Hiscox Ltd Change in presentation currency In November 2017 the - - PDF document

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Hiscox Ltd Change in presentation currency

In November 2017 the Group announced the functional currency of Hiscox Syndicate 33, Hiscox Dedicated Corporate Member Limited, Hiscox Syndicate Limited and Hiscox Capital Ltd, and the presentation currency of the Group would change from Sterling to US Dollars effective 1 January 2018. The change in functional currency will significantly reduce the volatility of the Group’s earnings due to foreign exchange movements, in particular due to translation of foreign currency balances. Given that a significant majority of Group earnings are denominated in US Dollars, we believe that the presentation currency change will give investors and other stakeholders a clearer understanding of Hiscox’s performance over time. To assist investors, the financial information for the full year and interim results of 2017 and the full year results of 2016 is re-presented in US Dollars below. Basis of preparation In accordance with the guidance defined in IAS 21 “The Effects of Changes in Foreign Exchange Rates”, for the full year and interim results of 2017 and the full year results of 2016 have been re-translated to US Dollars as follows:  Assets and liabilities were translated into US Dollars at closing rates of exchange. Trading results were translated into US Dollars at average rates of exchange for the period. Differences resulting from the re-translation on the opening net assets and the results for the year have been taken to the foreign currency translation reserve (FCTR);  The cumulative translation reserve was set to nil at 1 January 2004 (i.e. the transition date to IFRS). Share capital, share premiums and other reserves were translated at historic rates prevailing at the dates of transactions; and  All exchange rates used were extracted from the Group’s underlying financial records. The exchange rates used were as follows: GBP/USD FY2017 HY2017 FY2016 Closing rate 1.350 1.300 1.240 Average rate 1.289 1.258 1.356

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Consolidated income statement

Year to 31 Dec 2017 $000 Six months to 30 June 2017 $000 Year to 31 Dec 2016 $000 Income Gross premiums written 3,286,021 1,836,178 3,257,897 Outward reinsurance premiums (883,022) (561,138) (833,447) Net premiums written 2,402,999 1,275,040 2,424,450 Gross premiums earned 3,295,965 1,564,717 3,011,475 Premiums ceded to reinsurers (879,757) (386,434) (740,159) Net premiums earned 2,416,208 1,178,283 2,271,316 Investment result 104,750 58,533 95,774 Other income 54,079 27,618 50,980 Total income 2,575,037 1,264,434 2,418,070 Expenses Claims and claim adjustment expenses, net of reinsurance (1,310,916) (557,556) (1,003,132) Expenses for the acquisition of insurance contracts (805,022) (376,233) (730,148) Reinsurance commission income 217,092 103,813 174,418 Operational expenses (528,973) (253,851) (557,801) Net foreign exchange (losses)/gains (80,890) (38,836) 206,665 Total expenses (2,508,709) (1,122,663) (1,909,998) Results of operating activities 66,328 141,771 508,072 Finance costs (26,895) (12,432) (27,481) Share of profit /(loss) of associates 259 (240) 182 Profit before tax 39,692 129,099 480,773 Tax expense (5,788) (5,933) (23,806) Profit for the period (all attributable to owners of the Company) 33,904 123,166 456,967

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Consolidated balance sheet

31 Dec 2017 $000 30 June 2017 $000 31 Dec 2016 $000 Assets Goodwill and intangible assets 186,038 171,681 153,418 Property, plant and equipment 65,628 60,919 60,047 Investments in associates 10,723 10,332 17,155 Assets held for sale

• 7,271
• Deferred tax

53,462 51,225 51,326 Deferred acquisition costs 446,129 491,410 429,777 Financial assets carried at fair value 5,139,643 4,796,919 4,702,121 Reinsurance assets 1,833,255 1,203,006 999,005 Loans and receivables including insurance receivables 1,121,452 1,259,965 995,592 Current tax 5,716 7,517 2,985 Cash and cash equivalents 867,767 1,001,742 824,373 Total assets 9,729,813 9,061,987 8,235,799 Equity and liabilities Shareholders’ equity Share capital 33,913 33,858 33,806 Share premium 45,849 40,448 34,031 Contributed surplus 183,969 183,969 183,969 Currency translation reserve (310,582) (357,624) (437,569) Retained earnings 2,414,158 2,514,771 2,439,509 Equity attributable to owners of the Company 2,367,307 2,415,422 2,253,746 Non-controlling interest 1,074 1,074 1,074 Total equity 2,368,381 2,416,496 2,254,820 Employee retirement benefit obligations 64,114 72,981 69,612 Deferred tax

