Hiscox Ltd Preliminary results For the year ended 31 December 2016 - PowerPoint PPT Presentation

Hiscox Ltd Preliminary results For the year ended 31 December 2016

A record result Flattered by FX • Gross written premiums up by 23.6% to £2,402.6m • Profit before tax up by 64% to £354.5m • Full year dividend step up by 15% to 27.5p • Net asset value up by over £1 per share to 649.9p • Return on equity up by 7.0% to 23.0% 1

Retail comes of age Big-ticket 2010 split 2015 split 2016 split Hiscox London Market Hiscox Re and ILS GWP Retail Hiscox Retail 54% 46% 49% 51% 51% 49% NWP 39% 40% 47% 61% 53% 60% PBT 13% excl. FX 39% 46% 54% 61% 87% PBT excludes Corporate Centre. 2

Financial performance

Group performance Strength in diversity 2016 2015 Change • Top line growth of 23.6%, £m £m % 14.1% in local currency Growth • Net growth dominated Gross premiums written 2,402.6 1,944.2 23.6 by Retail Net premiums written 1,787.9 1,571.8 13.7 • Good underwriting profit Net premiums earned 1,675.0 1,435.0 16.7 and investment return Earnings • Favourable currency Underwriting profit 158.4 177.8 (10.9) movements Investment return 75.0 35.4 111.9 • Dividend step up Foreign exchange 152.4 15.2 902.6 • NAV up by over Other* (31.3) (12.3) (154.5) £1 per share Profit before tax 354.5 216.1 64.0 • Underlying expense Combined ratio 84.4% 85.0% (0.6) ratio steady Combined ratio excl. monetary FX 90.8% 85.7% 5.1 Balance sheet Ordinary dividend (p) 27.5 24.0 14.6 Additional return (p) ‒ 16.0 – Net asset value £m 1,818.4 1,528.8 18.9 p per share 649.9 545.0 19.2 Return on equity 23.0% 16.0% 7.0 4 *Includes finance costs, impairments and accelerated amortisation.

Hiscox Retail Strategy paying off 2016 2015 • Hiscox USA – outstanding £m £m performance, premium growth of over 30% Gross premiums written 1,181.4 989.8 • Hiscox UK and Ireland and Hiscox Europe – good Net premiums written 1,092.0 936.6 profitability and growth Net premiums earned 1,020.5 888.0 • Hiscox Special Risks – decreasing in the face of tough competition Underwriting profit 99.5 72.2 • Local currency growth Investment result 31.3 17.4 of 13.2% Foreign exchange and other* 27.2 (11.0) • Profits more than doubled • Retention rates Profit before tax 158.0 78.6 consistently at 90% Combined ratio 88.1% 92.9% • Combined ratios: – Hiscox UK and Ireland Combined ratio excluding monetary FX 91.9% 92.0% 83.0% – Hiscox Europe 86.3% – Hiscox International 93.6% 5 *Includes impairments and accelerated amortisation.

Hiscox London Market A good result in a challenging market 2016 2015 • Top line growth of 14.2% £m £m in local currency – significantly moderated at net level Gross premiums written 726.0 571.0 • Bottom line flattered by Net premiums written 469.1 410.3 foreign exchange Net premiums earned 443.1 366.4 • Step down in underwriting profit as challenging environment bites Underwriting profit (3.4) 40.9 • Growth driven by Investment result 13.4 6.8 new teams Foreign exchange and other* 34.0 6.9 • Materially shrinking in 2017 Profit before tax 44.0 54.6 Combined ratio 91.0% 86.6% Combined ratio excluding monetary FX 99.7% 88.8% 6 *Includes impairment.

Hiscox Re and ILS Good underwriting and good growth 2016 2015 • Local currency growth £m £m of 16.1% • Continued disciplined Gross premiums written 495.2 383.4 underwriting Net premiums written 226.8 225.0 • Growth in specialty and casualty lines, with new Net premiums earned 211.4 180.7 products and new teams • Kiskadee (ILS) now Underwriting profit 82.5 85.9 $1.25 billion AUM Investment result 11.7 4.7 • Increasing contribution from fees and profit Foreign exchange and other* 21.3 6.9 commissions • ILS funds have achieved Profit before tax 115.5 97.5 positive monthly returns since inception Combined ratio 53.7% 46.6% • Innovative fund structures Combined ratio excluding monetary FX 65.6% 51.4% and proximity to Hiscox Re provides access to a diverse pool of risk 7 *Includes finance costs.

