REG - Hiscox Ltd - Q1 2024 Trading Statement
02/05/2024 07:00
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RNS Number : 9134M Hiscox Ltd 02 May 2024
Hiscox Ltd trading statement
Hamilton, Bermuda (2 May 2024) - Hiscox Ltd (LSE:HSX), the international
specialist insurer, today issues its trading statement for the first three
months of the year to 31 March 2024.
Highlights:
· Group ICWP of $1,537.5 million (Q1 2023: $1,420.2 million) grew 8.3%
due to continued capital deployment in Re & ILS and the acceleration of
Retail growth since full year 2023.
· Hiscox Retail ICWP grew by 5.8% in constant currency as US DPD growth
accelerated to 11.3%, UK growth stepped up to 8.3% in constant currency and
Europe continued to perform strongly; this was partially offset by continued
headwinds within the US broker business.
· Hiscox Re & ILS deployed additional capital and new quota share
capacity, with ICWP growing by 19.0% and net ICWP growing by 9.7%.
· Hiscox London Market ICWP contracted temporarily, following the
non-renewal of certain large binder deals to instead write more open market
business and also due to the impact of one-off accounting reclassification
items. The first quarter contraction is expected to be offset by growth over
the course of the year.
· Large natural catastrophe losses were within expectations for the
first quarter.
· Investment income result of $66.9 million (Q1 2023: $98.1 million),
as duration was extended to 1.8 years to position the portfolio in
anticipation of falling interest rates.
· Share buyback on track, with 4.7 million shares repurchased for
approximately $71.4 million.
Aki Hussain, Chief Executive Officer, Hiscox Ltd, commented:
"A good start to 2024, with our focus on profitable growth continuing to
deliver. Retail momentum has improved with growth accelerating in Hiscox UK
and US DPD as our initiatives achieve targeted outcomes, and solid sustained
growth in Hiscox Europe. In Hiscox London Market and Hiscox Re & ILS we
continue to deploy capital where we see attractive opportunities. The outlook
for the year remains positive."
Hiscox Group
Hiscox continues to make solid progress across the portfolio of businesses. In
Retail we are beginning to realise the benefits of initiatives implemented
over the last couple of years, focused on improving service to brokers,
reinvigorating our brand as well as launching new products to service our
customers' needs. These have resulted in broad based growth across our retail
franchise, although we continue to face challenges in reversing the negative
trends in our US broker business. These challenges are not new and we are
confident they will be overcome as the year progresses and our initiatives
bear fruit - with profitable growth remaining the key priority.
In our big-ticket businesses we continue to maintain a thoughtful and
disciplined approach, growing the business where we have expertise and see
opportunity and moderating our position where this is not the case. This is
reflected in the fact that our flagship Lloyd's Syndicate, Hiscox 33, has been
ranked in the top two best performing large syndicates in each of the last
three years (#_ftn1) 1. Overall, the market remains in equilibrium, where we
are collecting sufficient premium for the risks we are taking, and this seems
likely to continue for the rest of the year.
The external environment remains unpredictable with an elevated level of risk
given geo-political events and macro-economic uncertainties. In this
environment our diverse and complementary portfolio of businesses positions us
well to serve our customers and effectively manage uncertainty.
Insurance contract written premiums for the period:
Insurance contract written premiums Insurance contract Growth in USD Growth in constant currency
to 31 March 2024 written
premiums
to 31 March 2023 (#_ftn2) 2
US$m US$m % %
Hiscox Retail $723.2 $669.0 8.1% 5.8%
Hiscox London Market $316.9 $333.1 (4.9%) (5.1%)
Hiscox Re & ILS $497.4 $418.1 19.0% 17.5%
Total $1,537.5 $1,420.2 8.3% 6.7%
Hiscox Retail
Hiscox Retail ICWP grew by 5.8% in constant currency to $723.2 million (Q1
2023: $669.0 million)(2), or 8.1% in US Dollars. In line with the outlook
provided with our full year results, Hiscox Retail growth has returned to its
medium-term growth target range, driven by a step up in growth in the UK
business, as well as robust growth in US DPD and Europe. These positive
drivers have been partly offset by continued subdued momentum in our US broker
business.