• 9,798

21,116 Insurance liabilities 6,007,750 5,266,834 4,777,693 Financial liabilities 391,110 369,682 342,604 Current tax 9,456 13,402 26,952 Trade and other payables 889,002 912,794 743,002 Total liabilities 7,361,432 6,645,491 5,980,979 Total equity and liabilities 9,729,813 9,061,987 8,235,799

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Operating segments

Year to 31 December 2017 Hiscox Retail $000 Hiscox London Market $000 Hiscox Re & ILS $000 Corporate Centre $000 Total $000 Gross premiums written 1,835,428 749,793 700,800

• 3,286,021

Net premiums written 1,674,238 484,945 243,816

• 2,402,999

Net premiums earned 1,585,289 561,572 269,347

• 2,416,208

Investment result 29,361 14,509 27,942 32,938 104,750 Other income 35,351 13,908 4,350 470 54,079 Total income 1,650,001 589,989 301,639 33,408 2,575,037 Claims and claims adjustment expenses, net of reinsurance (721,851) (400,229) (188,836)

• (1,310,916)

Expenses for the acquisition of insurance contracts (401,070) (159,823) (27,037)

• (587,930)

Operational expenses (384,685) (61,469) (53,294) (29,525) (528,973) Foreign exchange losses (530) (15,174) (5,253) (59,933) (80,890) Total expenses (1,508,136) (636,695) (274,420) (89,458) (2,508,709) Results of operating activities 141,865 (46,706) 27,219 (56,050) 66,328 Finance costs (10)

• (1,716)

(25,169) (26,895) Share of (loss)/profit of associates (247)

• 506

259 Profit/(loss) before tax 141,608 (46,706) 25,503 (80,713) 39,692 Profit/(loss) before tax and foreign exchange 142,138 (31,532) 30,756 (20,780) 120,582 100% ratio analysis Claims ratio % 45.2 70.1 71.0

• 54.9

Expense ratio % 49.3 38.6 27.9

• 43.9

Combined ratio excluding foreign exchange % 94.5 108.7 98.9

• 98.8

Foreign exchange impact % 0.1 2.9 2.4

• 1.1

Combined ratio % 94.6 111.6 101.3

• 99.9

Year to 31 December 2017 Hiscox Retail $000 Hiscox London Market $000 Hiscox Re & ILS $000 Corporate Centre $000 Total $000 100% ownership Net premiums earned 1,622,173 703,657 314,205

• 2,640,035

Claims and claims adjustment expenses, net of reinsurance (734,160) (493,201) (222,953)

• (1,450,314)

Expenses for the acquisition of insurance contracts (413,145) (197,629) (28,488)

• (639,262)

Operational expenses (386,080) (73,882) (59,264)

• (519,226)

Foreign exchange losses (1,120) (20,531) (7,535)

• (29,186)

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Six months to 30 June 2017 Hiscox Retail $000 Hiscox London Market $000 Hiscox Re & ILS $000 Corporate Centre $000 Total $000 Gross premiums written 930,360 395,769 510,049

• 1,836,178

Net premiums written 857,561 251,286 166,193

• 1,275,040

Net premiums earned 757,809 289,539 130,935

• 1,178,283

Investment result 14,711 9,958 16,331 17,533 58,533 Other income 11,541 7,623 8,319 135 27,618 Total income 784,061 307,120 155,585 17,668 1,264,434 Claims and claims adjustment expenses, net

• f reinsurance

(328,896) (155,232) (73,428)

• (557,556)

Expenses for the acquisition of insurance contracts (180,926) (85,228) (6,266)

• (272,420)

Operational expenses (184,173) (34,588) (25,253) (9,837) (253,851) Foreign exchange gains/(losses) 2,497 (10,375) (1,852) (29,106) (38,836) Total expenses (691,498) (285,423) (106,799) (38,943) (1,122,663) Results of operating activities 92,563 21,697 48,786 (21,275) 141,771 Finance costs (5)

• (777)

(11,650) (12,432) Share of (loss)/profit of associates (248)

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(240) Profit/(loss) before tax 92,310 21,697 48,009 (32,917) 129,099 Profit/(loss) before tax and foreign exchange 89,813 32,072 49,861 (3,811) 167,935 100% ratio analysis Claims ratio % 43.1 50.4 58.5

