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
for the year ended 31 December 2014
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dividend Full year 2014 £000 Full year 2013 £000 Gross premiums written 1,756,260 1,699,478 Net premiums written Net premiums earned 1,343,410 1,316,259 1,371,114 1,283,311 Investment return on financial assets Foreign exchange gains/(losses) 56,355 4,974 58,924 (9,890) Profit before tax Profit after tax 231,075 216,152 244,538 237,758 Basic earnings per share (p) Interim/final equivalent dividend (p) Additional capital return (p) Net asset value £m p per share 67.4 22.5 45.0 1,454.2 462.5 66.3 21.0 36.0 1,409.5 402.2 Return on equity after tax 17.1% 19.3%
31 December 2014 31 December 2013
Hiscox Retail £000 Hiscox London Market £000 Hiscox Re £000 Corporate Centre £000 Total £000 Hiscox Retail £000 Hiscox London Market £000 Hiscox Re £000 Corporate Centre £000 Total £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%
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Hiscox Retail Hiscox Retail brings together the results of the UK and Europe, and Hiscox International being the US, Guernsey 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, the UK includes elements of specialty and international employees and officers’ insurance written by Syndicate 3624. 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. 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. 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 Hiscox 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
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 2014. Corporate Centre forms a reportable segment due to its investment activities which earn significant external returns.
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31 December 2014 31 December 2013 Asset allocation % Annualised return % Return £000 Asset allocation % Annualised return % Return £000 Bonds £ 15.1 2.1 16.3 0.7 US$ 52.6 1.2 48.5 0.7 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
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Before fees, derivative positions, investments in insurance linked funds and third-party assets managed by Kiskadee Investment Managers.
67.6 19.4 11.7 1.3 USD GBP EUR CAD
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Investment portfolio £3,245m* as at 31 December 2014
maintained
29.8 22.4 16.7 19.9 9.4 1.8 Gvt. AAA AA A BBB BB and below 77.8 14.4 7.8 Bonds Cash Risk assets Asset allocation Bond credit quality Bond currency split
*Excludes third-party assets managed by Kiskadee Investment Managers.
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*Includes agency debt, Canadian provincial debt and government guaranteed bonds.
carry
Portfolios: $2.6bn
AAA % AA % A % BBB % BB and below % Total % Duration months Government issued 19.5 0.3 19.8 15.7 Government supported* 1.5 8.4 0.9 0.5 11.3 13.9 Asset backed 12.4 0.2 0.1 12.7 11.2 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
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*Includes supranational and government guaranteed bonds.
duration management
carry GBP portfolios: £449m
AAA % AA % A % BBB % BB and below % Total % Duration months Government issued 54.8 54.8 21.8 Government supported* 10.2 0.9 0.2 11.3 12.3 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
EUR and CAD portfolios: £346m
AAA % AA % A % BBB % BB and below % Total % Duration 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
12 £1.45bn available capital £1.26bn available capital (post return)
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. 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.
A.M. Best (catastrophe stressed) Standard & Poor's Fitch ratings Group capital model (economic) Group capital model (regulatory) Bermuda solvency capital requirement Economic Regulatory
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Total Group controlled premium 2014: £1,983m
Local casualty and commercial Reinsurance Specialty Art and private client Property Marine and energy Global casualty Period-on-period in local currency 2014 GWP
Non-marine Marine Aviation Casualty Specialty Professional liabilities Errors and
Directors and
Commercial small package Small technology and media Healthcare related Media and entertainment Kidnap and ransom Contingency Terrorism Specie 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 Marine hull Energy liability Offshore energy Marine liability D&O liability Healthcare Professional indemnity
+16.9% £503m
£419m +3.2% £358m +8.2% £285m +13.0% £238m +6.0% £126m +28.3% £54m
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rates continue to decline
under pressure – Upstream energy, terrorism, US commercial property
*Reinsurance for large single incidents e.g. large explosion.
