Hiscox Ltd Preliminary results For the six months ended 30 June - - PowerPoint PPT Presentation
Hiscox Ltd Preliminary results For the six months ended 30 June 2016 A good first half flattered by FX Excluding FX June June 2016 2016 Premium growth 17.5% 13.0% (2015: 12.0%) (2015: 7.2%) Profit before tax 206.0m 118.7m (2015:
June 2016 Excluding FX June 2016 Premium growth 17.5% (2015: 12.0%) 13.0% (2015: 7.2%) Profit before tax £206.0m (2015: £135.1m) £118.7m (2015: £150.8m) Combined ratio 80.7% (2015: 82.5%) 88.4% (2015: 80.3%)
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year end
equity excluding FX 15.8% (2015: 22.1%) June 2016 £m June 2015† £m Dec 2015 £m Gross premiums written 1,288.5 1,096.3 1,944.2 Net premiums written 889.1 860.1 1,571.8 Investment return on financial assets Foreign exchange gains/(losses) 42.0 87.3 27.9 (15.7) 33.7 15.2 Profit before tax Profit after tax 206.0 197.6 135.1 129.4 216.1 209.9 Basic earnings per share (p) Interim/final equivalent dividend (p) Additional return (p) Net asset value £m p per share 70.4 8.5 ‒ 1,667.7 591.7 43.7 8.0 – 1,414.7 505.5 72.8 24.0 16.0 1,528.8 545.0 Return on equity after tax* 28.3% 19.9% 16.0%
†Includes consolidation of Kiskadee.
*Annualised.
30 June 2016 30 June 2015*
Hiscox Retail £m Hiscox London Market £m Hiscox Re £m Corporate Centre £m Total £m Hiscox Retail £m Hiscox London Market £m Hiscox Re £m Corporate Centre £m Total £m Gross premiums written 581.1 342.7 364.7 ‒ 1,288.5 510.5 298.1 287.8 ‒ 1,096.3 Net premiums written 528.2 216.2 144.7 ‒ 889.1 481.8 207.8 170.5 ‒ 860.1 Net premiums earned 470.4 198.1 99.0 ‒ 767.5 433.8 169.8 106.2 ‒ 709.8 Investment result – Financial assets 15.2 10.6 9.4 6.8 42.0 11.4 5.3 5.1 6.1 27.9 Foreign exchange gains/(losses) 24.0 17.2 12.8 33.3 87.3 (11.9) (3.7) 0.2 (0.3) (15.7) Profit/(loss) before tax 92.3 37.1 54.6 22.0 206.0 61.6 21.2 59.6 (7.3) 135.1 Combined ratio 84.1% 85.3% 56.0% ‒ 80.7% 88.7% 90.6% 45.5% ‒ 82.5% Combined ratio excluding monetary FX 89.4% 94.8% 69.8% ‒ 88.4% 85.9% 88.4% 45.2% ‒ 80.3%
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*Restated to bring global kidnap and ransom business in to Hiscox Retail (Hiscox Special Risks). Business segments described in appendices.
30 June 2016 30 June 2015 Asset allocation % Annualised return % Return £000 Asset allocation % Annualised return % Return £000 Bonds £ 14.4 3.9 15.4 0.9 US$ 52.3 3.2 53.2 1.6 Other 8.8 2.2 9.1 0.4 Bonds total 75.5 3.2 43,581 77.7 1.3 15,038 Equities 6.9 (2.0) (2,737) 8.7 9.3 11,910 Deposits/cash/ bonds <3 months 17.6 0.3 1,114 13.6 0.4 909 Actual return 2.3 41,958 1.8 27,857 Group invested assets £3,946m £3,032m
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Before fees, derivative positions and investments in insurance linked funds.
69.3 18.5 10.7 1.5 USD GBP EUR CAD
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Investment portfolio £3,946m as at 30 June 2016
investment of bond proceeds in Q2
maintained
portfolio at 1.0%
22.2 months
26.8 16.2 18.5 20.8 16.2 1.5 Gvt. AAA AA A BBB BB and below 75.5 17.6 6.9 Bonds Cash Risk assets Asset allocation Bond credit quality Bond currency split
A.M. Best (catastrophe stressed) Standard & Poor's Fitch ratings Group capital model (economic) Group capital model (regulatory) Bermuda solvency capital requirement
7 £1.94bn available capital £1.92bn available capital (post interim dividend)
Rating agency assessments shown are internal Hiscox projections of the agency capital requirements on the basis of projected 2016 year end results. Hiscox uses the internally developed Group capital model to assess its own capital needs on both a trading (economic) and purely regulatory basis. All capital requirements have been normalised with respect to variations in the allowable capital in each assessment for comparison to a consistent available capital figure. The available capital figure comprises shareholders’ equity and subordinated debt as at 30 June 2016.