Hiscox Retail benefited from an average rate increase of 3%.
The Group previously announced its agreement to sell DirectAsia to Ignite
Thailand Holdings Limited. The transaction remains subject to customary
conditions and regulatory approvals.
Insurance contract written premiums for the period:
Insurance contract written premiums to 31 March 2024 Insurance contract written premiums to 31 March 2023(2) Growth in USD Growth in constant currency
£m/€m US$m £m/€m US$m % %
Hiscox Retail
- Hiscox UK £159.3 $202.2 £147.2 $178.5 13.3% 8.3%
- Hiscox Europe €241.2 $263.3 €226.5 $242.4 8.6% 6.6%
- Hiscox USA $242.1 $235.0 3.1% 3.1%
- Hiscox Asia $15.6 $13.2 18.2% 18.2%
Hiscox Retail total $723.2 $669.0 8.1% 5.8%
Hiscox UK
Hiscox UK has delivered growth of 8.3%, on a constant currency basis, taking
ICWP to $202.2 million (Q1 2023: $178.5 million). This step up in growth (FY
2023: 2.4%) is driven by improving performance across all areas of the UK
business, including the activation of distribution deals signed in 2023 and
ongoing investment in marketing.
For the first time in a number of years all parts of the UK business are in
growth mode, including broker and direct distribution channels across
commercial and personal lines.
We continue to develop our new broker e-trade offering, with a new high
net-worth platform pilot having gone live in April and a wider roll-out
planned thereafter.
The outlook for growth in our UK business is positive for the year, however,
the comparative will be temporarily moderated in the second quarter due to
some non-recurring premium recognised in June 2023.
Hiscox Europe
Hiscox Europe grew by 6.6% on a constant currency basis, with ICWP of $263.3
million (Q1 2023: $242.4 million). This is in line with our expectations due
to challenging first quarter comparatives. We expect the growth rate to build
as the year progresses, with the momentum further helped as new products and
partnerships come online over the course of 2024.
The roll-out of our new core technology across our European business remains
on track. In Germany migration of our professional, specialty and commercial
(PSC) business is nearing completion, with the art and private client (APC)
roll-out to commence during the year. PSC deployment has been completed in
France and is proceeding as planned in Benelux.
Hiscox USA
Hiscox USA delivered improved growth of 3.1% with ICWP of $242.1 million (Q1
2023: $235.0 million)(2), as US DPD momentum accelerated further, partially
offset by ongoing headwinds in US broker.
US DPD grew ICWP by 11.3% in the first quarter to $146.3 million (Q1 2023:
$131.4 million), building on 9.2% growth in the second half of 2023. US Direct
continues to deliver strong double-digit growth boosted by our investment in
marketing and strong retention. During the quarter we completed the full
digital launch of our workers' compensation partnership, allowing customers to
quote and buy a policy on our website, underwritten by a third-party partner.
By adding a workers' compensation offering to our already broad line of
products we are taking another step towards meeting all the insurance needs of
the average small business insurance buyer.
US partnerships is now also growing at a double-digit rate as the existing and
new partners onboarded in 2023 are ramping up production.
US broker ICWP had another quarter of reduced premiums, continuing the 2023
trend. The business has been impacted by challenging market conditions in
cyber and has taken longer than expected to pivot to growth after the book was
decisively re-underwritten, which has improved margin. Although we are
starting to see the results of our targeted growth campaign, with good
momentum in architects and engineers and entertainment, we anticipate the US
broker business will continue to shrink at mid-year.
Hiscox London Market
In the first quarter Hiscox London Market net ICWP decreased by 6.3% to $204.8
million (Q1 2023: $218.5 million)(2), while ICWP decreased by 4.9% to $316.9
million (Q1 2023: $333.1 million)(2). Top line deceleration is mostly timing
due to our non-renewal of certain large binder deals to instead write more
open market business, in line with our strategy to lead more of the business
we write. ICWP growth was also impacted by one-off accounting reclassification
items, adjusting for which Hiscox London Market gross premiums were broadly
flat year-on-year. The first quarter contraction is expected to be offset by
growth over the course of the year.