Insurance Catastrophe reinsurance Risk XS reinsurance* 12 month rolling period ending Index level % 0% 20% 40% 60% 80% 100% 120% 140%
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Hiscox Retail
insight and efficiencies
– High retention rates – Improving conversion rates – Data-based client and risk selection Hiscox London Market
growing well
us choices
challenges
attractive Hiscox Re
client relationships
expertise to generate stable fee income
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Relevant Front of mind Solving problems
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Gross written premiums for the year to 31 December 2014 2014 £000 2013 £000 Change % Growth in local currency % Hiscox Retail Hiscox UK and Europe Hiscox UK 434,963 412,388 5.5 6.3 Hiscox Europe 155,068 146,701 5.7 8.5 Hiscox International Hiscox Guernsey 64,475 70,780 (8.9) (4.0) Hiscox USA 223,081 189,519 17.7 24.1 DirectAsia 13,528 – – – Hiscox London Market 510,825 468,587 9.0 9.6 Hiscox Re 354,320 411,503 (13.9) (9.7) Total 1,756,260 1,699,478 3.3 6.0
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200 300 400 500 600 700 800 900 1,000 2012 2013 2014 PBT (£m) GWP (£m) Gross written premium Profit before tax
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Local casualty and commercial – GWP £m
Products for specific professions – tech, media, consultants Multiple specific professions Product extensions Launch specialty commercial in Europe Build a UK brand Launch US direct Launch specialty commercial in USA Launch Europe direct Plain English wordings E&O insurance through non-Lloyd’s brokers UK direct-to- consumer and partnerships 100 200 300 400 500 600 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
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Policy sales per week
200 400 600 800 1000 1200 1400 1600 1800 Policy sales
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36 USA Atlanta Chicago 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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Gross written premiums (£m)
Hiscox London Market - Volatile Hiscox UK Hiscox Europe Hiscox Guernsey Hiscox USA Local specialty lines Internationally traded lines 200 400 600 800 1000 1200 1400 1600 1800 2000 DirectAsia
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Total Group controlled premium 2014: £1,983m
Local casualty and commercial Reinsurance Specialty Art and private client Property Marine and energy Global casualty Period-on-period in local currency 2014 GWP
Non-marine Marine Aviation Casualty Specialty Professional liabilities Errors and
Directors and
Commercial small package Small technology and media Healthcare related Media and entertainment Kidnap and ransom Contingency Terrorism Specie 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 Marine hull Energy liability Offshore energy Marine liability D&O liability Healthcare Professional indemnity
+16.9% £503m
£419m +3.2% £358m +8.2% £285m +13.0% £238m +6.0% £126m +28.3% £54m
£000 2014 2013 2012 2011 2010 2009 Gross premiums written 1,756,260 1,699,478 1,565,819 1,449,219 1,432,674 1,435,401 Net premiums written 1,343,410 1,371,114 1,268,140 1,174,011 1,131,627 1,157,023 Net premiums earned 1,316,259 1,283,311 1,198,621 1,145,007 1,131,158 1,098,102 Investment return† 56,355 58,924 92,690 25,942 98,849 182,769 Profit before tax 231,075 244,538 217,454 17,271 211,366 320,618 Profit after tax 216,152 237,758 208,026 21,272 178,800 280,497 Basic earnings per share 67.4p 66.3p 53.1p 5.5p 47.2p 75.2p Dividend 22.5p 21.0p 18.0p 17.0p 16.5p 15.0p Invested assets (incl. cash) £m† 3,244.9 3,129.5 3,055.8 2,873.4 2,779.7 2,661.6 Net asset value £m 1,454.2 1,409.5 1,365.4 1,255.9 1,266.1 1,121.3 p per share 462.5 402.2 346.4 323.5 332.7 299.2 Combined ratio 83.9% 83.0% 85.5% 99.5% 89.3% 86.0% Return on equity after tax* 17.1% 19.3% 17.1% 1.7% 16.5% 30.1%
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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.
200 300 400 500 600 700 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 5-10 year 10-25 year 25-50 year 50-100 year 100-250 year
43 5-10 year 10-25 year 25-50 year 50-100 year 100-250 year
02 02 06 19 08 06 10 38 22 17 16 69 34 33 21 106 46 54 28 158
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
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 2014 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.
34% 24% 24% 34% 18% 5% 8% 5% 5% 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
31 December 2012
Hiscox Retail £000 Hiscox London Market £000 Hiscox Re £000 Corporate Centre £000 Total £000 Gross premiums written 725,067 321,043 519,709 – 1,565,819 Net premiums written 667,627 257,316 343,197 – 1,268,140 Net premiums earned 648,222 288,130 262,269 – 1,198,621 Investment result – Financial assets 20,584 19,228 34,383 18,495 92,690 Foreign exchange (losses)/gains (3,259) (8,023) 2,561 (11,452) (20,173) Profit/(loss) before tax 32,677 74,485 126,476 (16,184) 217,454 Combined ratio 98.8% 79.3% 64.9% – 85.5% Combined ratio excluding monetary FX 98.3% 76.7% 65.5% – 84.6%
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Hiscox Retail Hiscox Retail brings together the results of the UK and Europe, and Hiscox International being the US, Guernsey 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, the UK includes elements of specialty and international employees and officers’ insurance written by Syndicate 3624. 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. 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
Syndicate 3624 being auto physical damage, auto extended warranty and aviation business. Hiscox Re Hiscox Re is the Reinsurance division of the Hiscox 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 of Kiskadee, the Hiscox Group’s Insurance Linked Securities business. 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
a reportable segment due to its investment activities which earn significant external returns.
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2014 geographical split – controlled income 2014 currency split – controlled income
36.2 11.4 13.0 20.5 18.9 North America Other Westerm Europe (excl. UK) Worldwide UK 24.7 57.8 4.4 13.1 GBP USD CAD and other EUR
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Receivables at 31/12/14 of £525.3m
10.3% 34.7% 50.0% 5.0% AAA and collateralised AA A Other 52% 37% 11% A AA AAA
*Reinsurance placements in force at 1 January 2015.
2014 reinsurance protections* First loss exposure by rating
20.9 13.4 18.7 21.7 19.4 21.0 19.0 19.0 19.3 23.5 5 10 15 20 25 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
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Ceded as a percentage of GWP Reinsurance receivables as a percentage
17.0 10.0 7.7 13.4 11.0 11.6 11.7 12.3 10.3 10.6 5 10 15 20 25 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Annual venture The system used for running a Lloyd’s syndicate under which each ‘year of account’ is treated separately. Members own capacity on a syndicate for a ‘year of account’ and the results are declared when the year is closed by the RITC mechanism, usually after three years. Claims ratio Net claims incurred, including IBNR, as a percentage of net earned premiums. Combined ratio The total of the claims, expenses and impact of foreign exchange ratios. Expenses 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% of the Syndicate capacity not owned by Hiscox in 2014 (27% in 2013). 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. 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. Member or Name The companies or individuals who own the capacity of a syndicate and who belong to the membership of the Society
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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
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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