Balancing 'big-ticket lines' provided resilience in challenging 2020: Hiscox CEO
Specialist global re/insurer Hiscox's chief executive Bronek Masojada highlighted the company's "resilience" in loss-making 2020 but said the priorities will change in 2021 to take advantage of the positive rate momentum in the London Market.
Hiscox reported a pre-tax loss of $268.5 million in the full year 2020, driven by COVID-19 claims bill of $475 million net of reinsurance, against a profit of $53 million generated in 2019.
Its gross premiums written remained stable at $4 billion, but the combined ratio deteriorated to 114.5 percent in 2020. In the previous year, the company reported a combined ratio of 106.8 percent.
However, Hiscox’s London Market businesses delivered a profit of $97.2 million in 2020, compared with $23.3 million in 2019.
The company said it saw positive rate momentum in all segments at the recent renewals with London Market leading the way, up 20 percent.
Within its retail division, Hiscox grew 3 percent to $2.3 billion, compared with $2.2 billion in the prior year. Direct and partnerships business grew 15 percent, approaching $600 million GWP.
Hiscox's reinsurance & insurance-linked securities segment (Hiscox Re & ILS) fell 14 percent to $743.4 million, compared with $866.5 million in 2019.
The re/insurer reported an investment return of $198 million in 2020, down from $223 million in 2019.
Chief executive Masojada said the company's "long-held strategy of balancing big-ticket lines and retail earnings provided resilience in 2020", while adding that "In 2021, our priorities will switch from resilience to opportunity as we are well-placed to make the most of the best conditions in the London Market in many years and the structural shift to digital across all our lines."
Masojada pointed to two trends which will benefit Hiscox going forward. "The first is the dramatic digital acceleration which will benefit our direct and partnerships business, as well as our London Market business where we bound over 90% of our risks through Lloyd's PPL platform in 2020 and already trade $75 million through digital means with brokers and coverholders not located in London," he said.
"The second is the rating environment that will drive strong return to profit by our London Market and Re & ILS businesses. This, in turn, will allow us to drive growth in our Retail division, making use of the inherent strength of our balanced business."
Hiscox's chairman Robert Childs said: "Our long-term strategy has been to build a balanced book of business. We have grown our small-ticket Retail business in the UK, Europe, USA and Asia to balance the big-ticket London Market and Re & ILS businesses written through Lloyd's and in Bermuda.
"We have seen strong profitable growth in Hiscox London Market as rates continue to surge ahead in the wholesale markets. Disciplined underwriting over the last three years as we weeded out underperforming business has meant that we are very well placed to take advantage of the improving conditions. In Retail, Hiscox Europe and the US direct and partnerships business in particular had good results, notwithstanding the pandemic."
Commenting on the 2021 outlook, Childs concluded: "The challenges of a global pandemic have not withered the green shoots of a hardening market. Rates are rising across all three of our business areas, and the market is turning. Together with our multi-year investments in technology and digital tools, we have the infrastructure, talent and financial firepower to realise the significant opportunities ahead.
"We can look forward with confidence as some normality returns globally in 2021 and we continue to focus on providing excellent service during these difficult times in all our markets."
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