Hiscox Ltd Preliminary results For the year ended 31 December 2015 - - PowerPoint PPT Presentation
Hiscox Ltd Preliminary results For the year ended 31 December 2015 A good year Premium growth of 10.7% (2014: 3.3%) Hiscox Retail now 50% of Group GWP Profit before tax 216.1m (2014: 231.1m) Combined ratio 85.0% (2014:
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Full year 2015 £m Full year 2014 £m Gross premiums written 1,944.2 1,756.3 Net premiums written Net premiums earned 1,571.8 1,435.0 1,343.4 1,316.3 Investment return on financial assets Foreign exchange gains 33.7 15.2 56.4 5.0 Profit before tax Profit after tax 216.1 209.9 231.1 216.2 Basic earnings per share (p) Interim/final equivalent dividend (p) Additional return (p) Net asset value £m p per share 72.8 24.0 16.0 1,528.8 545.0 67.4 22.5 45.0 1,454.2 462.5 Return on equity after tax 16.0% 17.1%
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31 December 2015 31 December 2014
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 975.6 585.2 383.4 ‒ 1,944.2 891.1 510.9 354.3 – 1,756.3 Net premiums written 919.6 427.2 225.0 ‒ 1,571.8 825.9 336.9 180.6 – 1,343.4 Net premiums earned 870.4 383.9 180.7 ‒ 1,435.0 790.7 332.5 193.1 – 1,316.3 Investment result – Financial assets 17.2 6.7 3.3 6.5 33.7 25.9 8.9 9.4 12.2 56.4 Foreign exchange gains/(losses) (8.1) 6.7 8.3 8.3 15.2 (5.1) 9.0 2.7 (1.6) 5.0 Profit/(loss) before tax 73.3 59.9 97.5 (14.6) 216.1 78.1 62.6 105.6 (15.2) 231.1 Combined ratio 93.5% 85.7% 46.6% ‒ 85.0% 93.5% 84.2% 49.8% – 83.9% Combined ratio excluding monetary FX 92.6% 87.8% 51.4% ‒ 85.7% 92.9% 87.2% 51.6% – 84.7%
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Business segments described in appendices.
31 December 2015 31 December 2014 Asset allocation % Annualised return % Return £000 Asset allocation % Annualised return % Return £000 Bonds £ 12.3 1.1 15.1 2.1 US$ 51.2 0.9 52.6 1.2 Other 8.9 0.6 10.1 1.9 Bonds total 72.4 0.9 21,585 77.8 1.5 36,714 Equities 7.2 4.0 10,410 7.8 7.6 17,604 Deposits/cash/ bonds <3 months 20.4 0.4 1,685 14.4 0.4 2,037 Actual return 1.0 33,680 1.8 56,355 Group invested assets £3,609m £3,245m
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Before fees, derivative positions and investments in insurance linked funds.
70.7 17.0 10.8 1.5 USD GBP EUR CAD
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Investment portfolio £3,609m as at 31 December 2015
to proceeds from subordinated debt issuance
maintained
portfolio at 1.3%
18 months
32.7 18.5 16.3 17.6 13.1 1.8 Gvt. AAA AA A BBB BB and below 72.4 20.4 7.2 Bonds Cash Risk assets Asset allocation Bond credit quality Bond currency split
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A.M. Best (catastrophe stressed) Standard & Poor's Fitch ratings Group capital model (economic) Group capital model (regulatory) Bermuda solvency capital requirement
9 £1.80bn available capital £1.71bn available capital (post return)
Rating agency assessments shown are internal Hiscox projections of the agency capital requirements on the basis of projected 2015 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.
Economic Regulatory
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Loss development by accident year
0.70 0.75 0.80 0.85 0.90 0.95 1.00 1.05 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Ultimate net claims 2007 2008 2009 2010 2011 2012 2013 2014
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Net asset value (£m)
returns since 2012: £750m
682 824 951 1,121 1,266 1,256 1,365 1,409 1,454 1,529 200 400 600 800 1,000 1,200 1,400 1,600 1,800 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
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core London Market and reinsurance business
flat e.g. UK commercial and US Direct
Core London Market UK local casualty and commercial Catastrophe reinsurance US Direct 20 40 60 80 100 120 140 Rate on line indexed to January 2010
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Total Group controlled premium 2015: £2,165m
Local casualty and commercial Specialty Reinsurance Art and private client Property Marine and energy Global casualty Period-on-period in local currency 2015 GWP
Non-marine Marine Aviation Casualty Specialty Professional liabilities Errors and
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 D&O, PI Healthcare General liability
+14.0% £581m +15.2% £434m
£429m +5.2% £292m
£238m
£111m +39.1% £80m
143 111 126 226 137 145 11 176 39 71 2010 2015 100 200 300 400 500 600 700 800
GWP £m
15 Marine and energy Property: onshore energy, US homeowners, commercial Specialty: terrorism, political risks, personal accident, aerospace Contractors’ equipment FTC Casualty: D&O, PI, healthcare
Total = £456m Total = £729m
495 290 51 34 31 5 27 27 12 100 200 300 400 500 600 2010 2015 Casualty Specialty Healthcare Marine Kiskadee Property
GWP £m
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Total = £534m Total = £438m
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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 Systemic attack on domain name servers. Widespread webpage outage for one to two days. Insurance industry loss of c.£5bn £100m 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 £225m Casualty reserve deterioration 35% deterioration on existing casualty reserves of c.£825m
£300m Property catastrophe 1 in 200 year catastrophe event from £160bn US windstorm £300m
Gross written premiums for the year to 31 December 2015 2015 £m 2014 £m Change % Growth in local currency % Hiscox Retail Hiscox UK and Europe Hiscox UK and Ireland 443.3 435.0 1.9 2.2 Hiscox Europe 151.8 155.1 (2.1) 7.8 Hiscox International Hiscox Guernsey 67.8 64.5 5.1 (1.9) Hiscox USA 294.5 223.1 32.0 21.5 DirectAsia* 18.2 13.5 34.8 24.7 Hiscox London Market 585.2 510.8 14.6 8.5 Hiscox Re 383.4 354.3 8.2 2.9 Total 1,944.2 1,756.3 10.7 7.2
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*DirectAsia – 2014 figure relates to the nine months from the date of acquisition.