Economic Regulatory
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premium
core London Market lines – Marine and energy – Aviation – Big ticket property
catastrophe reinsurance
are improving and margins healthy
Core London Market (excluding White Oak) All Retail Catastrophe reinsurance 12 month rolling period ending Rate on line indexed to January 2010
40 60 80 100 120
11 Reinsurance Local casualty and commercial Specialty Art and private client Property Marine and energy Global casualty Period-on-period in local currency 2016 GWP
Non-marine Marine Aviation Casualty Specialty Professional liabilities Errors and
Private directors and
Cyber Commercial small package Small technology and media Healthcare related Media and entertainment Kidnap and ransom Contingency Terrorism Product recall Personal accident Political risks Aerospace Contractors’ equipment FTC Extended warranty Home and contents Fine art Classic car Luxury motor Asian motor Commercial property Onshore energy USA homeowners Managing general agents International property Cargo Marine hull Energy liability Offshore energy Marine liability Public D&O, PI Healthcare General liability
+16.1% £400m +21.6% £372m +8.1% £242m +0.1% £152m +6.1% £147m
£75m +58.2% £53m
Total Group controlled premium 30 June 2016: £1,441m
premium increased to facilitate growth in Kiskadee
premium has reduced as rates have reduced
specialty and casualty lines which have higher combined ratios
Excludes Kiskadee. Other: specialty, casualty, aviation, healthcare.
12 100 200 300 400 500 600 700 Gross Net Gross Net Gross Net H1 2014 H1 2015 H1 2016 GWP/NWP (US$)
Hiscox Re GWP and NWP (US$ Group controlled)
Gross catastrophe Net catastrophe Gross other Net other
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Six months to 30 June 2016 Local currency GWP £m NWP £m GWP change % NWP change % GWP change % NWP change % Hiscox Retail Hiscox UK and Europe Hiscox UK 244.4 211.7 9.3 (0.9) 8.7 (1.7) Hiscox Europe 101.2 98.0 9.2 9.8 7.5 7.7 Hiscox International Hiscox Special Risks 44.9 38.8 (16.4) (19.8) (21.8) (24.8) Hiscox USA 183.4 174.8 40.0 39.8 32.8 31.6 DirectAsia* 6.2 4.4 (11.7) 8.0 (16.7) 14.6 Hiscox London Market 342.7 216.2 15.0 4.0 9.7 0.2 Hiscox Re** 364.7 144.7 26.8 19.2 20.6 12.1 Total 1,287.5 888.6 17.7 9.8 13.3 5.9
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*Excludes Hong Kong for both periods. **Excludes consolidation of Kiskadee for H1 2015.
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Hiscox London Market
‒ Core London Market 1.2% ‒ New classes of business 5.3% ‒ Alternative distribution 3.2%
energy, terrorism
Mediterranean yacht market
large losses £16.1m Hiscox Re
1 July renewals
large losses £7.0m
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Hiscox Special Risks
markets affecting premiums
DirectAsia
competitive Singapore market
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Hiscox UK and Ireland
and broker e-trading solution (Hiscox Trader)
Hiscox Europe
and IT freelancer products launched in Germany
100 200 300 400 500 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 HY 2015 HY 2016 Broker Direct and partnerships
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– Direct over 110,000 – Broker over 40,000
five years of 26.0%
– Atlanta – Chicago – Dallas – Los Angeles – New York City – San Francisco – White Plains
$US GWP
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Group controlled income.
