Hiscox Ltd Preliminary results for the year ended 31 December 2014 - PowerPoint PPT Presentation

Hiscox Ltd Preliminary results for the year ended 31 December 2014

A strong result • Premium growth of 3.3% (2013: 8.5%) – Insurance up by 8.8% – Reinsurance down by 13.9% • Profit before tax £231.1m (2013: £244.5m) • Combined ratio 83.9% (2013: 83.0%) • Return on equity 17.1% (2013: 19.3%) • Capital return of 60p including final dividend equivalent 1

Strategy gives us options Retail now a major contributor 2

Financial performance

A strong result Full year Full year 2014 2013 £000 £000 Gross premiums written 1,756,260 1,699,478 Net premiums written 1,343,410 1,371,114 1,283,311 1,316,259 Net premiums earned • Investment return of 1.8% Investment return on financial assets 56,355 58,924 4,974 (9,890) Foreign exchange gains/(losses) • Foreign exchange positive Profit before tax 231,075 244,538 Profit after tax 216,152 237,758 Basic earnings per share (p) 67.4 66.3 22.5 21.0 Interim/final equivalent dividend (p) 36.0 45.0 Additional capital return (p) • Retail profits cover Net asset value dividend £m 1,454.2 1,409.5 462.5 402.2 p per share Return on equity after tax 17.1% 19.3% 4

Segmental analysis 31 December 2014 31 December 2013 Hiscox Hiscox Hiscox London Hiscox Corporate Hiscox London Hiscox Corporate Retail Market Re Centre Total Retail Market Re Centre Total £000 £000 £000 £000 £000 £000 £000 £000 £000 £000 Gross premiums written 891,115 510,825 354,320 – 1,756,260 819,388 468,587 411,503 – 1,699,478 Net premiums written 825,878 336,895 180,637 – 1,343,410 751,144 359,941 260,029 – 1,371,114 Net premiums earned 790,721 332,497 193,041 – 1,316,259 711,081 303,251 268,979 – 1,283,311 Investment result – Financial assets 25,869 8,900 9,375 12,211 56,355 19,179 6,048 13,451 20,246 58,924 Foreign exchange gains/(losses) (5,121) 9,044 2,682 (1,631) 4,974 (3,911) (1,873) (3,308) (798) (9,890) Profit/(loss) before tax 78,065 62,649 105,563 (15,202) 231,075 61,179 63,144 128,982 (8,767) 244,538 Combined ratio 93.5% 84.2% 49.8% – 83.9% 94.3% 81.4% 58.9% – 83.0% Combined ratio excluding monetary FX 92.9% 87.2% 51.6% – 84.7% 93.7% 80.3% 57.3% – 82.1% Hiscox Retail Hiscox Re Hiscox Retail brings together the results of the UK and Europe, and Hiscox International being the US, Hiscox Re is the Reinsurance division of the Hiscox Group, combining the underwriting platforms in Guernsey and Asia retail business divisions. Hiscox UK and Europe underwrite European personal and Bermuda, London and Paris. The segment comprises the performance of Hiscox Insurance Company commercial lines business through Hiscox Insurance Company Limited, together with the fine art and (Bermuda) Limited, excluding the internal quota share arrangements, with the reinsurance contracts non-US household insurance business written through Syndicate 33. In addition, the UK includes written by Syndicate 33. In addition, the healthcare and casualty reinsurance contracts written in the elements of specialty and international employees and officers’ insurance written by Syndicate 3624. Bermuda hub on Syndicate capacity are also included. The segment also captures the performance Hiscox International comprises the specialty and fine art lines written through Hiscox Insurance Company of Kiskadee, the Hiscox Group’s Insurance Linked Securities business. (Guernsey) Limited, and the motor business written via DirectAsia, together with US commercial, Corporate Centre property and specialty business written by Syndicate 3624 and Hiscox Insurance Company Inc. via Corporate Centre comprises the investment return, finance costs and administrative costs associated the Hiscox USA business division. with Group management activities. Corporate Centre also includes the majority of foreign currency Hiscox London Market items on economic hedges and intragroup borrowings, further details of which can be found at note Hiscox London Market comprises the internationally traded insurance business written by the Group’s 13 of the Group’s Report and Accounts for the year ended 31 December 2014. Corporate Centre 5 London based underwriters via Syndicate 33, including lines in property, marine and energy, casualty forms a reportable segment due to its investment activities which earn significant external returns. and other specialty insurance lines. In addition the segment includes elements of business written by Syndicate 3624 being auto physical damage, auto extended warranty and aviation business.