• 46.9

Expense ratio % 47.7 40.4 22.7

• 42.8

Combined ratio excluding foreign exchange % 90.8 90.8 81.2

• 89.7

Foreign exchange impact %

• 0.3

3.8 2.2

• 1.1

Combined ratio % 90.5 94.6 83.4

• 90.8

Six months to 30 June 2017 Hiscox Retail $000 Hiscox London Market $000 Hiscox Re & ILS $000 Corporate Centre $000 Total $000 100% ownership Net premiums earned 776,005 360,643 149,091

• 1,285,739

Claims and claims adjustment expenses, net

• f reinsurance

(334,322) (181,626) (87,225)

• (603,173)

Expenses for the acquisition of insurance contracts (185,268) (104,701) (5,409)

• (295,378)

Operational expenses (185,240) (41,065) (28,421)

• (254,726)

Foreign exchange gains/(losses) 2,273 (13,736) (3,322)

• (14,785)

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Year to 31 December 2016 Hiscox Retail $000 Hiscox London Market $000 Hiscox Re & ILS $000 Corporate Centre $000 Total $000 Gross premiums written 1,601,957 984,517 671,423

• 3,257,897

Net premiums written 1,480,709 636,158 307,583

• 2,424,450

Net premiums earned 1,383,838 600,883 286,595

• 2,271,316

Investment result 41,208 16,664 13,639 24,263 95,774 Other income 19,088 12,368 18,583 941 50,980 Total income 1,444,134 629,915 318,817 25,204 2,418,070 Claims and claims adjustment expenses, net of reinsurance (537,163) (353,195) (112,774)

• (1,003,132)

Expenses for the acquisition of insurance contracts (356,003) (186,007) (13,720)

• (555,730)

Operational expenses (388,771) (77,117) (64,605) (27,308) (557,801) Foreign exchange gains 50,508 47,448 31,132 77,577 206,665 Total expenses (1,231,429) (568,871) (159,967) 50,269 (1,909,998) Results of operating activities 212,705 61,044 158,850 75,473 508,072 Finance costs

• (2,243)

(25,238) (27,481) Share of profit/(loss) of associates 1,542 (1,360)

• 182

Profit before tax 214,247 59,684 156,607 50,235 480,773 Profit before tax and foreign exchange 163,739 12,236 125,475 (27,342) 274,108 100% ratio analysis Claims ratio % 38.4 57.4 39.1

• 44.2

Expense ratio % 53.4 42.0 25.8

• 46.4

Combined ratio excluding foreign exchange % 91.8 99.4 64.9

• 90.6

Foreign exchange impact %

• 3.8
• 8.7
• 11.9
• 6.4

Combined ratio % 88.0 90.7 53.0

• 84.2

Year to 31 December 2016 Hiscox Retail $000 Hiscox London Market $000 Hiscox Re & ILS $000 Corporate Centre $000 Total $000 100% ownership Net premiums earned 1,419,512 746,111 328,778

• 2,494,401

Claims and claims adjustment expenses, net of reinsurance (545,801) (428,430) (128,575)

• (1,102,806)

Expenses for the acquisition of insurance contracts (367,457) (223,918) (14,017)

• (605,392)

Operational expenses (390,581) (89,358) (70,695)

• (550,634)

Foreign exchange gains 54,396 65,225 39,225

• 158,846

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Sensitivity analysis

The following sensitivity analysis is based on a 10% strengthening or weakening of Sterling against the US Dollar. This analysis assumes that all other variables, in particular interest rates, remain constant and that the underlying valuation of assets and liabilities in their base currency is unchanged. Effect on profit before tax ($m) As at 31 December 2017 New basis Old basis 10% strengthening of US Dollar (21.0) 120.7 10% weakening of US Dollar 17.2 (98.7) For further information Hiscox Ltd Marc Wetherhill, Group Company Secretary, Bermuda +1 441 278 8300 Ryan Thompson, Investor Relations, London +44 (0)20 7448 6522 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. It’s a long-standing strategy which in 2017 saw the business deliver a profit before tax (excluding foreign exchange) of £93.6 million despite reserving net $225 million for claims in the most costly year ever for natural catastrophes. The Hiscox Group employs over 2,700 people in 14 countries, and has customers worldwide. Through the retail businesses in the UK, Europe, Asia and the US, we offer a range of specialist insurance for professionals and business customers as well as homeowners. 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, quality, courage and excellence in execution. We pride

• urselves on being true to our word and our award-winning claims service is testament to that. For more

information, visit www.hiscoxgroup.com.