Hiscox upbeat on strong underwriting result as profits fall

Specialist insurer Hiscox Group reported a strong 2022 performance on Wednesday, with gross premiums written increasing 3.6% to $4.43bn, despite foreign exchange headwinds caused by a strengthening dollar.

The FTSE 100 company’s underwriting profit saw a significant increase, reaching $269.5m - the highest result since 2015, and representing a 25% year-on-year increase despite elevated losses from natural catastrophes and man-made incidents.

Its combined ratio of 90.6% also reflected a strong performance.

Profit before tax slid, however, to $44.7m from $190.8m after its investment losses, with earnings per share falling to 12.1 US cents from 55.3 cents.

Hiscox Retail performed well, achieving a combined ratio of 94.8%, returning the segment to the 90% to 95% combined ratio range a year ahead of the stated target.

The division's gross premiums written increased 5.1% at constant currency to $2.27bn, driven by strong growth in its commercial business.

Hiscox said it expected to continue operating within that range going forward.

The company's Europe segment continued to grow strongly, increasing 13.6% year-on-year at constant currency to pass the €500m milestone.

Meanwhile, the US business delivered two major change initiatives, which led to growth of 5.6% year-on-year, excluding the impact of the former initiative.

The US DPD business also grew, by 9.7%, as a result of the platform migration.

In Hiscox London Market, the company said its focus remained on disciplined growth and building balanced portfolios at attractive returns.

While gross premiums written declined 4.8% to $1.11bn, mainly due to the underwriting actions taken on the property binder portfolio, an attractive rating environment meant the London Market was expected to grow gross premiums written in 2023.

Hiscox Re & ILS, the firm’s reinsurance and insurance-linked securities unit, reported strong top-line growth underpinned by ILS inflows in the first half of 2022 and an improving underwriting and rating environment.

The unit's gross premiums written increased 28.5% to $1.04bn, crossing the $1bn milestone for the first time.

Hiscox said it remained conservatively reserved with an 8.9% margin above actuarial best estimate, and completed two legacy portfolio transactions in 2022.

The company added that it was deploying additional organically generated capital into the attractive reinsurance market while remaining strongly capitalised, with an estimated Bermuda Solvency Capital Requirement (BSCR) of 197%.

However, its investment result saw a loss of $187.3m, primarily due to unrealised mark-to-market losses in its bond portfolio, swinging from a 2021 profit of $51.2m.

The firm said it expected the losses to unwind as the bonds matured, adding that its bond reinvestment yield of 5.1% as at 31 December represented significant upside for 2023.

Hiscox’s directors declared a final dividend for the year of 24 cents per share.

In a separate announcement on Wednesday, Hiscox also said Robert Childs had informed the board of his intention to retire as chairman, and to step down from the board during 2023.

It said the nominations committee had started a process, led by senior independent director Colin Keogh, to identify and appoint Childs’ successor as chairman.

“I am very pleased with the progress made across the group during 2022, as we delivered the strongest underwriting result in seven years,” said group chief executive officer Aki Hussain.

“We have a refined strategy, a new experienced and energetic leadership team, we have made significant progress in rolling out new-generation technology in the US and Europe and we are enjoying our highest employee engagement scores in ten years.”

Hussain said the outlook for 2023 was positive.

“We are facing favourable market conditions in all of our key markets; our talented teams supported by a strong balance sheet and financial flexibility are set to make the most of the significant opportunities ahead.”

At 0953 GMT, shares in Hiscox were up 2.28% at 1,097.5p.

Reporting by Josh White for Sharecast.com.