Total GWP 30 June 2016: $270m
Professions Media and entertainment Property Direct and partnerships Executive risks
54% 13% 8% 8% 17%
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People Attracting the talented and ambitious
attractive to employees
Veterans
in each region
24 months Systems and infrastructure Future proofing the business
underway ‒ Digitalised and scalable business ‒ Implementation to begin 2017
infrastructure etc.) Brand The gift that keeps on giving
and this will continue to climb
to an emotional connection
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26 USA Atlanta Chicago Dallas Los Angeles New York City San Francisco White Plains Guernsey St Peter Port Latin American gateway Miami Bermuda Hamilton Europe Amsterdam Bordeaux Brussels Cologne Dublin Hamburg Lisbon Lyon Madrid Munich Paris UK Birmingham Colchester Glasgow Leeds London Maidenhead Manchester York Asia Bangkok Hong Kong Singapore
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200 400 600 800 1000 1200 1400 1600 1800 2000 2200
29 Hiscox Reinsurance Hiscox London Market - Retail
Gross written premiums (£m)
Hiscox London Market - Volatile Hiscox UK Hiscox Europe Hiscox Guernsey Hiscox USA Local specialty lines Internationally traded lines DirectAsia
30 Reinsurance Local casualty and commercial Specialty Art and private client Property Marine and energy Global casualty Period-on-period in local currency 2016 GWP
Non-marine Marine Aviation Casualty Specialty Professional liabilities Errors and
Private directors and
Cyber Commercial small package Small technology and media Healthcare related Media and entertainment Kidnap and ransom Contingency Terrorism Product recall Personal accident Political risks Aerospace Contractors’ equipment FTC Extended warranty Home and contents Fine art Classic car Luxury motor Asian motor Commercial property Onshore energy USA homeowners Managing general agents International property Cargo Marine hull Energy liability Offshore energy Marine liability Public D&O, PI Healthcare General liability
+16.1% £400m +21.6% £372m +8.1% £242m +0.1% £152m +6.1% £147m
£75m +58.2% £53m
Total Group controlled premium 30 June 2016: £1,441m
£m 2015 2014 2013 2012 2011 2010 Gross premiums written 1,944.2 1,756.3 1,699.5 1,565.8 1,449.2 1,432.7 Net premiums written 1,571.8 1,343.4 1,371.1 1,268.1 1,174.0 1,131.6 Net premiums earned 1,435.0 1,316.3 1,283.3 1,198.6 1,145.0 1,131.2 Investment return† 33.7 56.4 58.9 92.7 25.9 98.8 Profit before tax 216.1 231.1 244.5 217.5 17.3 211.4 Profit after tax 209.9 216.2 237.8 208.0 21.3 178.8 Basic earnings per share 72.8p 67.4p 66.3p 53.1p 5.5p 47.2p Dividend 24.0p 22.5p 21.0p 18.0p 17.0p 16.5p Invested assets (incl. cash)† 3,609.4 3,244.9 3,129.5 3,055.8 2,873.4 2,779.7 Net asset value £m 1,528.8 1,454.2 1,409.5 1,365.4 1,255.9 1,266.1 p per share 545.0 462.5 402.2 346.4 323.5 332.7 Combined ratio 85.0% 83.9% 83.0% 85.5% 99.5% 89.3% Return on equity after tax* 16.0% 17.1% 19.3% 17.1% 1.7% 16.5%
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†Excluding derivatives, insurance linked funds and third-party assets managed by Kiskadee Investment Managers.
*Annualised post tax, based on adjusted opening shareholders’ funds.
32 5-10 year 10-25 year 25-50 year 50-100 year 100-250 year
02 02 06 22 06 07 10 43 17 18 15 76 26 35 20 113 36 62 27 163
Mean industry loss $bn Industry loss return period and peril
JP EQ – Japanese earthquake US EQ – United States earthquake EU WS – European windstorm US WS – United States windstorm
Hiscox Ltd loss ($m) Lower 5%- upper 95% range Modelled mean loss
200 300 400 500 600 700 800
JP EQ US EQ EU WS US WS JP EQ US EQ EU WS US WS JP EQ US EQ EU WS US WS JP EQ US EQ EU WS US WS JP EQ US EQ EU WS US WS 5- 10yr 5- 10yr 5- 10yr 5- 10yr 10- 25yr 10- 25yr 10- 25yr 10- 25yr 25- 50yr 25- 50yr 25- 50yr 25- 50yr 50- 100yr 50- 100yr 50- 100yr 50- 100yr 100- 250yr 100- 250yr 100- 250yr 100-250y
Hurricane Katrina $50bn market loss 21 year return period Hurricane Andrew $56bn market loss 25 year return period Northridge Quake $24bn market loss 40 year return period Superstorm Sandy - $20bn market loss, 7 year return period 1987J $10bn market loss 15 year return period Loma Prieta Quake $6bn market loss 15 year return period 2011 Tohoku Quake $25bn market loss, 45 year return period
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Hiscox Group – losses shown as percentage of 2015 gross and net written premium
Estimates calculated in accordance with Lloyd’s guidelines using models provided by Risk Management Solutions, Inc and AIR Worldwide Corporation. Industry return periods estimated using Lloyd’s guideline industry loss figures.