6 Strategy working

7 Diverse capital creates options

Solid investment performance 31 December 2014 31 December 2013 Asset Annualised Asset Annualised allocation return Return allocation return Return % % £000 % % £000 Bonds £ 15.1 2.1 16.3 0.7 US$ 48.5 0.7 52.6 1.2 Other 10.1 1.9 9.9 0.6 Bonds total 77.8 1.5 36,714 74.7 0.7 17,105 Equities 7.8 7.6 17,604 7.1 18.3 39,289 Deposits/cash/ bonds <3m 14.4 0.4 2,037 18.2 0.5 2,530 Actual return 1.8 56,355 1.9 58,924 Group invested assets £3,245m £3,129m Before fees, derivative positions, investments in insurance linked funds and 8 third-party assets managed by Kiskadee Investment Managers.

High quality, conservative portfolio Investment portfolio £3,245m* as at 31 December 2014 • Short duration • High credit quality Asset allocation Bond credit quality Bond currency split maintained Bonds Gvt. USD AAA • Risk assets at 7.8% Cash GBP AA Risk assets EUR A • Not stretching for yield CAD BBB BB and below 1.8 1.3 7.8 9.4 11.7 29.8 14.4 19.9 19.4 67.6 77.8 16.7 22.4 *Excludes third-party assets managed by Kiskadee Investment Managers. 9

Portfolios – USD bond portfolios as at 31 December 2014 BB and Portfolios: $2.6bn • Favour corporates AAA AA A BBB below Total Duration % % % % % % months • Credit provides positive carry Government issued 19.5 0.3 19.8 15.7 Government supported* 1.5 8.4 0.9 0.5 11.3 13.9 • Still cautious on duration Asset backed 12.4 0.2 0.1 12.7 11.2 • Governments for liquidity Mortgage backed agency 0.3 5.8 6.1 28.6 Non agency 0.6 0.1 0.1 2.3 3.1 10.7 Commercial MBS 8.1 0.2 0.2 8.5 22.3 Corporates 1.1 5.2 21.9 10.1 0.2 38.5 19.0 Total 24.0 39.4 23.5 10.6 2.5 100.0 17.4 10 *Includes agency debt, Canadian provincial debt and government guaranteed bonds.

Portfolios – GBP, EUR and CAD bond portfolios as at 31 December 2014 BB and GBP portfolios: • Governments favoured for AAA AA A BBB below Total Duration £449m duration management % % % % % % months • No exposure to Greece Government issued 54.8 54.8 21.8 • Corporates added for Government supported* 10.2 0.9 0.2 11.3 12.3 carry Asset backed 3.2 3.2 10.4 Corporates 6.2 5.1 13.0 6.4 30.7 16.1 Total 19.6 60.8 13.0 6.6 0.0 100.0 18.7 BB and EUR and CAD AAA AA A BBB below Total Duration portfolios: £346m % % % % % % months Government issued 45.9 1.6 2.8 50.3 34.6 Government supported* 10.3 5.4 0.4 16.1 17.0 Asset backed 2.2 2.2 12.2 Corporates 2.4 5.8 14.8 7.9 0.5 31.4 14.4 Total 60.8 12.8 15.2 10.7 0.5 100.0 24.9 11 *Includes supranational and government guaranteed bonds.

2014 capital requirements £1.45bn available capital £1.26bn available capital (post return) Economic Regulatory A.M. Best Standard & Poor's Fitch ratings Group capital Group capital Bermuda solvency (catastrophe model (economic) model (regulatory) capital requirement stressed) Rating agency assessments shown are internal Hiscox projections of the agency capital requirements on the basis of 2014 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. 12 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.

Returning 60p per share of capital • 15p per share final dividend equivalent • Additional return of 45p per share with share consolidation • Issue of E or F shares (similar to last year’s C or D share) • Share consolidation: 88 new ordinary shares for 100 existing ordinary shares • Maintains TNAV per share and ROE enhancing • Treats all shareholders equally • Strong continuing capital base • Key dates – EGM: 25 March, payment date: 2 April 13

Fascinating financial facts • Good claims experience – Low level catastrophe losses – Hiscox net £25.6m aggregate industry losses £4.8bn (Hurricane Odile, European and UK storms and floods, Japanese snow storms) – Small impact from aviation and marine losses – Hiscox net £8.7m aggregate industry losses £0.9bn (MH17, MH370, Tripoli airport and Normand Atlantic ferry) • Reserve releases £172m (2013: £140m) • $875m Letter of Credit and bank facility – $441.5m drawn down (2013: $333m) • Defined benefit pension scheme deficit increases to £32.2m (2013: £4.4m). Impact to net assets £17.3m net of tax 14

Underwriting