Hiscox ups profits in 2023 as reinsurance & ILS grab huge rate hikes
Bermuda-based global specialist insurer Hiscox more than doubled pre-tax profits in 2023, including a nearly 5x increase in profits in its reinsurance and ILS division where underwriting margins surged notably.
“Our business has delivered excellent results, with record profits of $625.9 million underpinned by a 36% improvement in the underwriting result and a record investment income,” CEO Aki Hussain said.
"We will continue to deploy more of our financial resources to drive profitable growth," Hussain told his company's earnings call.
Hiscox Re & ILS laid claim to an average risk-adjusted rate increase of 31% for the year and only now admits that rate growth “is beginning to plateau” in US property cat after the 2023 market reset while international property cat “continues to see a broad rate hardening.”
Even stronger rate gains came on the retrocession book, up 42% on the prior year, but “are now starting to soften slightly” as capacity is said to be returning to the market. "Despite this, we believe that rates remain attractive," Hiscox said of outlook.
Amid that run up in reinsurance rates and following the group's move to trim secondary peril exposure by cutting aggregate programmes, Hiscox Re & ILS slashed 15.8 percentage points from its undiscounted combined ratio to 69.8%, the driver of the 4.7x increase in pre-tax profit for the segment.
“Reinsurance market conditions are expected to stabilise and remain attractive after the significant improvements in 2023,” management said. “We have allocated additional capital to this segment as Hiscox Re & ILS continues to seize the opportunities created by the hard market conditions and focuses on growing our net book.”
Hiscox’s London Market operations more than doubled pre-tax profits to $251.4 million, including a 43% increase in the insurance service result, having trimmed a milder 2.9 points from its undiscounted combined ratio.
Insurance contract written premium grew 11.5% on a 7% risk-adjusted rate gain as Hiscox leaned into property and found “significant opportunities” in renewables and energy construction. Rate dynamics scattered across lines with property binders and major property rates up 26% and 21% respectively, and terrorism rates up 15%. Cyber and D&O suffered double-digit rate decreases. General liability rates are being “sustained” and underwriting is called “selective”.
The array of Hiscox’s retail insurance ventures doubled pre-tax profits, but stumbled lightly on underwriting margins with an undiscounted combined ratio of 96.2% up 2.5 points. Premium growth rose 4.2%, which management admitted is “below expectations” despite momentum in Europe and accelerating growth on the US digital platform. Part of the low growth came as Hiscox backed away from some US cyber and some broker distribution glitches.
All combined, the re/insurance segments plus investment and other earnings, led to a full-year pre-tax profit of $625.9 million, up from the prior year’s $275.6 million, and a group ROE of 21.8%.
Did you get value from this story? Sign up to our free daily newsletters and get stories like this sent straight to your inbox.