36% 17% 30% 46% 28% 7% 4% 8% 9% 5% San Fransisco earthquake European windstorm Florida windstorm Gulf of Mexico windstorm Japanese earthquake Industry loss return period $50bn 1 in 240 year $107bn 1 in 80 year $125bn 1 in 100 year $30bn 1 in 200 year $50bn 1 in 110 year Gross loss Net loss
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Event
Pandemic Global Spanish flu type event (high infection, low mortality) 45% infection rate, 20% medical treatment, 0.3% case fatality rate £75m Cyber Very large cloud service provider (e.g. Amazon Web Services) goes offline for 12 days. Insurance industry loss of c.£30bn £125m Multi-year loss ratio deterioration 5% deterioration on three years casualty premiums of c.£2bn £100m Economic collapse US GDP drop of 10% to 15%, approximately three times the 2007-08 financial crisis £275m Casualty reserve deterioration 35% deterioration on existing casualty reserves of c.£850m
£300m Property catastrophe 1 in 200 year catastrophe event from £160bn US windstorm £300m
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2016 geographical split – controlled income 2016 currency split – controlled income
42.2% 10.3% 9.5% 23.3% 14.7% North America Other Westerm Europe (excl. UK) Worldwide UK 24.7% 58.2% 5.0% 12.1% GBP USD CAD and other EUR
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Receivables at 30/06/16 of £793.6m
51.1% 19.7% 24.7% 4.5% A AA AAA and collateralised Other 67% 25% 8% A AA AAA
*Reinsurance placements in force at 21 July 2016.
2016 reinsurance protections* First loss exposure by S&P rating
13.4 18.7 21.7 19.4 21.0 19.0 19.0 19.3 23.5 19.2 21.5 31.0 5 10 15 20 25 30 35
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Ceded as a percentage of GWP Reinsurance receivables as a percentage
10.0 7.7 13.4 11.0 11.6 11.7 12.3 10.3 10.6 10.2 11.3 12.7 5 10 15 20 25
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*Includes agency debt, Canadian provincial debt and government guaranteed bonds.
still favoured Portfolios: $2.7bn
AAA % AA % A % BBB % BB and below % Total % Duration months Government issued 27.6 27.6 18.0 Government supported* 0.8 6.9 0.1 0.2 8.0 17.6 Asset backed 8.4 0.2 0.1 8.7 10.1 Mortgage backed agency 7.2 7.2 28.5 Non agency 0.8 0.3 1.7 2.8 11.2 Commercial MBS 1.7 0.3 2.0 17.2 Corporates 0.8 5.1 20.0 17.1 0.2 43.2 22.3 Cash 0.5 0.5 0.0 Total 12.5 47.6 20.7 17.1 2.1 100.0 19.6
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*Includes supranational and government guaranteed bonds.
for duration management
Ireland , Italy, Portugal
duration increased following investment
GBP portfolios: £561m
AAA % AA % A % BBB % BB and below % Total % Duration months Government issued 27.0 27.0 18.2 Government supported* 15.7 1.8 0.1 17.6 17.3 Asset backed 3.3 0.9 4.2 11.8 Corporates 6.1 6.6 17.9 18.0 48.6 41.5 Cash 2.6 2.6 0.0 Total 25.1 35.4 20.5 19.0 0.0 100.0 28.6
EUR and CAD portfolios: £366m
AAA % AA % A % BBB % BB and below % Total % Duration months Government issued 27.5 0.5 28.0 47.2 Government supported* 19.0 8.3 0.6 0.1 28.0 18.6 Asset backed 1.6 0.1 1.7 10.7 Corporates 6.5 10.7 16.4 7.0 0.4 41.0 21.1 Cash 1.3 1.3 0.0 Total 54.6 19.5 18.4 7.1 0.4 100.0 27.3
Hiscox Retail Hiscox Retail brings together the results of the UK and Europe, and Hiscox International being the US, Special Risks and Asia retail business divisions. Hiscox UK and Europe underwrite European personal and commercial lines business through Hiscox Insurance Company Limited, together with the fine art and non-US household insurance business written through Syndicate 33. In addition, Hiscox UK includes elements of specialty and international employees and officers’ insurance written by Syndicate 3624, and Hiscox Europe excludes the kidnap and ransom business written by Hiscox Insurance Company Limited. Hiscox International comprises the specialty and fine art lines written through Hiscox Insurance Company (Guernsey) Limited, and the motor business written via DirectAsia, together with US commercial, property and specialty business written by Syndicate 3624 and Hiscox Insurance Company Inc. via the Hiscox USA business division. It also includes the European kidnap and ransom business written by Hiscox Insurance Company Limited and Syndicate 33. Hiscox London Market Hiscox London Market comprises the internationally traded insurance business written by the Group’s London based underwriters via Syndicate 33, including lines in property, marine and energy, casualty and other specialty insurance lines, excluding the kidnap and ransom business. In addition the segment includes elements of business written by Syndicate 3624 being auto physical damage, auto extended warranty and aviation business. Hiscox Re Hiscox Re is the reinsurance division of the Group, combining the underwriting platforms in Bermuda, London