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Total policy numbers (in force) Dec 31 2015 Markets Direct Broker Total UK 138,000 152,000 290,000 USA 93,000 40,000 133,000 Europe 9,000 100,000 109,000 DirectAsia 80,000 ‒ 80,000 Total 320,000 292,000 612,000 21
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Hiscox UK and Ireland
insurance product
move to new IT platform, insourcing of the direct commercial sales and service centre
RH Classics Hiscox Europe
good opportunities
in Lisbon – reducing European expense base
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47% 21% 14% 9% 9%
2015 total GWP = $447m
Professions (broker channel) Media and entertainment Property Direct and partnerships Executive risks
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Hiscox Guernsey
reductions due to competitive environment
more efficient process between producers, brokers and underwriters
collaboration DirectAsia
new Managing Director
brand-building complementing local expertise
and premium income up 500%
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Reinsurance
to quota share reinsurance
in importance
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Premium retained Premium ceded to Kiskadee Premium ceded to other third parties
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31 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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200 400 600 800 1000 1200 1400 1600 1800 2000 2200
34 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
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Total Group controlled premium 2015: £2,165m
Local casualty and commercial Specialty Reinsurance Art and private client Property Marine and energy Global casualty Period-on-period in local currency 2015 GWP
Non-marine Marine Aviation Casualty Specialty Professional liabilities Errors and
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 D&O, PI Healthcare General liability
+14.0% £581m +15.2% £434m
£429m +5.2% £292m
£238m
£111m +39.1% £80m
£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.
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 10-25yr 25-50yr 50-100yr 100-250yr
37 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
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.
31% 16% 24% 40% 21% 6% 3% 6% 8% 4% 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 Systemic attack on domain name servers. Widespread webpage outage for one to two days. Insurance industry loss of c.£5bn £100m 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 £225m Casualty reserve deterioration 35% deterioration on existing casualty reserves of c.£825m
£300m Property catastrophe 1 in 200 year catastrophe event from £160bn US windstorm £300m
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2015 geographical split – controlled income 2015 currency split – controlled income
41.3% 14.6% 8.4% 17.2% 18.5% North America Other Westerm Europe (excl. UK) Worldwide UK 24.7% 59.7% 4.0% 11.6% GBP USD CAD and other EUR
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Receivables at 31/12/15 of £538.8m
47.6% 26.3% 21.6% 4.5% A AA AAA and collateralised Other 57% 35% 8% A AA AAA
*Reinsurance placements in force at 20/02/2016.
2016 reinsurance protections* First loss exposure by S&P rating
20.9 13.4 18.7 21.7 19.4 21.0 19.0 19.0 19.3 23.5 19.2 5 10 15 20 25
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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 10.2 5 10 15 20 25
Portfolios: $2.7bn
AAA % AA % A % BBB % BB and below % Total % Duration months Government issued 31.5 0.1 31.6 17.7 Government supported* 0.7 6.2 0.6 0.3 7.8 16.2 Asset backed 10.1 0.3 0.1 10.5 10.3 Mortgage backed agency 4.2 4.2 30.5 Non agency 0.6 0.3 1.9 2.8 12.2 Commercial MBS 3.6 0.3 0.2 4.1 16.2 Corporates 0.9 5.4 17.7 14.8 0.2 39.0 18.6 Total 15.9 48.2 18.6 14.9 2.4 100.0 17.5
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*Includes agency debt, Canadian provincial debt and government guaranteed bonds.
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*Includes supranational and government guaranteed bonds.
Governments favoured for duration management Corporates for carry No exposure to Greece, Ireland , Italy, Portugal or Spain sovereign debt Credit and duration to maintain positive yield in Euros GBP portfolios: £441m
AAA % AA % A % BBB % BB and below % Total % Duration months Government issued 41.7 41.7 20.3 Government supported* 18.4 2.7 0.2 21.3 17.0 Asset backed 3.7 3.7 12.4 Corporates 5.9 5.1 13.0 9.3 33.3 15.6 Total 28.0 49.5 13.0 9.5 0.0 100.0 17.7
EUR and CAD portfolios: £339m
AAA % AA % A % BBB % BB and below % Total % Duration months Government issued 34.8 1.7 36.5 46.3 Government supported* 10.9 7.9 0.7 19.5 18.6 Asset backed 1.5 0.1 1.6 11.3 Corporates 3.9 9.4 19.9 8.5 0.7 42.4 14.4 Total 51.1 19.0 20.7 8.5 0.7 100.0 26.7
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, Hiscox UK includes elements of specialty and international employees and officers’ insurance written by Syndicate
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
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 2015 (27.5% in 2014). 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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