Hiscox London Market achieved an average rate increase of 3% in the first
quarter, ahead of our expectations, with cumulative rate increases of 76%
since 2018.
Property net ICWP continued to grow at a double digit rate, with particularly
strong growth in property binders and flood, as rates increased by 12% and 13%
respectively. The transition to the green economy and national energy security
concerns continue to present significant opportunities. We continue to enhance
our capabilities in this sector and have taken the decision not to renew a
large binder agreement in order to underwrite this business directly ourselves
instead. While this decision will present a short-term impact on growth, we
expect momentum to recover through the course of the year.
As expected, cyber and D&O continue to experience rate decreases, down 9%
and 6% respectively, although rate reductions are now moderating. We continue
to manage the cycle proactively in these lines of business to maintain the
quality of the portfolio.
Our ESG sub-syndicate, launched a year ago, has had a positive start to 2024
with casualty risks now also written under its umbrella. This continues to be
well received by brokers and we are excited about the opportunities ahead,
proactively pursuing new business across multiple lines of business.
Our collaboration with Google Cloud continues in 2024. After the 2023 proof of
concept successfully demonstrated that we could reduce the time taken to
quote a terrorism risk from three days to three minutes, we are now
implementing this into the live environment. In parallel, we are
extending the core proof of concept capabilities to major property, a more
complex class, where we are also aiming to reduce the time to quote. Over
time, we aim to roll out AI capabilities to all relevant lines of business,
which will free up time for our underwriters to focus on higher-value tasks.
Hiscox Re & ILS
Hiscox Re & ILS ICWP grew by 19.0% to $497.4 million (Q1 2023: $418.1
million) as the business continued to seize attractive market opportunities
deploying additional capital and new quota share capacity. Net ICWP increased
by 9.7% to $203.6 million (Q1 2023: $185.6 million).
January renewals were orderly, as the market remained disciplined with a broad
standardisation of terms and conditions and attachment points largely holding.
Following the significant improvements in rate during 2023, rates increased
marginally by 2% in the first quarter, bringing cumulative rate increases
since 2018 to 94%.
Rates fell slightly in Japan renewals but remain adequate following the
increases after the 2018 and 2019 typhoons. Looking forward to the mid-year
renewals, the demand for US catastrophe risk is likely to increase driven by
ongoing inflationary pressures. This is expected to be met by increased
capacity in the market, moderating pressure on rates. Positive market
conditions are anticipated to persist throughout 2024, and we will continue to
deploy capital where we see attractive opportunities. Nonetheless, ICWP growth
is expected to moderate as the year progresses due to the planned outflow from
the ILS funds; by the end of 2024, net ICWP growth is likely to exceed
moderated top line growth.
Due to the seasonal nature of the risks underwritten by Hiscox Re & ILS,
the majority of premium is earned in the second half of the year.
Hiscox ILS assets under management were $1.7 billion as at 31 March 2024 (31
December 2023: $1.8 billion). These decreased to $1.5 billion on 1 April 2024
after a planned capital return of $180 million, which was partially offset by
new capital through our side car and the ILS fund raising efforts. We also
received additional quota share support ensuring the Group continues to
benefit from capital-light fee income.
Claims
Claims experience in the first quarter of 2024 has been well within
expectations for natural catastrophe losses.
On 26 March, the M.V. Dali container ship crashed into the Francis Scott Key
Bridge as it left the Port of Baltimore in the USA, causing most of the bridge
to collapse and a number of casualties. This is a complex claim given the
likely challenges of wreck removal and clean up, the rebuilding of the bridge,
potential business interruption claims, and the tragic loss of life. Hiscox
has no direct exposure to the business interruption policy of the port or the
property policy covering the bridge, although Hiscox London Market
participates on the reinsurance for the International Group of P&I Clubs.