and Paris. The segment comprises the performance of Hiscox Insurance Company (Bermuda) Limited, excluding the internal quota share arrangements, with the reinsurance contracts written by Syndicate 33. In addition, the healthcare and casualty reinsurance contracts written in the Bermuda hub on Syndicate capacity are also included. The segment also captures the performance and fee income of Kiskadee, further details of which can be found in note 2.3 of the Group’s Report and Accounts for the year ended 31 December 2015. Corporate Centre Corporate Centre comprises the investment return, finance costs and administrative costs associated with Group management activities. Corporate Centre also includes the majority of foreign currency items on economic hedges and intragroup borrowings, further details of which can be found at note 13 of the Group’s Report and Accounts for the year ended 31 December 2015. Corporate Centre forms a reportable segment due to its investment activities which earn significant external returns.
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Binding authority An agreement between a Lloyd’s managing agent and a coverholder under which the managing agent delegates its authority to enter into contracts of insurance to be underwritten by the members of a syndicate. Claims ratio Net claims incurred, including IBNR, as a percentage
Combined ratio The total of the claims, expenses and impact of foreign exchange ratios. Expense ratio Expenses as a percentage of net earned premiums. Funds at Lloyd’s The amount of assets, which can be cash, investments or letters of credit, that a syndicate member has to deposit with Lloyd’s to support his share of the capacity on a syndicate. The minimum amount is 40% of the capacity owned by the member. Gross written premium Premiums contracted for before any deductions. Group controlled The total gross written premium controlled by the Group including the 27.5% of the Syndicate capacity not owned by Hiscox in 2016 (27.5% in 2015). IBNR Incurred but not reported. An estimate made at the end of each accounting period to cover the expected cost of losses that have occurred but have not yet been reported to the insurer or reinsurer. ILS Insurance-linked Securities. Financial instruments whose value is affected by an insured loss event. Examples include catastrophe bonds and other forms of risk-linked securitization. Incurred loss ratio Paid and outstanding losses as a percentage of premiums. Gross incurred loss ratio is before deducting any reinsurance and net is after deducting reinsurance. Long-tail A term used to describe an insurance risk that has the potential for claims development or new claims to be reported a number of years after expiry of the term of the policy.
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MGA Managing General Agency. An individual or business entity appointed by an insurer to solicit applications from agents for insurance contracts or to negotiate insurance contracts on behalf of an insurer. Member or Name The companies or individuals who own the capacity of a syndicate and who belong to the membership of the Society
Net premiums earned Premiums received after the cost of reinsurance and adjustment for unearned premium. Unearned premium covers the future period of risk of an insurance policy. Net premiums written Premiums contracted for after deduction of reinsurance. Open year A year of account of a syndicate which has not been closed by Reinsurance To Close (RITC). RITC usually occurs at the end of the third year. A year of account can be left open beyond the third year if the extent of the future liability cannot be accurately quantified. Qualifying quota share These are quota share reinsurance policies, which Lloyd’s allow in certain circumstances, that enable a syndicate to write gross premium in excess of its capacity. Reinsurance to close – RITC The reinsurance to close comprises a premium payable by the closing year to the members on the next open year of account and a contract which transfers the liability for all claims in respect of the closing year to the next open year. Run-off account At Lloyd’s, a year of account which is kept open after the date
Stamp capacity The volume of business measured in gross written premiums net of acquisition costs underwritten by the group through its managed syndicates at Lloyd’s of London. Subrogation The right of the underwriter to ‘stand in the shoes of the insured’ and take over the Insured's rights, following payment
third party responsible for the loss. It is limited to the amount
Syndicate capacity Also referred to as the ‘stamp’. The maximum amount of business that a syndicate in Lloyd’s can write per year, aggregated from all its members.
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