A good claims experience • Net catastrophe and market loss claims impact for Hiscox Ltd – Catastrophe: £65.4m (2015: £17.9m) – includes Hurricane Matthew, Alberta wildfires, Louisiana and Houston floods, Texas hailstorm, Japan and Ecuador earthquakes, UK and European storms – Market losses: £12.4m (2015: £17.6m) – includes Jubilee oil field, Prestige, Pemex, Brussels and Istanbul terrorist attacks • For Hiscox Re and ILS, good risk selection in a year of high frequency, low severity catastrophe activity 8

A consistent approach to reserving Reserve releases £213m (2015: £206m) Loss development by accident year • 12.7% of opening net reserves broadly 2011 2012 2013 2014 2015 consistent with prior years 1.05 • No adverse development 1.00 • Maintaining a cautious 0.95 approach 0.90 0.85 0.80 0.75 0.70 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Ultimate net claims Reserve release as % of opening net reserves 15.0% 12.9% 12.7% 11.5% 10.2% 9.5% 2011 2012 2013 2014 2015 2016 9

Portfolio – asset mix High-quality, conservative portfolio Investment portfolio £4,410m as at 31 December 2016 • AUM increased as a result of growing balance sheet and USD strength Asset allocation Bond credit quality Bond currency split Bonds Gvt. USD • Risk assets at 6.9% Cash AAA GBP AA Risk assets • High credit quality EUR A maintained CAD and other BBB BB and below • Yield to maturity of bond portfolio 1.3% at 31 December (1.0% as at 30 June) 1.5 1.7 • Average bond duration: 6.9 9.5 14.9 21.5 months 15.7 30.2 18.3 18.9 70.5 77.4 15.9 18.6 10

Strong investment performance 31 December 2016 31 December 2015 Asset Annualised Asset Annualised allocation return Return allocation return Return % % £000 % % £000 Bonds £ 14.1 2.7 12.3 1.1 US$ 54.6 1.7 51.2 0.9 Other 8.7 1.1 8.9 0.6 Bonds total 77.4 1.9 55,709 72.4 0.9 21,585 Equities 6.9 6.2 17,246 7.2 4.0 10,410 Deposits/cash/ bonds <three months 15.7 0.3 1,881 20.4 0.4 1,685 Actual return 1.9 74,836 1.0 33,680 Group invested assets £4,410m £3,609m 11 Before fees, derivative positions and investments in insurance linked funds.

Solvency capital vs. regulatory requirements $2.6bn $1.4bn surplus Solvency ratio estimate 214% $1.2bn Available statutory economic capital and surplus Bermuda enhanced solvency capital requirement 12

Capital requirement £1.97bn available capital £1.92bn available capital (post final dividend) Economic Regulatory A.M. Best S&P Fitch Group capital model Group capital model Bermuda enhanced (catastrophe (economic) (regulatory) solvency capital stressed) requirement Rating agency assessments shown are internal Hiscox assessments of the agency capital requirements on the basis of 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 13 respect to variations in the allowable capital in each assessment for comparison to a consistent available capital figure. The available capital figure comprises net tangible assets and subordinated debt.

Retail providing bottom line stability Balance of insurance profits Total Group controlled income Underwriting profits Hiscox Retail Hiscox London Market Hiscox Re and ILS Hiscox Retail Big-ticket (Hiscox London Market, Hiscox Re and ILS) 100% 90% ILS Quota 80% 44% UK and share Ireland 70% 64% 71% Reinsurance 60% 82% Marine and Europe energy 91% 50% Special Casualty Risks 40% Specialty USA 30% 56% Property 20% 36% DirectAsia 29% 10% 18% 9% 0% 2012 2013 2014 2015 2016 14

Focus remains on growing shareholder value NAV up, dividend up Net asset value per share (p) • Compound growth of 13.4% • Dividends and capital 700 650 returns over five years: £825m 600 • Total shareholder returns 545 over five years: £881m 500 463 • Final dividend up 19%, full year dividend up 15% 402 400 • Progressive dividend 346 to continue 333 324 299 • NAV per share up £1.05 300 258 this year 210 200 100 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 15

Underwriting

Rates stable in retail, continued pressure in big-ticket lines • Retail stable All Retail Core London Market Catastrophe reinsurance • Small reductions in 120 catastrophe reinsurance • Greatest pressure in 100 Rate on line indexed to January 2010 London Market, driven by – Marine and energy – Aviation 80 – Big-ticket property • Focus growth on areas 60 of rate adequacy 40 20 0 12 month rolling period ending 17