No associated reserves were booked in the first quarter, as it remains an
emerging event, however we expect the net loss to be moderate for the Group
due to the reinsurance arrangements in place.
Economic inflation continues to trend down. Hiscox has a conservative
reserving philosophy and maintains robust reserves with a high probability of
favourable run-off. The front book has achieved exposure indexation and rate
increases, mitigating inflationary pressures.
Investments
The investment income result for the first quarter of 2024 is $66.9 million
(Q1 2023: $98.1 million), or a return of 0.8% year to date (Q1 2023: 1.3%)
impacted by upwards pressure on bond yields as rate cut expectations moved out
in the period. Assets under management at 31 March 2024 were $8.0 billion (FY
2023: $8.0 billion).
The overall duration of the bond portfolio increased to 1.8 years by the end
of the quarter as the asset duration was brought more into line with that of
the liabilities, and to position the portfolio to benefit from any reductions
in rates later in the year. Although a marginal headwind to returns in the
first quarter, it leaves the bond portfolio well positioned going forward. The
yield to maturity rose slightly to 5.2% at the end of March, up from 5.1% at
year end.
The cash returns on both the bond returns and the cash and cash equivalents
allocation continue to rise, dampening the impact of the mark-to-market
volatility.
Equity markets returns were positive in the quarter.
Overall, the Group maintains modest exposure to selected risk assets. We
continue to look to incrementally improve long-term risk and capital adjusted
outcomes through further diversification.
Capital management
The Group remains well capitalised on both a regulatory and rating agencies
basis, with high levels of liquidity, and strong capital generation. Capital
generation is weighted towards the second half of the year due to the earnings
profile of catastrophe exposed business.
We have the flexibility to deploy capital into each of our business units
where we see attractive growth opportunities, while maintaining balance sheet
strength and financial flexibility in line with our strategy.
As at 30 April 2024, the Group has repurchased 4.7 million shares for total
consideration of approximately $71.4 million as part of the $150 million share
buyback programme announced on 5 March 2024.
ENDS
A conference call for investors and analysts will be held at 10:00 BST on
Thursday, 2 May 2024.
Participant dial-in numbers:
United Kingdom (Local): +44 20 3936 2999
United States: +1 646 787 9455
All other locations: +44 20 3936 2999
Participant Access Code: 263576
Investors and analysts
Yana O'Sullivan, Director of Investor Relations, London +44 (0)20 3321 5598
Marc Wetherhill, Group Company Secretary, Bermuda +1 441 278 8300
Media
Eleanor Orebi Gann, Group Director of Communications, London +44 (0)20 7081
4815
Simone Selzer, Brunswick +44 (0)20 7404 5959
Tom Burns, Brunswick +44 (0)20 7404 5959
Notes to editors
About The Hiscox Group
Hiscox is a global specialist insurer, headquartered in Bermuda and listed
on the London Stock Exchange (LSE:HSX). Our ambition is to be a respected
specialist insurer with a diverse portfolio by product and geography. We
believe that building balance between catastrophe-exposed business and less
volatile local specialty business gives us opportunities for profitable growth
throughout the insurance cycle.
The Hiscox Group employs over 3,000 people in 14 countries, and has customers
worldwide. Through the retail businesses in the USA, UK, Europe and Asia, we
offer a range of specialist insurance products in commercial and personal
lines. Internationally-traded, bigger-ticket business and reinsurance is
underwritten through Hiscox London Market and Hiscox Re & ILS.
Our values define our business, with a focus on people, courage, ownership and
integrity. We pride ourselves on being true to our word and our award-winning
claims service is testament to that. For more information, visit
www.hiscoxgroup.com (http://www.hiscoxgroup.com) .
(1) Source: Lloyd's Insights Hub, Syndicate accounts. "Large" defined as over
£1 billion in premium. Performance based on combined ratio. 2023: 2(nd),
2022: 1(st), 2021: 2(nd).
(2) K&R business written through Syndicate 33 has been transferred from
Hiscox USA to Hiscox London Market. Q1 2023 financials have been restated to
report on a consistent basis.
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