Trading Statement (available in full here) with the following key financial information:
- Gross Written Premiums of US$3,680 million up 6.3% and in particular:
- Hiscox London Market (Synd 33 business) Gross Written Premiums of US$845.3 million a reduction of 6.1% as measures to reduce under-priced catastrophe business continue
- Hiscox Re & ILS Gross Written Premiums of US$1,066.9 million up 32.3% as a result of hardening market conditions.
- Investment loss of US$293.9 million due to unrealised mark to market losses in the bond portfolio which are expected to unwind as the bonds mature; Hiscox comments that their reinvestment yield is 4.8% showing a much improved yield thanks to the increase in risk-free rates;
- US$135 million net of reinsurance reserved for Hurricane Ian, "well within our modelled range, based on an insured market loss of $55 billion, reflecting the continued reduction in under-priced natural catastrophe exposed risk. "The majority of our exposure is in big-ticket lines: $40 million net in London Market and $90 million net in Re & ILS." Hiscox comments that this is "a much lower cost than it would have been if we had not reduced our exposure to under-priced Florida business in the preceding two years. The multi-year underwriting actions alongside better than expected non-catastrophe claims experience results in a robust outlook for the full year."
- No change to the previously announced loss estimates for Ukraine." of US$48m net. "US$34 million of that is attributable to Hiscox London Market, where currently the majority of reserves comprise incurred but not reported (IBNR) losses. Hiscox London Market exited the aviation hull insurance business in 2018 and political risk/trade credit business in 2017."
The following are extracts from the Trading Statement that we thought our readers might want to read:
"Hiscox Re & ILS is benefitting from stronger rate momentum with an average risk adjusted rate increase of 12.5% in the period. Since 2017 this business has achieved cumulative rate increases of 52%. Rates are particularly strong in retrocession, North American property catastrophe and cyber portfolios, where traditional reinsurers and alternative capital reduced capacity and cedents looked to purchase more cover in an inflationary environment.....Hurricane Ian's landfall in September is expected to further reinforce the hardening rate momentum. We will remain disciplined in our approach to drive rate adequacy, whilst being ready to deploy more of our own capital in the event of third party capital withdrawal and materially elevated rates."
"The reinsurance book is largely written for 2022 so our attention now turns to the upcoming January 2023 renewals. We are expecting further and potentially material rate hardening as capital withdrawal combined with elevated demand, creates an exciting opportunity for the reinsurance market. In the event of material rate hardening we would expect to deploy more of our own capital and increase retained premiums."
"Hiscox London Market benefited from an average rate increase of 7%, ahead of expectations. Since 2017 this business has achieved cumulative rate increases of 72%. Hardening market conditions persisted in most lines, with cyber continuing to lead the way. D&O and general liability rates have been softening, although remain attractively priced, having achieved cumulative rate increases of over 250% and 130% respectively over the last five years. Terrorism rates, terms, and conditions are starting to exhibit positive rating momentum as a result of the market absorbing Ukraine-related losses. While household and commercial property achieved 10% rate growth in the period, pricing is still not sufficient to achieve our target returns, consequently we will continue to reduce our catastrophe exposures in this area. This decision reflects our constant portfolio review and appraisal to ensure we are allocating capital in the most beneficial lines of business."
"In cyber, we are continuing to see a reduction in the ransomware claims frequency in the majority of our markets. Markets are starting to address the systemic aggregation in cyber through endorsements sub-limiting catastrophe events. While Hiscox remains a cautious underwriter in large cyber, our business continues to innovate in product development for our small commercial clients."
This Hiscox Trading Statement reads very positively in terms of rate momentum and expectations for next year. Please do read the full announcement for all the content. Hiscox's share price had risen at the time of writing. If any more information appears on the Hiscox website we will post links here.